Be sure to weigh the pros and cons of each type and seek professional advice if necessary. Here is a list of our partners. To help you get started, here are some tips to keep in mind: By following these steps, you'll be well-equipped to run your gas station business efficiently and successfully. There are so many factors to consider, from the logo design to the colors you use. However, with all the costs involved in starting a gas station, we recommend opening a separate bank account to keep your business and personal finances separate. If your gas station is located on a busy city intersection, it probably wont make much sense to provide a restaurant for customers; but if youre on a busy highway with few nearby dining options available to travelers, then adding a restaurant could be a great idea. In a time when it's a challenge to pull in a ton of profit on gas alone, you will need to upgrade. If you're just starting out and selling to family and friends, a sole proprietorship may be enough. When deciding on the right type of entity for your gas station business, it's important to consider your liability exposure and your goals for the business. Its simply important to have an idea of what you want to become before you start researching whether its feasible with the resources you can muster., Once youve got an idea about the business model youll be using, its time to start writing up a business plan. However, this does not influence our evaluations. A gas station franchise gives you the advantages of a full-service business, such as convenience, location, technology, and branding, while reducing your start-up costs. As a CODO (company-owned dealer operated) format, you will earn a commission per L of fuel sold. Here are some of the biggest factors that affect the cost of running a gas station franchise. Building a business plan for your gas station business is incredibly important for any aspiring business owners. When it comes to alleviating inflationary pressures brought on by the fuel sector, artificially lowering sign price is not the lever that will do the most good. Average net margins in US gas stations are between, As fuel prices rise, gas station owners often, counter-intuitively earn less. An added benefit of investor capital is that the financial risk is on the investor., Now its time to spend all the money youve gathered and get your venture off the ground. So as prices change in the oil markets, its stressful not only for consumers but also for the fuel retailers. As mentioned, there are two main types of gas station business: independent gas stations and franchised gas stations. Here are some of the key costs associated with launching a gas station: Yes, gas station businesses can be profitable but it depends on the size, location and management of the station. Gas station owners in the Midwest could earn around $61,000 on average annually, while operating a gas station in the South could earn you around $66,000 on average per year [1]. Through the development of a comprehensive business plan, entrepreneurs are able to accurately assess resources and expenses, set realistic goals, create achievable timelines and craft strategies to succeed in the competitive market. It seems like the industry is finally picking back up again and returning to pre-pandemic levels. This alone will affect where you look for it.If you are buying an existing gas station you might be able to negotiate a sellers note with the seller to finance a portion of the acquisition price. These include:, However, its not all doom and gloom. Refer back to your customer profiles on page 2 for each segment of your market., This will lead from your market research and products and services pages, and be a natural progression from there. Something went wrong while submitting the form. Simply selling gas in a single, rural location will require significantly lower startup costs, and may be possible with less than half of this figure., On the other end of the scale, a large, franchise-model company with multiple outlets in popular cities across the country could be started with something along the lines of $7.5 million. This chore becomes more of an annoyance when people drive into a fully-packed gas station. Pros: Quick access to capital; flexible repayment terms. Often, drivers will stop by for gas in the early morning before work. After you learn from that and save up, buy a gas station. In some states, you may also have to publish a notice in a local paper. Its understandable that consumers are eager for relief at the pump and might quietly wonder if fuel retailers are making record-high profits and whether they could be doing more to lower prices faster. Registered Agent Directory, Check out our small business software & tools review directory, Check out all of our small business marketing ideas, Gas Station Business Plan Template & Guidebook, Best Automotive Business Ideas & Examples in 2023, 75+ Unique, Creative & Funny Gas Station Business Slogans, How to Set up an LLC For Your Gas Station Business in 5 Steps. All financial products, shopping products and services are presented without warranty. Its really up to you to determine how many bells and whistles youd like to add to your humble gas station, whether it becomes a convenience store selling snacks and bottled beverages, or whether its a full-on travel plaza with a restaurant (or two). Having a structured plan in place to guide decisions, actions and goals is the key to success for any business. If youve got previous experience and a great business plan, you might have some luck here, although the profit margins on gas are a very unattractive component to this venture, so dont be surprised if youre rejected, especially if you dont have much in the way of alternative revenue streams., Small Business Administration loans help secure your finances by backing loans by up to 85%. Be sure to research the legal and financial requirements for your chosen entity and comply with all necessary regulations. 5. On a $100 fill-up, gas station owners could pay $3.50 plus another small fee. How much does it cost to start a gas station? Forward dividend yield (as of . Both local and global economic factors are also at play, and the politics of whether road transport is promoted can change demand too. Hes written on a broad range of Surprisingly, the cost of crude oil only accounts for around 52% of the price of gasoline [4], so while its easy to blame big oil, theyre not the only ones who affect gas prices. Share to Facebook Share to Twitter Share to Linkedin EV charging stations -- unused -- in a parking lot. Write compelling website copy. Usually, the realization that processing fees are eating into your profits only comes when you review your bank statements. Many gas stations are open 24 hours a day. The key is to make informed decisions that work best for your current situation. These, and many other factors, go some way to explaining how profit margins on anything related to fuel are so volatile. We break down some of the biggest profit-eaters for gas station owners below. There are several advantages to buying a franchise, like using an existing trademark and operating within a proven business model. Grey's Anatomy star Kevin McKidd, 49, and Station 19 actress Danielle Savre, 34, were seen making out and getting handsy with each other on vacation in Lake Como, Italy on Wednesday, May 31. (Estimates Revealed). For example, a gas station located near a college campus may define its ideal target audience as young adults between 18-22 years of age from nearby cities who are looking for convenience and low prices. My passion for entrepreneurship drives me to share my expertise with aspiring entrepreneurs, empowering them to turn their business dreams into reality. Since 2012, over 50,000 entrepreneurs from around the world have used ProjectionHub to help create financial projections. The markup, then, would bring in 20 cents of revenue. Use of this site constitutes acceptance of our Terms of Use and Privacy Policy | CA Notice at Collection and Privacy Notice| Do Not Sell/Share My Personal Information| Ad Choices This can be done yourself, but for something as complex as the fuel industry, it may be a good idea to get some expert help., This document will be a significant contributor to your success for several reasons. Through meticulous research and firsthand experience, I uncover the essential steps, software, tools, and costs associated with launching and maintaining a successful business. Starting a new gas station business can be an exciting adventure, but it's important to remember that obtaining the proper licenses and permits is a critical step in the process. Like all industries, the retail fuels industry goes through regular high and low-margin periods. Your gas station location will influence how much traffic you attract, so it should be a priority when youre brainstorming how to open a gas station. If you're looking to buy an existing gas station, the cost will depend on the size and location of the gas station and the condition of the buildings and equipment. While your income will come out of the profit your gas station earns, so will every other expense you have during the year. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. , so while its easy to blame big oil, theyre not the only ones who affect gas prices. In your market analysis, here are some questions you want to answer: How can you eliminate those weaknesses in your own business? You can configure your email account to forward messages to your business phone number so that you never miss an important message from a customer. Nonetheless, our extensive research and hands-on experience have revealed an estimated starting cost of approximately $1835000 for launching such an business. Even still, traditional lenders dont usually lend money to new businesses. Here are some additional tips to improve your marketing strategy: Remember, marketing is an ongoing process, so be sure to track your results and adjust your strategy as needed. Margins have started coming back down to average, and sign prices are following as the market begins to equilibrate. After all, the oil and gas industry has soared to over $180 billion in 2018. Please note, not all of these costs may be necessary to start up your gas station business. Using a specifically designed financial projection template for gas stations, you can create a professional-looking document that facilitates your accurate financial forecasts in a presentable manner. Gas suppliers often earn a percentage of your sales, so you should do a thorough rate comparison to ensure you are maximizing your own profit margins. These come with free support and can be customized based on the specifics of what youll be selling. You may want to consider consulting a business attorney to determine which legal structure is best for your needs. You might see BP, Shell or Mobil signage, but in reality, half of them are small businesses, called independent dealers, and theyre at the mercy of the market. 5. You must know them as you review franchise agreements and . While not unique to gas station owners, credit card fees are rarely thought about ahead of time. If your station is in the West, youre more likely to make around $60,000 annually on average. It will show you whether they are a proud owner of the gas station or not. Have you ever wanted to open a gas station but kept delaying it because you didnt even know where to start? Youll also describe the legal structure and list all the relevant experiences of your management team to highlight what theyre bringing to the table., As we mentioned, your gas station will likely need a little help from other products and services to stay afloat and weather the unpredictable nature of the fuel industry. The address of your prospective business may be one of the most important factors to take into consideration when deciding whether to own a gas station. ), Self-serve beverage fountains (coffee or soda), A gift shop with local souvenirs or practical travel items. Also, you should research the equipments repair history to determine the remaining shelf life. This will verify whether you should reuse or replace the existing equipment. Boost your rating by offering stellar customer service, clean facilities, and responding to reviews. Having a gas station in a location with high foot traffic can increase the number of customers and potentially result in higher profits. You're entering into a world that goes far beyond pumping gas. The information provided on this website (the "Site") is for general informational purposes only and should not be construed as legal advice. Upside data shows that gas stations are selling four percent less gasoline than last year. Oops! Decide what pages and content will be included on your website and how they will be organized. However, you would need to pay royalties to the parent company. July 8, 2022 Sprockets Convenience store revenue totaled $663.5 billion and grew almost 25% in the last year, according to the 2022 Convenience Store News Industry Report. As a new gas station business owner, it's important to prioritize setting up a proper accounting system to effectively manage your finances. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion directly. However, LLCs usually experience more difficulty raising money from investors. Starting a gas station is going to be a similar process as starting a convenience store, but with a lot of extra steps, as in many cases, thats exactly what a gas station is for a significant number of its customers. The typical U.S. fuel retailer has at least one competitive gas station only 0.016 miles away and at least 1.5 stations within a half-mile radius. After all, Forbes reported last fall that many private gas station owners barely make two cents off every dollar of gas sold. Your submission has been received! What do you want to achieve with your business? Many gas station owners increase their profit margins through their convenience stores. When fuel prices hit record highs earlier this summer, Biden and Bezos publicly argued about whether fuel retailers could alleviate the pressure on consumers by reducing markups at the pump. Be sure to regularly reconcile your accounts and update your records, ideally on a monthly basis, to stay on top of your finances and avoid headaches down the road. See how much you could earn by owning your own gas station. Gas Station Business Plan. One tip when choosing a business location is to research up-and-coming neighborhoods. The unknown man entered the BP located on Atlantic Avenue just after 10 p.m. In addition to recording the number of gas pumps and fuel options will be available at your gas station, you should research additional products and services to boost your profit margins. Opening a business bank account for your gas station company may seem overwhelming, but it doesn't have to be. Within this, business models can vary. Well help you understand the legalities, financing options, and provide crucial tips for success. Hire a professional website designer or work with a freelancer. If youre wondering how to start a gas station, weve got some important information for you. Can you buy stock in gas station? If you expect to own a chain of gas stations or grow your gas station brand to compete with industry leaders, like Shell of Chevron, then a corporation may be the business structure for you. If an environmental site assessment yields unfavorable findings, you can withdraw from the sale and get your deposit refunded. What does this mean for vehicle owners? These convenience stores have many of the same characteristics as supermarkets and grocery stores. Get worry-free services and support to launch your business starting at $0 plus state fees. A gas station business makes money by selling fuel and convenience store items to customers. Just leave your details we'll be with you shortly. Further, this fluctuation in prices makes it very hard to project financial situations with any certainty.. And your cost is generally based on refining costs, distribution costs, and crude oil prices. According to the National Association of Convenience Stores, the average privately held gas station made only 0.02 cent of profit on each dollar of sales.. Undoubtedly gas stations do give a great rate of profitability. Dan Marticio is a freelance writer. So if you are ready to take control of your financial future and start a profitable gas station business, read on! This will ensure that your customers can find what they're looking for quickly and easily. 1. Starting a gas station business can be a challenging task, and acquiring the proper equipment, tools, and supplies is crucial for success.. It will detail how the information youve found leads to the strategies youre proposing for marketing your products and getting them sold. And those who do, are faced with some common challenges. NerdWallet Compare, Inc. NMLS ID# 1617539, NMLS Consumer Access|Licenses and Disclosures, California: California Finance Lender loans arranged pursuant to Department of Financial Protection and Innovation Finance Lenders License #60DBO-74812, Property and Casualty insurance services offered through NerdWallet Insurance Services, Inc. (CA resident license no. Follow Jan 25, 2021,08:30am EST Listen to article This article is more than 2 years old. Operating a gas station can expose you to several risks on a daily basis: burglary, employee injury, equipment breakdown, property damage, and more. However, when starting a gas station, we do not recommend operating as a sole proprietor. All financial products, shopping products and services are presented without warranty. 1. You may also end up paying higher business taxes [2] in some locations than you would in others. These retailers rely on daily profit margins, which are extremely thin. Define your website goals and target audience. Fast, secure and reliable. Owners of gas stations that do more than sell gasoline earn more money because the profit margins of the other things they sell are high. But if you take the time to plan and focus on what you want your customers to feel, you can create a brand identity that will set your business apart from the rest. Its not an understatement to say that theres a gas station on nearly every street corner. Before we get into how to own a gas station, lets see what the industry is like as a whole., The current market size in 2022 is $138.3bn, representing a growth of 10.4% in the last year. You might be surprised that many gas stations dont make a significant profit from selling fuel. Location: Location is a key factor when it comes to the success of a gas station. This business structure tends to be attractive to gas station owners who choose to stay small, especially if they own only one gas station. Running inventory every day will help you identify when your reserves are low and you need to restock. Don't forget to renew your licenses and permits regularly to stay compliant with local regulations. To make sure you have all the necessary licenses and permits for your gas station business, start by contacting your local business licensing office or chamber of commerce. A common misconception about gas stations is that theyre all owned by big corporations that can sustain big losses. Unlike most other services, gas stations will almost always be in demand. This compensation may impact how and where products appear on the Site, including the order in which they appear. How profitable is a gas station? Also, the cost of replenishing your fuel reserves can rack up quickly. But with the right mix of hard work, passion and market understanding, you can make it happen. Open a business bank account in which you deposit all of your gas station's earnings. Recent statistics indicate there are over 121,000 gas stations operating in the United States, employing nearly 930,000 people. Everybody likes it when things are stable. Unfortunately, all of these factors are beyond your control, and you can only charge so much for gas and have customers come back to your station. This list of 11 energy stocks straddles both fossil fuels and renewables, and most of these companies pay a generous dividend to shareholders as well: Energy stock. How much to invest in gas station? How much profit can you make owning a gas station? newfounder is a modern day business media company that helps entrepreneurs build successful businesses across the globe.867 Boylston St 5th floor, Boston, MA 02116. Speed up service, reduce ticket errors and manage incoming orders. Their expertise and support can help you navigate the accounting process with confidence. Having such information readily available will prove invaluable during future funding rounds or when competing for contracts. These are designed specifically to help small businesses like yours get started, and often require low down payments. Once you've obtained all the necessary licenses and permits, you can officially open your gas station business and start operating with confidence. While we strive to ensure the accuracy, validity, and reliability of the information on the Site, we cannot guarantee its completeness or availability. By taking the time to obtain the proper licenses and permits, you'll be setting your gas station business up for success and avoiding any potential legal issues in the future. Pros: Typically low interest rates; predictable repayment terms. So how do we make money? If youre looking to start a gas station, youll want to consider this closely, as it may make the difference between whether your gas station is profitable or not in the long run.. All rights reserved. Restaurant Turnover Rate: How To Calculate It? Why gas stations are a popular investment Gasoline sales in the United States are on a constant increase. Sign up for theFortune Features email list so you dont miss our biggest features, exclusive interviews, and investigations. Operating Costs: High operating costs, such as personnel costs and the cost of maintaining the station, can significantly . Another factor to consider when it comes to choosing a location is where your competition is located. If you decide to buy a franchise, make sure you have a business attorney review the legalities of any franchise agreement before signing. Also, youll want to confirm that the domain name is available with sites like Name.com or GoDaddy.com. The licenses and permits required to run a gas station business depend on the country, state and local jurisdiction. As we mentioned before, starting a gas station has a high financial entry barrier. Terms & Conditions. This will be how you figure out where your company fits into the industry and what makes it stand out. You can then use the money deposited into that account to buy what you need for the gas station's operation. Even the weather plays a significant role in the demand for fuel at any given time, in any area., Some of the key macro drivers are, therefore:, So, theres a lot of cause for fluctuations. It is a fascinating and dynamic business. You can expect to pay at least $50 to $70 per 20-gallon barrel of fuel. In addition to the fierce competition, gas stations must also get consumers to show up at the pumps. Aug 16 Written By EV Connect If you're a retail or hospitality business owner, property manager or developer, landlord or even a city planner in an area where many residents drive electric vehicles, you may be wondering, "Are electric car charging stations profitable?"