Gas Station Business Opportunity: Lucrative?

I just received a newsletter I subscribed to that sparked my interest to explore more: BizBuySell reports that gas station business listings dominate in 3 out of 7 most viewed listing in July 2010. What’s the big deal of gas station business opportunity?

I never really into gas station business opportunity until I read some articles to explore deeper into it.

Now – the first issue would be: Why gas station is a lucrative business? Referring to Cyrus Business Brokers and BuyerZone‘s articles, there are a couple of advantages of owning a gas station:

• Gasoline is essential in our lives – to say the least, people who own and/or drive vehicles need to buy gas, regardless of the soaring gas prices.
• Gas station + mini mart/convenience store = profit – adding mini mart or convenience store (some add fast food restaurants) to the gas station location means more revenue and profit.

However, BuyerZone’s article mentions that owning a gas station is not really simple. You might want to consider these issues to see whether a gas station is THE business you want to really get into.

• Large up-front capital – a gas station business opportunity is not cheap – land investment, licenses, etc. could cost you a fortune; not only that, you might encounter problems in acquiring funding from financial institutions because gas stations are considered to be risky and time-consuming.
• Plenty of due diligence – e.g. (costly) environmental testing; local officials need to assess your property to check whether your gas station is free from dangerous substances; and other due diligence, such as local market research, etc.
• Not newbie-friendly – to own a gas station, you are required to have an experience in the industry.
• Low profit margin – gas stations are typically low in profit margin; e.g. a Mobil gas station for sale in Gardena, CA makes $108,000 cash flow from $3,500,000 gross income.

Not being pessimistic, but I agree to the points above – it’s not easy to own and operate a gas station, indeed. However, gas stations offer their owners a big upside:

An opportunity to have a passive-income business.

Typically, gas stations – by nature – don’t require owners to be around on regular basis. However, do bear in mind that if you are buying a gas station franchise, you need to comply with the franchisor’s rule whether absentee ownership is allowed or not.

My opinion: I like the passive-income potential, but given the large up-front capital, the low margin and the level of due diligence required, I’ll pass this business opportunity. If I do have $350,000 in start up funding, I’d go for a restaurant business (or even an online business,) instead.

This article is simply my early (and newbie) observation on gas station business – so please consider it as informational purpose only. For more expert advice and opinions, you should consider contacting a well-trusted business brokers.

Ivan Widjaya
Gas station business opportunity
Image by Wonderlane