what you look for in gas station before buying?

 

• Environmental issues: Check for any environmental problems.
• Tanks and pumps issues: Inspect the tanks and pumps.
• Financial statements accuracy: Review the financial statements.
• Sales diversification: Evaluate the sales diversification.
• Competition: Consider the level of competition.
• Real estate handling: Check how the real estate is being handled.
• Franchised or unbranded: Determine if the gas station is franchised or unbranded.
• Family members working: Inquire if any family members work at the gas station.

1. Are there any environmental issues?

Environmental issues can affect a gas station's chances of success. If the issues are serious enough, they can go as far as to bankrupt the gas station and, potentially, the investor. Perform a detailed environmental assessment of the whole site and equipment during your due diligence phase. Use a reputable company with experience in gas station environmental issues. They will help uncover any past or current issues before you buy the gas station.

2. Are there any tanks and pumps issues?

The tanks should be reviewed as part of the environmental assessment, and you should ask the seller about the pumps' status as well. Tanks are always an area of environmental concern. Additionally, look at the gas station's overall equipment. Are the pumps and other equipment in good shape? Are they reasonably modern? Old pumps that don't look well maintained will surely affect the attractiveness of your station and, ultimately, your sales.

3. Are the financial statements accurate?

Ideally, you want the gas station's financial statements to break down revenues by source. This approach allows you examine each revenue center carefully and determine how much profit comes from fuel and how much comes from other sources. Unfortunately, getting accurate financial statements from the current owners can sometimes be a challenge.

Financial reporting problems are aggravated if the gas station has a large proportion of cash sales that aren't recorded accurately. The issue of unreported cash sales is tricky and must be handled delicately. Consider asking the seller, in a professional way, if the gas station has any unreported income from cash sales. If they do, speak with a tax professional that can advise you accordingly.

Making an investment decision without reliable financial statements is difficult – and risky. Note that without accurate financial statements, you will not be able to get outside financing since the transaction won't meet lending requirements.

4. Are sales diversified?

Fuel sales have low margins and can be volatile. This makes them difficult to manage. Most stations that perform well have additional sources of revenue. These include revenues from convenience stores, car washes, quick lube centers, or auto maintenance shops.

Most experts recommend that it's best to have a station with diversified revenues. Obviously, the choice is up to you, though lenders may not feel comfortable financing gas station acquisitions that rely solely on fuel sales.

5. How much competition is there? What are the local demographics?

Fuel sales are sensitive to competition and demographics. Ask the current owner about the local competition and market, but also perform your own due diligence. Drive through the area and look at it through the eyes of a customer. What fuel options are there? Are the gas stations pleasant, convenient, and modern? From this perspective, is the station you are buying a good option?

Look at the demographics as well. Who are the station's customers and what are they buying? Are they local customers, commuters, or a mix of both? This analysis will help you get an idea of what will shape demand for your station.

6. How is the real estate being handled?

Generally, gas stations that include a provision for the location (real estate) are easier to finance than those that don't. Location is one of the key factors in the success of a gas station. Lenders will only finance transactions in which the buyer is able to use the real estate during the term of the loan. You can do this by getting a lease that covers the term of the loan or by acquiring the real estate outright. Keep in mind that some locations may have restrictions regarding the brand of fuel that can be sold.

7. Is the gas station franchised or unbranded?

There are pros and cons to buying a franchised vs. an unbranded gas station. Franchised owners get to use all the branding and designs from the franchisor. They get instant market recognition. Owners of franchised stations must also buy all their fuel and products from the franchisor. Lastly, they must offer and honor all of the franchisors offers and abide by their restrictions.

Unbranded gas station owners don't have to follow the same rules as the franchised owners. This gives them some freedom and options. However, they don't get the benefit of a known brand or their support system. Ultimately, you must decide which type of station best fits your strategy.

8. Do any family members work at the gas station?

It is not unusual for small business owners to hire family members to work their gas stations. They may operate fuel pumps (if full-serve) or work inside the convenience store. In principle, there is no problem with this practice.

However, some small business owners pay their family members "off the books." They may also pay their family member employees a lower than required wage. This can be a problem for you. Replacing these "family employees" with regular employees will cost you more. This affects your bottom line. Take this difference into account when making an offer.

9. Has the station experienced any criminal activity?

Unfortunately, some gas stations become the targets of criminal activity. The types of crimes vary from simple credit card fraud all the way to armed robbery. As a buyer, you need to be aware of these issues. The last thing you want is to buy another person's problem.

Ask the seller directly about local crime and financial fraud. Additionally, go to the local police station and ask them for a crime activity report about the station. That report should give you a good idea of the amount of crime in the area near the station.

Should you work with an expert?

If there is one thing that you learned from this article, it is that acquiring a gas station is not easy. Invest the cost of consulting with experts who are familiar with gas station acquisitions. In the end, that may save you from making a bad investment.

At a minimum, work with a CPA or tax professional who is familiar with gas stations. They will help you evaluate the station's financial reports. Additionally, hire a reputable environmental company to perform the assessment.

What You Need to Know Before Buying a Gas Station

Your interest in a gas station has peaked, and you’re seriously considering drawing up some contracts to finalize a buy. Before that final step, however, all potential buyers need to put in the due diligence of research before completing their buy. So what questions do you need to ask? What do you need to know before taking the final plunge on a gas station?

• Gas Pumps and Fuel Tank Condition - Pumps and fuel tanks, like anything else, will get old over time. Before you finalize any price, be sure to get updated reports on the conditions of the pumps and tank. If the station is an established franchise, then representatives will monitor the pumps regularly, and records should be easy to get a hold of.
• Convenience Store Condition and Current Inventory - The convenience store is where you will make the bulk of your sales, so knowing its condition and how much potential remodelling it might need is one of the first things to look out for. Be sure to look for any snack machines that need to be replaced or repaired. What vendors will you have to reach out to in order to fulfill inventory that isn’t already in place?
• Reported Profits of Former Owner - Look at the monthly and yearly profit reports from the owner. How lucrative is the business? What are the trends in dips or gains by month? Do the numbers add up to what the cost of purchase is?
• Location Popularity and Current/Potential Demographics - How strong of a location is it? Are you by a highway? In a residential area? Are you near a school that could indicate high sales of snacks favored by kids? Are they any big construction sites in the area that could project a new demographic entering the area?
• Required Renovations of Property - Be sure to ask if there are any pending deadlines for required renovations. Are there any perennial water leaks that won’t go away? Is anything within the building’s infrastructure meeting a deadline for renovation?
• Status of Liquor/Tobacco Licence and Relevant Local Laws - Some cities, like San Francisco, have bans on flavored e-cigarettes, and other cities are following suit in their local statutes. Also, some residential areas prohibit the sales of alcohol either because they’re near a school, church, or some other factor. Be aware of your city’s guidelines for selling tobacco products and alcohol and what their parameters are.

Avoiding Buying a Gas Station Pitfalls

Knowing what pitfalls to avoid from the outset of your business venture will make the initial trial and error period that much less of an inconvenience. As with any business, there will be some roadblocks along the way, and following these tips will help avoid some of the biggest traps early buyers run into.

• Research and Then Research Some More - Especially when it comes to a million-dollar deal, there’s no such thing as too much research. Use all the resources at your disposal to solve problems, find answers, and learn from the mistakes of others.
• Trust Your Instincts but Decide Based on Numbers - If you’re instincts are telling you that something is off, they’re probably right. That doesn’t mean, however, that you make any rash or drastic decisions before proper scrutiny. Review the contract and the deal laid out. Are your worries warranted? In the end, return to the numbers. As long as the numbers add up, there’s no reason to lose confidence in a decision.
• Never Rush into a Deal - Finalizing a deal is exciting and, understandably so, probably leads to a lot of buyers rushing into agreements that needed more review. As anxious as you might be to start your business and implement your strategy, it’s important to stay calm, cool, and collected. Make sure you’ve done due diligence in reviewing every aspect of the gas station, contract, and potential contingencies before you make a buy.
• Plan for the Long Term but Ensure Your Short Term is Covered - A gas station is the kind of investment that could pay dividends in the long run. In order to get there, however, you need to make sure that there aren't any short-term obstacles too large for you to hurdle over. This comes down to looking at immediate liabilities that might come with any aspect of the gas station and making sure those liabilities won’t put you out of business before you reach the end point.

Conduct Research to Prepare Your Store for Opening

Before you start choosing colors for your walls, you need to research the conditions your store will be operating in.

Factors like location and local demand for products you sell will be the difference between success and failure in your first year, and the more research you do, the better prepared you will be for running your store.

Be sure to thoroughly research the following topics:

• Locations - You want a location that makes sense for your store and your target customers. For example, a gas station will have much different location requirements than a boutique clothing store.
• Vendors - Researching vendors is critical. You need strong, beneficial vendor relationships to secure the margins your store needs to survive. Be sure not to enter into any contracts that will force you to sell products your customers won’t be interested in.
• Local product demand - Never open a store without concrete data that people will be buying what you’re selling. Identify your target market in your area and assess how your store is going to satisfy demand in your store’s category.
• Competition - Your store needs to stand out from the competition. Accomplishing this requires that you know your competitors from top to bottom, from their products and offerings, to the general feeling that walking into their store gives you.
• Permits required for operations - The permitting process can add weeks or months to your startup time, so always find out which permits you need for occupancy and operations in advance.
• Regulations specific to your store - To more easily comply with the federal, state and local regulations your store must operate under, research these regulatory requirements before opening. For example, gas stations in California are required to have fume capture features on their pumps while other states do not.
• Projected startup and operating budget - Always research the costs that will be required to open your store and the ongoing operational costs to create an accurate budget. Anyone who invests in your store will want to know that you’ve done these calculations.
• Projected overhead vs projected returns - Before you open your store, you need to calculate your projected overhead vs returns and find out when you will be getting into the black. This will be important for calculating the rates at which you will be able to repay any loans you use to finance startup.

Find the Perfect Location for Your Convenience Store

What is the biggest factor in how much business your store receives? Location, location, location.

Be sure that you thoroughly evaluate several potential locations before you decide on the premises of your store.

• Evaluate workable locations - You’ve researched workable locations for your store, now it’s time to pay a visit. Pay attention to your surroundings as you approach potential storefronts: the people passing by on foot and in cars, the other businesses immediately surrounding you, the kind of environment the property is located in, etc. Ask yourself, does this location make sense for the kind of products I’m selling and the people I want in my store?
• Secure your storefront property - Always be sure to negotiate for favorable lease terms for your storefront property with the assistance of an experienced broker. Once you’ve reached an agreement with the landlord or leasing agency, get your startup plans in motion to minimize pre-opening rent expenditures.
• Get your certificate of occupancy - Your city or county may require a Certificate of Change in Occupancy for your store before you start using your storefront premises. You will need to present detailed operational plans so the planning/building department can determine if your storefront is up to code for your intended use of the property.
• Make tenant improvements - Many improvements such as the surface level remodel of a bathroom can be done without a construction permit, but you should contact your local building department to be sure you aren’t making improvements that require a permit.

Register Your Store and Obtain all Required Permits and Licenses

Before you open your doors, you should have received all certifications, licenses and permits required for operating your store in your state.

• Obtain your Federal Employment Identification Number (FEIN) - Every company needs an FEIN for a variety of business reporting requirements, such as taxes and reporting new hires. You can apply for your FEIN here.
• Apply for a business license for your state - Search “apply for (your state) business license” and you should be able to apply online.
• Apply for a business license for your city (if required) - Many cities require a local business license in addition to your state’s business license, so find out if this is required. Search “apply for (your city) business license” to get started.
• Apply for a seller’s permit - Seller’s permits are required for all retailers. Search for “apply for (your state) seller’s permit online” to get started on your application.
• Get a resale certificate - A resale certificate will allow you to purchase goods from wholesalers without paying sales tax. Search “Apply for (your state) resale certificate” and you should be able to apply online.
• Register/trademark your store’s name - Register your store’s name with your secretary of state’s office, including any DBA name you will be operating under if your company’s legal name won’t be a great draw to customers. Registering a domain for your store name and creating a “coming soon” website page are great ways to trademark your store name inexpensively.
• Obtain all required licenses and permits for your operations - You’ve researched the relevant regulations that your store will be required to meet, so now is the time to put in applications for licenses and permits relevant to these regulations. For example, if your convenience store will serve hot food, you may need a food handler’s license and your employees may need food handler certifications from your state.

Choosing and Securing Inventory

The inventory you select should be chosen strategically to appeal to your target customers and obtained through favorable vendor relationships.

• Select inventory that will be in high demand in your area - The inventory your store carries needs to be exactly what your target customers are looking for. To accomplish this, visit your competitors to see what they carry, the kinds of customers they serve and what seems to be missing from their store shelves. You can also use Google Trends to research what product types and specific products/brands people are searching for online in your city or greater metro area.
• Evaluate various vendors/distributors - Before you agree to a long term contract or place a large order, always shop around with various vendors and distributors. You want a vendor with the right prices, but you also need someone who has your best interests at heart. The last thing you need is a contract with a distributor who is always trying to unload unpopular items into your store.
• Research competitor pricing and set your prices - You need to at least match your competitors on price, if not beat them. Though this may mean lower margins, sticker shock can cause customers to choose your competitor for good. That being said, if you are selling higher quality products than competitors, your customers will expect higher prices.
• Stock up for your grand opening - Your store should be fully stocked for your grand opening. The last thing you want are customers who leave dissatisfied and empty handed.

Design Your Convenience Store’s Interior

Your store’s interior creates the shopping experience of your customers and you want this experience to be top-notch and in-line with your business model.

• Design your interior and decide on decorations - Your store’s interior sets the tone for the shopping experience of your customers, and it should be designed with your business model in mind. For example, a music store should be inviting and warm, so that customers feel comfortable spending more time evaluating instruments and become attached to an instrument that appeals to them. Convenience stores, on the other hand, should be clean and clinical, so that customers get in, get what they’re looking for and get out without lingering and taking up the limited space in the aisles of the store.
• Design your store’s layout - Just like the overall “feel” of your store’s environment, your layout should be designed with your business model and customers in mind. For example, do your customers want to spend 15 minutes comparing different options, or do they want to get what they’re looking for, buy and leave in under a minute?
• Prioritize top selling items - Your top sellers should always be front and center. That being said, any item in your store needs to be visible to customers and top selling items should never obscure other items from view.
• Get POS and other retail displays - POS displays and other retail displays are great for grabbing the attention of customers and moving specific inventory items. Just be sure that your retail displays match the interior of your store and don’t stick out like a cheesy sore thumb.

Store System Set-Up and General Checklist

To ensure your store runs like a well oiled machine, you need to ensure that you store’s systems are properly set up and general requirements for your store are met.

• Open a bank account for your Store - Be sure that your daily maximum for number of transactions and total purchases will be acceptable before choosing a bank.
• Create branded paper/plastic bags - Branded bags are a great way to advertise your store through your customers.
• Decide which stockroom equipment you will need - Consider which stock room equipment will be most useful for the setup of your store. Common items include step ladders, storage shelves, storage totes, stockroom carts and dollies.
• Get barcode labels - Order barcode labels appropriate for the products you sell ( most likely UPC or EAN).
• Check fire protection features - Ensure that your fire extinguishers and fire protection systems are working, especially before your building is inspected by your local fire marshal.
• Get your store’s website live - Add webpages to the “coming soon” site you used to trademark your store’s name. Apart from listing your address and hours of operation, this site can be a great place to post reviews from satisfied customers, display popular inventory items and provide a way for customers to contact you (your company’s email).
• Find the best POS system for your store - Find a POS system that meets the needs of your store and that will provide a seamless checkout experience for your customers. You should also ensure that your POS system will easily integrate with the inventory management system you choose.
• Find the best inventory management system for your store - Continuous inventory management is essential, especially in high-volume retail environments. You should always evaluate your needs and options before deciding. CStorePro offers a free 30 day trial, so you can see our solution in action before you make a commitment.
• Invest in office supplies and a computer for your store - Get the office technology and supplies you need for operations like a laptop, a scanner, a printer, printer paper, pens, staplers, etc.
• Get furniture for your back office, break room and counter - Investing in some relatively comfy chairs or stools will help you and your employees to rest more effectively on their breaks and when sitting behind a counter while no customers are present.

Hire and Train Employees

Your employees keep your business running, but before they start their first day at your store, you need to ensure that they are adequately equipped and prepared for the work the will do.

• Uniforms and name tags - Uniforms and name tags should match the colors of your store’s brand, and should be made from high quality material. Cheap or ugly uniforms will be hated by your employees and will cause customers to feel uncomfortable. If it does not make sense for your employees to wear uniforms, establish dress guidelines for them to follow.
• Employee training program and employee manual - Your employee training program should be created to ensure that all employees are adequately trained and prepared for their on-the-job duties. Your employee manual should address topics such as conduct expectations, requirements for cleanliness and clothing, customer service expectations, drug testing policy and all other policies that your employees will be required to follow while working for you.
• Hours reporting system for employees - Whether employees will be entering their hours on a computer program or using physical time cards, choose a reliable system that takes minimal time for employee hours reporting and that is resistant to fraudulent reporting by employees.
• Create an example employee schedule based on your hours of operation - By creating an example employee schedule based on your hours of operation, you can determine your operational staffing needs and avoid under or over hiring.
• Set up payroll system - Find a payroll system that works for your store’s needs. To save time for managers, find a solution with employee hours reporting and automatic wage withholding/payroll tax payment.
• Hire managers and assistant managers - Managers and assistant managers need to be organized, trustworthy and effective leaders. They will be responsible for ensuring that your store’s operations are compliant with federal and state requirements and responsible for the actions of employees under their supervision.
• Hire part time and full time employees - Your employees are the face of your store and you should make hires who are hard working, honest and motivated to go the extra mile for customers. Hiring a mix of full time and part time employees will help you save on the benefits that may be required for full time employees.
• Train employees prior to your grand opening - All employees should be fully trained according to your training program before you open. Employees should also know how to use your POS and inventory management system and have a few practice interactions with you or your managers, who pretend to be customers with various requests or demands.
• Report all employees hired to your state government - Federal law requires all new hires to be reported to your state’s government within a set number of days following their hiring. You can meet these reporting requirements online by searching “report new hire online in (your state)” You are required to report the following information for each new hire:
• Employee name
• Employee address
• Employee Social Security number (SSN)
• Employee date of hire or rehire (the date a new or rehired employee first performs services for pay)
• Employer name
• Employer address
• Employer federal identification number (FEIN)
• Operating manuals - Create operating manuals for all systems and devices used in your store (POS system, Inventory Management System, soda machines, etc.) or use operating manuals provided by system vendors.

Launch with Your Grand Opening

Your grand opening sets the tone for your store’s reputation in your community and is an opportunity to make a lasting impression on customers.

Here’s how to make your grand opening a smashing success.

• Marketing your grand opening - To ensure that you have a high volume of customers for your grand opening, make sure that this event is highly visible. Other than a big “Grand Opening” banner or sign for your store, you should advertise your grand opening via fliers, posters, radio advertisements, print advertisements, online banner ads targeting your metro area and even TV ads if you have the budget.
• Grand opening deals and offerings - Great deals and offerings will make a great first impression on customers and encourage them to spend more money at your grand opening.
• Customer loyalty programs - Your grand opening is a great opportunity to enroll a large amount of customers in any reward or loyalty program you will offer. This gives you access to customer contact info, which can be used to promote special offers for these customers and secure their repeat business.
• Promotional items - Giving away promotional items like mugs, key fobs or other branded swag is a great way to make your first customers feel special. These branded items will also be free advertising for your business once they have left your store, so be sure that you invest in items that will be used by customers, not thrown out.

There are quite a few things to get done before you open your store, but this new store opening checklist will help you manage this complex process and help you ensure that your store opens and runs successfully.