that the gross profit margin collected on gas sales pays the rent, the lights and insurance. And every dollar earned above cost in the convenience store or the vehicle washing area flows directly to the bottom line.
Dublin, CA (Vocus) December 5, 2009
Reasons to buy gas station business opportunities include the success of the industry regardless of economic conditions, and the manageability of companies in this sector. But as explained in a small business blog post at BizBen.com there are five risks in this kind of business for which prospective buyers must be prepared.
“Whether the economy is booming or struggling, gas stations are selling what the public is always buying,” said Peter Siegel, MBA, founder and CEO of BizBen.com--Businesses for Sale in California.
“But buyers of this kind of business should be warned there are considerable dangers involved. You have to know the risks and guard against them.”
Among those risks, according to the BizBen article, is contamination of the soil under the station, usually caused by leaks from underground storage tanks.
“Imagine the surprise when an entrepreneur who thinks he successfully accomplished his ‘buy gas station’ strategy finds out the station has to be torn down so the site can be excavated in order to remove contaminated soil. Even if there’s a successful lawsuit against the seller for not disclosing the problem, the new owner can expect to be out of business for at least three or four months,” according to Siegel.
“And the unfortunate person who may have just purchased the business can forget any income to repay loans or support the family until the business is up and running again.”
Another risk detailed by the BizBen entry concerns the right to use the land and the length of time that right is enforceable.
The BizBen.com executive noted: “I’m aware of situations where someone purchased this kind of business thinking that the oil company’s ten year lease provided plenty of time to make back the investment and enjoy a profit.
“What buyers aren’t always told is that the franchisor, rather than owning the land, may simply have a leasehold interest. And if the company loses the lease, it’s the sublessee--a person thinking he made a smart gas station buy--who will find himself out of luck.”
Among the appealing aspects of gas stations for sale is the presence of a companion business, such as a convenience store or car wash.
Once customers are on the property, usually to fill their gas tanks, many will spend a few extra dollars on a snack or beverage. And that’s where the profit is made.
“Sellers often claim,” Siegel said, “that the gross profit margin collected on gas sales pays the rent, the lights and insurance. And every dollar earned above cost in the convenience store or the vehicle washing area flows directly to the bottom line.”
BizBen.com, the state’s leading online marketplace of small and mid-market companies, has been California’s exclusive source of small business sales statistics for more than 10 years. In addition to featuring 7,000+ offerings for those who want to buy gas stations and other opportunities, the BizBen.com site features a number of resources, articles, news items, practical tips and a blog page, all providing information and ideas for business owners/sellers, business buyers, business brokers, and agents, and other professionals serving the market.