The first thing to know when buying a gas station is that you are unlikely to get rich selling gas. In an urban area the typical margin per gallon of gas is 6-9 cents per gallon. In many cases credit card fees will wipe out any profit on gasoline sales. This is why it is becoming more common for stations to offer split pricing, one price for cash and another for credit.
While many people assume that higher gas prices mean more profits for gas stations owners – very often the opposite is true. Higher prices generally mean lower sales volume while at the same time squeezing already tight margins.
The key to a profitable gas station is the “inside sales”. Here margins typically run as high as 35%. Groceries, beverages and tobacco sales are lucrative. Other income streams such as car wash, lotto and ATM fees are common. Increasingly gas stations are serving prepared food and gourmet coffee in an effort to boost the bottom line.
To be viable most gas stations need at least $30,000 per month in inside sales. While gas is not very profitable it is a good lure to entice people into the store. Gas stations near major Interstates can do very high volume and are sought after.
The industry has become increasingly competitive and is always sensitive to the general economic climate. On the positive side everyone needs gas and a gas station with good inside volume can be highly profitable.
While there are gas stations that sell mostly or only gas, most stations also have a convenience store attached. For the purpose of this article I am dealing with the gas station/convenience store operation.
Author Anthony Rigney is a Florida based Business Broker and Board Certified Intermediary (BCI). He is also the owner and founder of Quorum Business Advisors, LLC.