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Before You Buy A Gas Station Ask These 5 Questions


Before You Buy Gas Stations Ask These 5 Questions

Gas stations make for excellent investments for those looking to start or expand their own small business. You can buy gas stations in any town in any state on any street corner, which is both a good and bad thing.

The last census put the total number of gas stations at around 120,000. With so many choices out there, separating the wheat from the chaff is a challenge.

Ask yourself these five questions before you buy a gas station.

What Environmental Issues Might Lurk Underground?

After you buy gas stations, you also inherit any existing environmental conditions. Once the sale is complete, any problems found from that point on will be attributed to the current owner; it is extremely difficult to prove that a mess was there when you bought the property. Before taking the plunge to buy gas stations, it pays to have an environmental survey conducted. Pay attention to extra services that are offered on the same site as the gas station, such as a car wash or auto repair shop that can also be a source of environmental issues.

What Are You Getting When You Buy Gas Stations?

Are those extra services and equipment part of the sale? Does the actual building and the land have different owners? What does the current lease terms look like and will you have to renegotiate or be locked in to legacy terms? Not all of these questions are readily apparent and could be a potential red flag lurking beneath the surface.

What Do The Records & Financials Look Like?

Poor recordkeeping can disguise the true value of a gas station, especially for locations with gas pumps, a convenience store, car wash, and other amenities. An owner might insist that they have "cash sales" that they include in the store's total revenues or sales. Bottom line -- if they can't prove it, don't add it into the valuation. Insist on seeing at least the previous two years worth of financial statements and have them checked by an accountant or CPA.

What Other Hidden Problems Might There Be?

Maybe there is major road work scheduled right in front of the gas station, scheduled to take at least 6 months for completion. How would you stay in business if you had limited business right at the start? Check with local authorities and records to make sure you buy gas stations at a good time.

What Are Your Financing Options?

Make sure you are fully capitalized. Can you qualify for a Small Business Administration backed loan? Is the seller offering financing terms? Do you have to dip into your home equity or 401k to muster up funds? The terms on your startup capital will dictate how much risk you can tolerate; it is a risky proposition to literally bet your house to buy gas stations.

Also, it is important to conduct the usual due diligence checklists before you buy gas stations in addition to these five industry specific questions. Doing the necessary 'homework' and research really pays off when buying any business, and gas stations are no exception. By knowing all the facts ahead of time, you'll be able to make a smart business investment.

Looking to buy a gas station business? See all gas stations for sale in California - or sell a gas station business and reach thousands of gas station buyers.

Categories: BizBen Blog Contributor, Buying A Business, How To Buy A Business

Contributor:

Peter Siegel, MBA
Areas Served: All Of California
Phone:  925-785-3118 Cell, 925-785-3118 Text
Founder & President Of BizBen.com (since 1994) & BizBenNetwork.com. I am the Lead Facilitator for the ProSell & ProBuy Programs on both websites. I consult daily with buyers, sellers, and intermediaries daily about buying and selling businesses. Call 925-785-3118.

Comments Regarding This Blog Post


Impending Roadwork - Check with the local building department and see if there are plans for any significant roadwork scheduled, which could affect availability to the gas station location.

Crime - Many gas stations are open 24 hours and have convenience stores, and so these can be magnets for "hold ups". Check with the local police department, and investigate if this store attracts crime. Bright lights, clean windows (not obscured by signs), and surveillance cameras can help deter crime.






  Helpful Resources To Assist In Selling And Buying California Businesses
Shalonda Chappel-Pilgram: Escrow & Bulk Sale Services - Southern California

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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.

Brad Steinberg, Business Broker: Laundromat Specialist

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

Matt Weiler, Business Broker: Gas Station Specialist

Business Broker Specializing in primarily gas stations. Geographic area of focus: San Francisco Bay Area to Sacramento and as far South as Monterey, California. To sell or buy a small or large gas station phone Matt (gas station business broker specialist) direct at 408-623-0920.

Bob Hughes, Business Broker: Coachella Valley Area

Bob Hughes is a business broker & is President of Hughes Properties. Hughes has a wide variety of entrepreneurial experience with the personal ownership & sale of numerous businesses, and has sold over 200 small & mid-sized businesses in the Riverside County marketplace. Call Bob at 760-323-8311.

Michael Floorman, Business Brokerage, BTI, San Francisco Bay Area

Business Team, San Jose (Campbell) located in the Pruneyard Towers at Bascom and Hamilton. Established in 1981 Business Team with over 6600 sales to date has 1000 business listings to choose from, paid Google advertising. We offer highly trained and experienced professionals.

Elizabeth McGovern: Escrow Services - San Francisco Bay Area

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