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Why You Should Start a Gas Station Business

Gas Station Business.

Contrary to popular belief, the majority of gas stations in the U.S. are not owned by big names like Chevron (NYSE: CVX) and Shell (OTCMKTS: RYDAF). Instead, they are operated by individuals like you, and the exciting part is that these people have the potential to rake in a whopping $50,000 or more each month.

Imagine what you could get by just finding a gas station for sale, buying it, and running it: Financial freedom, the ability to be your own boss, as well as the opportunity to make a significant impact in your community. If you’re wondering how to get started, don’t worry, we’ve got you covered.

We’re going to walk you through everything you need to know to start your own gas station business, from where you can find a gas station for sale and all the costs you should expect as you enter the business, to the unexpected way gas stations make the most of their money. Hint: It’s not through selling fuel.

How to Get into the Gas Station Business

There are three ways you can get into the gas station business. The first one is rather direct: finding a gas station for sale and buying it, and the second one is building one from scratch, while the third way is buying into a franchise like BP (OTCMKTS: BPAQF) or Chevron.

You might think that buying into a franchise is the most logical and cost-efficient option here, but the truth is, it could cost you a lot more money down the line. For example, if you buy into a franchise for a gas station, you’re going to have to pay a leasing fee for the land that the gas station is on every month or every year, depending on the lease.

Notably, the average leasing cost for a gas station in the U.S. stands at approximately $2,500 per month. In addition to that, you’re going to have to pay a monthly amount to whoever you’re getting that franchise from, which could significantly impact your profits.

On the other hand, if you find a gas station for sale and buy the business, it’ll be a lot cheaper. That’s because if you buy a business, you own 100% of it and won’t have to pay leases. Therefore, if you want to get into this business for the long term, the best thing to do is buy a gas station business.

Websites like BizBuySell.com help you find a gas station for sale based on your state or wherever you want to start the business. Overall, gas station businesses start from $100,000 and could go up to a few million, depending on the size of the business.

Tips for Starting a Profitable Gas Station Business

Gather Information

The first step is important if you’re a beginner who knows nothing about the gas station business. You could ask around gas stations in your area and talk to employees or managers to make use of their expertise, or even get a job at a gas station yourself, so you completely understand what you’re getting into.

Finding a Good Location

Once you gather enough information about how the business works, you must pick a good location. Imagine two gas stations in the same city; one makes $70,000 per month, and the other only half of that. This is purely based on location.

The first gas station gets a lot of traffic, while the second one doesn’t. Meaning, you’ll only be able to make tons of money in this business if you pick the right location.

A great location for a gas station business has high traffic volumes and visibility from passing traffic at the same time, as you’d want everyone driving by to be able to see your business. It also needs to be easily accessible so your customers can enter and exit the gas station without difficulty, so you don’t lose customers to the nearest competitor.

That is why the first step to finding the best location for your business is to look for accessibility. You should look for areas on a road, highway, or intersection, not somewhere consumers may have difficulty finding the gas station.

You could visit the locations yourself and use the services of the gas stations there, in order to determine if that location is convenient. You can even visit multiple times to check the traffic and see how many cars pass there or how many people visit the gas station.

When picking the location, it’s important to avoid areas with construction sites near them, since this can make filling up their cars challenging for your customers. In addition, if a construction project results in a major road or highway closing, traffic will decrease, and you will lose customers. Therefore, you must be aware of any future construction projects that will take place in the area.

For our next location tip, we’ll say don’t get intimidated by competition nearby. If you find a good location with really good traffic but with another gas station nearby, you don’t have to abandon the location. Just think of a game plan for how you can beat your competitors.

You could make your business stand out more by posting signs outside your site and along the road, or even undercutting your competitors by offering loyalty programs and discounts at your gas station. It is also a good idea to advertise your discounts by having big signs near a major highway or road so that customers can see what you are offering.

You need also to consider the fact that there are multiple types of gas stations. Sure, you could buy a gas station that only sells fuel for a lower cost, but you can also invest more and buy one that has a convenience store that you can sell stuff in to increase your revenue streams or a gas station that has a car wash.

You can get a good deal on the location, but it’s not always as good as it seems, so you should watch out for scammers who might lie and say that their gas station business sees more traffic than it actually does, which means you need to do your own research and even visit that gas station yourself a few times in order to evaluate the traffic there.

You can even use Google Maps for this since it can tell you if an area is busy and what its peak hours are. Additionally, some roads might be highlighted in red or orange on the map, which means that there’s a lot of traffic.

Financing

Now that you have the location picked out, you can buy it right away, if you’re able to afford it. However, if you don’t have that $300,000 to buy a gas station, you can go to your bank to get a loan, or ask the person that’s selling the gas station to do owner financing.

Owner financing means that the seller finances the purchase directly with the buyer, either in whole or in part. If you’re wondering why would the seller agree to something that puts them at more risk, know that owner financing is actually advantageous to both parties since it eliminates the costs of a bank intermediary, and because owners are often more willing to negotiate when you offer them extra income in the form of interest. It can also help a property sell much quicker.

The Costs to Consider

The most important cost when running a gas station business is salaries for employees. If you think you don’t need employees and you’ll manage the entire operation by yourself or with the help of friends and family, that’s fine.

But, you should also consider the endgame of getting into this business: owning multiple gas station businesses.

You can still make good profits by running a single gas station. In fact, some gas stations on BizBuySell.com sell for around $270,000 and generate a cash flow of around $140,000. On the other hand, you can earn much more than that amount if you own a route with several stations, and even more if you decide to sell that route in the end. If you want to make it big, you have to employ other people to help you grow the business.

Other costs that you’ll have to consider are the costs of insurance. If you’re wondering how much is that, it varies from place to place, but Insuranks, an educational platform on insurance, says that the average gas station insurance cost is $100 per month or $1,200 per year for $1 million in coverage, and this insurance is offered by multiple companies like Next Insurance and CoverWallet Business Insurance.

You also need to consider the maintenance costs for fuel pumps, which are around $75 and $250 for one pump’s parts if you decide to do it yourself and can go up to $400 and $600 if you decide to hire a professional.

There are also the costs of getting a permit from your state or city, but don’t let this discourage you. If you’re buying an existing gas station business or getting into a franchise, then most of this paperwork would be already done, and all you have to do is ask the seller to transfer it to you.

This is why buying an existing business is better than building one from the ground up since you’ll avoid the tiresome legal processes. All you need to have is a good lawyer who will handle the paperwork for you at the start, and you won’t have to bother with most of it.

If your gas station has another business, like a convenience store, you must also account for their costs. For example, a small convenience store can sell as few as 500 items, while a medium-sized store might sell up to 2,500 items. On average, you should expect to pay at least $20,000 in initial inventory costs.

You should also account for the costs of filling up your gas inventory. You don’t just open a gas station; the fuel pumps stay running 24/7, so you’ll have to buy fuel constantly. On average, the initial inventory for gasoline and diesel can cost you around $10,000 to $50,000. Meanwhile, the monthly gas restocking expenditure can span between $15,000 and $45,000.

When you account for all these costs, it could cost you around $300,000 to buy the business, and from $70,000 to $100,000 to run it.

The Profits

It might surprise you to know that a lot of gas stations don’t make a lot of money from selling fuel. According to 2022 research by IBISWorld, gas stations make an average net margin of just 1.4% on their fuel, and that’s far lower than the 7.7% average across all industries.

Gas stations actually make the most money from the businesses attached to them, like convenience stores, car washes, or even restaurants. Many gas station owners actually use fuel just to lure people in.

We’re sure you’ve been through this: You go into a gas station and start pumping fuel into your car, and after you are done, you go into the convenience store to buy a snack or a drink. That’s how gas station owners make the most money.

Some gas station businesses for sale on BizBuySell.com even highlight the amount of money the convenience store makes on its own. One earns nearly $55,000 per month from its grocery store.

It also sells lottery commissions and earns $1,500 per month, so this is a good thing to include in your offerings. You can even set up your own ATM machine and earn more than $1,000 commission from it.

You can check the profits of other gas station businesses online, where sellers list the cash flows their gas stations generate and the price they’re selling them for. The most important metrics you need to look at when evaluating a gas station business are the monthly sales of the convenience store, the lottery tickets, and the monthly gallons the station sells.

If you think you can’t afford a big fancy gas station with a convenience store or car wash, a great tip is to seek out gas station businesses with just a gas station, so it’d be selling for less than $100,000 but still has a fairly good location. You could go there and buy that business, then set up some vending machines, or even a food truck, and that way you can make some extra money.

You can even hire a mechanic and have them do simple car repairs like changing brakes or replacing windshield wipers. A full brake repair costs from $200 to $800, so having a mechanic with you can bring in some extra income.

The Risks

To sum up, having a gas station could be a very lucrative business, but it’s not a widely known one. So, we tried to give you some tips on how to find a good gas station for sale and get started in the gas station business.

This type of business still has risks, like the rise of natural gas and EVs. If you want to be in this business for a long time, you should try offering these two options, even though it will be costly. One EV charging unit costs a whopping $100,000!

Remember that you must do your due diligence very well, and account for potential risks like these two. Hopefully, you can use some of our tips in your own gas station venture one day.

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