How to run a gas station business

Written by john hewitt
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How to run a gas station business
Gas stations help to keep the world mobile. (petrol station image by .shock from Fotolia.com)

The petrol station business is extraordinarily competitive. Business owners that select an excellent location and run an inviting convenience store, car wash or auto mechanic shop can turn a steady profit. As with any business, gas stations have some complexities, including environmental issues related to gasoline storage, that make it challenging. In addition, profit margins on gasoline can be less than 10 per cent, making it important to develop alternative revenue streams.

Skill level:
Moderately Challenging

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Instructions

  1. 1

    Find a petrol station to purchase, or select a location on which to build your own. Decide between running a station through a franchise - allowing you to sell gasoline branded by a major oil company - or running an independent station. Be aware that brand stations charge more for gasoline, but provide preferred contracts with franchisees. Note that independent owners can access lower gasoline prices, but must use their own brand name when selling.

  2. 2

    Evaluate the station or location for viability. Estimate the number of cars that pass a potential location during a day, paying particular attention to rush hours. Use that estimate to compare alternative locations. Request all accounting statements and contact the local bureau of watershed management or similar agency for information on area contamination. Find out how the area is zoned as gas stations are often banned from residential and commercially zoned areas due to pollution and traffic issues. Regulations differ among municipalities.

  3. 3

    Create a business plan, even if you're taking over an existing location. Note that gas stations usually make the majority of revenue from convenience stores, maintenance shops, car washes and other similar businesses with higher profit margins. Consider as many alternative sources of revenue as possible as gasoline can primarily be a draw to get customers interested in other products.

  4. 4

    Purchase the petrol station or the land on which to build it. If you can't afford to buy it outright, find partners to invest in the project in return for an equity stake, or consider a business loan. The relatively low profit margin of gas stations tend to make it more sensible to fund in cash, however.

  5. 5

    Negotiate deals with gasoline suppliers and assorted side businesses. As a franchisee, that process is relatively simple; independent owners need to take a broader look at the selections available. Be aware that petrol station owners have a relatively weak negotiating position, however, as any one petrol station only makes up a tiny percentage of the business that an oil company does. Owners that possess a wider network of stations often have the clout to negotiate lower prices and benefit from higher profit margins.

Tips and warnings

  • It's usually wise only to stock diesel if the petrol station is accessible to trucks and other vehicles that require it. Diesel cars are in the minority in the United States.

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