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Buying A Gas Station: What To Look For When Doing Due Diligence

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Comments & Replies: 1     Views: 8638     Posted By: Peter Siegel MBA  



Topics: Buying A Business, Due Diligence     Tags: buying a business, due diligence



Doing your due diligence when buying any type of business is extremely important. Regardless of what type of business you are buying there are certain things you will always look at such as, financials, equipment, legal issues etc. However, certain business present a whole different and unique set of issues that need to be investigated. Gas stations with C-stores are one of these businesses that require you to do a little more research before you buy. For example; you are going to want to look into any environmental issues that may exist or that may present themselves in the future. Any environmental problems found after the sale will be your problem to deal with.

It pays to have an environmental survey done before making the purchase. You will also want to instigate a certified property survey or request to receive a copy of a recent certified property survey. Potential buyers must consider rent and pool margin on gas. If there is a car wash you'll need to inspect the age of the car wash equipment. Most car washes last about 10 years. Regarding the lease situation; if the land is owned by the oil company that’s a plus; if a third party owns the land, check the underlying lease between the oil company and the landlord. You'll also want to check the transfer fee and security deposit charged by the oil company.

Take a close look at the financial records. A gas station owner that also has a convenience store, car wash or other amenities may claim that there are cash sales included in the store's total revenue or sales. Bottom line, if they can't prove it can't be added in to the value of the business. Insist on seeing at least the previous two years’ worth of financial statements and have them checked by an accountant or CPA. Find out if the inventory included in the price of sale.

If you’re buying a franchise keep in mind that you will probably be competing with the same brand. Find out how many other franchisees are in your area and determine if the market is already saturated. Another thing to consider if you choose to go the franchise route; as a franchisee you are obligated to purchase your gas and products from the franchise in contrast to an independent owner who can competitively source their products from available distributors. That leaves some room for price negotiation; however, most enter into long-term contracts with suppliers in order to take advantage of discounts.

Would like to hear from other Advisors on BizBen what thoughts they have on this topic. Please feel free to add a Comment (and reply on any Comments contributed by others).

If you have other questions or topics that you would like discussed on BizBen regarding buying, selling, valuing small to mid-sized businesses etc. please phone me (Peter Siegel at BizBen) at 866.270.6278.

Replies To This Comment
 
Many excellent points, Peter. One thing I would add for buyers. Before you pull the trigger, contact the owners of your closest competitor gas stations. Make sure there aren't any brand changes coming anytime soon. I've dealt with situations where someone buys an unbranded station in hopes of changing to a branded station that is currently not in the immediate area. But then a major corporate merger happens or a one-off independent operator gets the same idea you have. The recent buyout of United Oil by a New York investment firm created situations where you saw two of the same branded stations at the same intersection. It's extremely important that you know you're headed in the right direction when you purchase. And you can't read the future unless you've spoken with the other players in your game.



  Helpful Resources To Assist In Selling And Buying California Businesses

Harry Sidhu, CBB, Broker - SF Bay Area, Central Valley, SAC Region

Assisting both sellers and buyers of businesses - dealing mainly with Liquor Stores, Grocery Markets, Gas Stations, Smoke Shops, Restaurant Related, Retail Related, Service Related. Serving SF Bay Area, North Bay, Sacramento area. Call Harry Sidhu, CBB for assistance at 510-366-6130.

Abdul Jobah, Business Broker, Central Valley, Kern County

As A Real Estate Agent, I offer my clients assistance with the sale or purchase of commercial properties and/or businesses. Please contact me if you are looking to sell or buy a Central Valley business. If at any time you have any questions please do not hesitate to call me at 661-703-3916.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.

Jack Oh, Business Broker - LA, Orange Counties

Business broker and real estate services in the Los Angeles and Orange County areas. 10 years experience with great negotiating skills. To sell a business or buy a business in the LA or Orange County Areas phone Jack and his team at 562-787-4989.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 800-864-0420.

Prabhjot Randhawa, Broker: SF Bay Area, Northern Central Valley

I'm a Business Advisor at Liberty Business Advisors of San Fransisco. I have over 20 years of experience in all phases of entrepreneurship. During the past 15 years my concentration has been in business of mergers and consulting. I have owned and operated over 10 businesses.

Ron Hottes, Broker - Serving LA, Orange, Inland Empire Area

LINK Business is a business brokerage team of 28 highly skilled and seasoned professionals. Our business brokers have over 100 years of cumulative experience & the expertise to help you buy or sell a business in the LA County, Orange, Inland Empire areas. Call Ron for a consultation at 310-539-8300.

Peter Siegel, MBA - SBA Loans, Non SBA Financing Assistance

For over 25 years I have provided niche business purchase financial advisory and loan placement services with SBA and Non-SBA Loans, Retirement Plan Conversions, Private Investors, etc. Financing amounts available: $20K to $7MM. Call today to get pre-qualified or receive financing: 866-270-6278.


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