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

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Comments & Replies: 1     Views: 11226     Posted By: Peter Siegel MBA  Peter Siegel MBA: BizBen Founder, ProBuy/ProSell Program Director



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
 
Contributor: Business Broker: LA County Area  Post ID: 976
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
Taj Randhawa, Business Broker Specialist - Gas Stations, Liquor Stores

If you are interested buying or selling a gas station, liquor store feel free to phone me for a consultation. My vast experience & specialization in gas stations & liquor stores helps me in serving my clients with full confidence, trust & sincerity. Serving Central Valley, SF Bay Area. 559-259-4247.

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.

Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

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.

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.

Michael Davidson, Business Broker - Southern California

Los Angeles Business Broker providing M&A quality services for Small Business Owners. We leverage our technology and expertise to Simplify & Expedite the Business Sales Process. Matching the right buyer with the right business is how we define success.


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