How to Open a Gas Station — Ultimate guide
How to open a Gas Station
They say in order to open a fool-proof business, choose an industry that you know will be around for a long time. What is more needed than the fuel we use to gas up our vehicles? So much of our economy is dependent on the ability of cars and trucks to make it across state lines; without gas in our cars, think of how many orders would go unfulfilled, or of how many deliveries would be canceled. It’s enough to make your head spin.
Look at the Market
Depending on the area you’re looking into, gas stations are quite literally everywhere. You will not want to position yourself in a location that is already saturated.
In looking at the market, you will have to determine the following:
- Who are my competitors?
- What advantages might they have over me?
- What can I do differently than them?
- How can I maximize profit given my location?
- What threats are present to the success of my business?
Really take your time with this market research.
Sit down and write out the answers to these questions if you must. You will want to know the ins and outs of this industry, and doing your homework will get you to that point.
Craft your Business Plan
Any business, no matter the industry, begins with a business plan, which is essentially an overview of how you are going to run your company. Within your plan, you will identify a few crucial factors:
- Executive Summary. Provide a quick summary of who you are as a company, where you’re located (or intend to locate yourself), and outline the goals you have. This section might also feature your mission statement.
- Company Summary. In this section, you will go over all of the necessary costs toward starting your company. You will list what these costs are, the dollar amount, and any assets, liability, and capital. Total funding that you receive or plan to receive will also go in this section.
- Products. What do you plan to sell? In Step 3, you will determine whether or not you will simply sell gas, or if you will also have a convenience store on your property.
- Market Analysis. Remember those questions from Step 1? Those should be outlined in this section. Discuss the threats to your business, your strengths, your weaknesses, and your target market. Any information on your competition will also go here.
- Strategies and Implementation. Consider this the roll-out section. How will you begin? What steps will you take to make your business dream a reality? What strategies do you have in place to market yourself and maximize sales? Any predictions (known as a sales forecast) will go in this section.
- Personnel and Finances. In this section, you will highlight any wages paid to employees. You will also include a profit and loss projection, so have your numbers and that sales forecast ready.
Gas, or More?
Another great question to ask yourself is this: do you want to service mostly cars, or do you envision yourself as more of a truck station? This will determine how you market yourself and can influence your equipment needs.
A commercial fuel station — which services commercial vehicles such as trucks — tends to need more space to accommodate some of those larger trucks (think 18-wheelers), while a retail fuel station does not.
However, a retail fuel station will attract car loads of families on road trips, so in that instance, it might be a good idea to think about expanding beyond selling just gas.
Remember that if you decide to go the convenience store route, that means more products you will have to buy.
You will have to equip yourself with more cash registers and potentially more employees to have people oversee the fueling area as well as the convenience area.
If you live in a state in which customers can pump their own gas, you might not need too many more employees. New Jersey and Oregon are the only two states in which customers cannot pump their own gas. Use this knowledge when you plot your location.
Form your Business Entity
Business owners can choose what type of business they would like to establish based on the industry, services provided, and — most importantly — the level of risk they might incur. There are four main types of business entities. They are:
- Sole proprietorship
- Limited Liability Company, or LLC
While the idea of sole proprietorship might seem appealing since there is no distinction between the actual business and the owner (who would be you), this is actually not the most popular decision for gas station owners. Due to the risk involved, such as potential thefts and problems with equipment, many gas station owners opt to establish an LLC, a Limited Liability Company. Should you encounter any trouble as a result of your business, an LLC prevents your personal assets from getting taken away to collect business debts. The best course of action, however, is to consult with a business attorney for more clarification.
Each state has its own requirements and processes for registering a business entity, so be sure to check your state’s website for specific information.
A great resource is the U.S. Small Business Administration website, which will walk you through how to register your business, how to apply for an EIN (Employer Identification Number), acquiring tax information, and more.
Acquire Your Property
Location is everything when it comes to the success of gas stations. In some parts of the country, the area can be completely saturated, which would drive competition up. In other parts of the country, yours might be the only gas station around. If you have more freedom of choice when it comes to location, choose an area that is a combination of both factors mentioned above.
Another aspect to consider is ease of access. Drivers would much rather patronize a gas station that is easy to enter and exit, versus one that has a complex driveway or one that is located on a fast, dangerous highway. Put yourself in the mind of your customers when scoping out a location.
Finally, you will have to figure out the intricacies of ownership when it comes to the property. Is the property and all corresponding equipment in your name? If you are purchasing a franchise — which means you are owning a gas station that is just one out of many from the same company, such as Chevron — you will also have to figure out what is legally yours, and what is not.
When working with a franchise, there are specific start-up costs involved, and many of them have an expectation that you will have a certain sum of money from the get-go.
When working with the 7-Eleven franchise, for instance, you can expect it to cost around $20,000 to get started. Bigger franchises will come with an even heftier price tag.
Products and Personnel
When it comes to stocking and restocking your products, you will want to invest in a good point of sale system, also known as a POS System. This website has a great list of POS Systems available to small and medium-sized businesses alike. Simply put, POS Systems allow you to keep track of trends with your products, which products you need to re-order and which are not doing so well, and options to entice more customers with rewards programs and promotions.
Keep in mind when you organize your finances that you are going to have to account for employee salaries. If you operate a 24-hour gas station, that is going to come into play.
The employees who are working the overnight shift will more than likely be responsible for stocking the shelves if your station includes a convenience store.
Even though the POS System takes care of a lot of the numbers, a good employee should also have a general understanding of how much product you have on hand, and when to re-order.
The last step before the grand opening of your gas station will be acquiring all of the necessary paperwork. This includes a contract between you and the supplier of gas. As with all other contractual relationships, you will want to shop around to make sure you are getting the best deal. Many gas suppliers will ask for a percentage of the sales you make, so be certain that you’re running the numbers to see if the contract makes sense. When in doubt, consult a business attorney to help you.
You will also need to obtain the proper licensing and permits. Each state government’s website lists the type of permits you will need as well as the legislative body you can consult if you need assistance. However, you will more than likely need a combination of the following documents before you open your doors:
- Operational license
- Zoning permits
- Fire and tank inspections
- Registration for gasoline tankers
- Motor fuels retail outlet license
Note that if you sell alcohol and or cigarettes on your premises, that is another permit. Again, be sure to consult with a business attorney as well as the proper state governmental body to ensure you have all of your paperwork.
Though it might seem challenging at first, owning your own gas station is well worth it in the end!