Those seeking to buy gas station business opportunities need to know about five factors that can make this purchase particularly risky compared to other businesses. Along with food, clothing and shelter, Americans consider the fuel needed to run their vehicles a necessity. The chance to be on the selling end of that commodity is what drives a number of entrepreneurs to buy gas station business opportunities.
But there are at least five substantial risks awaiting the buyer interested in this industry. And it is critical to know about them.
1. What's underground? Among the costliest mistakes in a buy gas station plan is to examine only visible assets. While above ground equipment might be functioning just fine, an underground disaster is occurring if gasoline is leaking from storage tanks. The state of California is diligent about enforcing environmental rules for gas stations. For the new owner, especially one not protected by a franchisor, that means enormous clean up costs, not to mention the loss of business while the tractors dig up contaminated soil and the station has to be rebuilt. Requiring both Phase I and Phase II soil testing as a condition of purchase, is a must for the prospective buyer.
2. About those tanks. One of the first questions about California gas stations for sale is whether it has DWFG (double-walled, fiberglass) fuel storage tanks with leak detection sensors. If fuel storage for a possible purchase candidate has not been upgraded, it's best to focus the buy gas station business effort on other offerings.
3. Who's the real property owner? The land may not be owned by the seller, even if seller is a name brand franchisor dispensing its product at the station. Imagine buying a Chevron or a Shell Oil franchise and learning that the company holds only a lease--being sublet to you--which soon will expire. Anyone wanting to buy gas station business opportunities must insist on knowing who owns the property, whether mortgage payments, if any, are being made on time, and the duration and terms of any lease held by the seller.
4. Future traffic patterns. Many investors who have searched to buy gas station businesses have learned, too late, that a road construction crew would soon tear up the route motorists use to access the gas station business. This fact often is known by the seller. It might even be the undisclosed reason for the sale. So a trip to city hall and a conversation with planning and roads department people is an essential part of the pre-offer due diligence process.
5. Paying a fair price. Some California gas station brokers and sellers like to tie the business asking price to the gallonage pumped or to gross revenues. But the smart entrepreneur pursuing a buy gas station business objective looks at actual earnings before the seller pays, or sets aside money for interest, taxes, depreciation and amortization. In many cases, markup on the fuel sold may not be enough to cover overhead. The profit might come from a related business, such as mechanical repair, convenience market or car wash.
Knowing that most California gas stations sell at a price equating to the range of two to three times the annual EBITDA figure, not including real estate or inventory, a buyer can be prepared when talking price with the seller or broker. And whether the price at which to buy gas station business assets belongs at the bottom, the top, or in the middle of the range, depends on factors such as terms of the lease, seller's willingness to help finance, and condition of the equipment and improvements.
An entrepreneur on a buy gas station purchase mission is investigating an industry with solid opportunities. But he or she needs to be mindful about the five risks.
About The Author: Peter Siegel, MBA is the BizBen Founder / President. BizBen has hundreds of gas stations for sale and wanted to buy requests and lists numerous gas stations brokers/agents who assist buyers & sellers of California gas stations. You can reach Peter Siegel, MBA (Gas Station/Business Purchase Financing Expert, ProBuy & ProSell Program Advisor with BizBen working with buyers, sellers, brokers, and agents) at 866-270-6278.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|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.
|Elizabeth McGovern: Escrow Services - SF Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Ranvir S. Sandhu, Esq. - Legal Services For Buyers And Sellers
I've worked at top Bay Area law firms and have extensive experience with business entity formation, mergers, dissolutions, conversions, employment matters, including experience in reviewing and negotiating transactional documents such as leases and purchase agreements.
|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.
|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.
|Michael Floorman, Business Broker, 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.
|William Park, Business Broker - Southern California
Highest Volume Broker in California, Simply Check our HUNDREDS of Listings! Over 25 Associates, Speaking Dozen Languages, Helping Buyers and Sellers of Small Business since 1982, Centrally Located between Los Angeles and Orange Counties, while Riverside & San Bernardino Counties are Very Accessible.
|Matt Sadati, Business Broker, SF Bay Area, Northern CA
I have Engineering and Law, JD degree, with over 30 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 33 businesses each having one to 30 branches.
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