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How to Start a Profitable Gas Station Business

Do you want to start a gas station business? If so, find here a detailed stepwise guide on starting a gas station covering aspects like costs, licenses, market opportunity, and many more.

It is without saying, that gas station is a profitable business across the globe. In the United States, a report from U.S Energy Information and Administration predicts that crude oil production will reach 12.8 million barrels per day in the year 2024.

However, the number of existing gas stations still does not meet the demands wholly. Hence, there is a good scope for new entrepreneurs to open a gas station and make good money.

A gas station is a retail business engaged in selling fuel for personal or commercial vehicles. Right at the outset, it must be mentioned, that starting a gas station requires a huge amount of investment. If you can invest or have a financial investor backup and are highly passionate about the automobile industry only then consider starting a gas station business.

Here are the 14 Steps to Start a Gas Station

1. Understand the Market

As with any other business, it is extremely important to understand the local market. The target audience can be broadly categorized into three sectors. First is the local residents, the second is families on a traveling trip, and the third is the trucks running for distribution materials.

It is advised to go for market research and collect information regarding local demand, competitors if any, products and services offered by them, and much more. It will help you in finding the gaps and accordingly plan your gas station business.

2. Decide on the Products/ Services

Talk to existing gas station owners and learn the day-to-day operations of running it. The primary job is to fuel vehicles and restock fuels and gasoline. However, most gas station owners add convenience stores and sell different types of food items and other items required while traveling. You can also run services like a car wash, and air stations at your gas station.

3. Select a Location

Selecting the right location is extremely critical for a successful gas station business. Most gas station owners suggest choosing a location near highways. You must ensure the selected location is visible to people from a long distance.

Also, it is advised not to select a location where already there is a gas station operating or wholesale retailers are offering gas at a reduced rate.

4. Choose the Type of Gas Station

There are three ways of starting a gas station business. Firstly, you can build your gas station from scratch. Secondly, you can buy an existing gas station store. Thirdly, you can buy a franchise from an existing reputed gas station company. Companies like Shell, and Lukoil provide franchise opportunities to deserving candidates in the United States.

Read: Top Gas Station Franchise Opportunities 

5. Create a Business Plan

Based on the information collected, start writing a business plan for your proposed gas station. Include chapters like objectives of the company, operating plan, financial plan with costs, break-even analysis, payback period, and a marketing plan. You can take help from business plan generators if the need arises. Some of the basic aspects that must be included in your gas station plan document are the following:

  • Startup and recurring costs.
  • Market analysis
  • Target customers.
  • Products/ services offering.
  • How do you plan to promote your gas station?

6. Name Your Gas Station

It is very important to choose the right name for your gas station business. You can check this guide to know more about naming a business.

7. Licenses and Permits

Owners of the gas station must hold a business license and federal and state tax identification numbers. Every country and state has different sets of rules and regulations for the gas station business. If you are from the United States, go to the official site of sba.gov and learn more about the licenses and permits required to run a gas station. It is advised to talk to local attorneys and procure the licenses.

8. Cost of Opening a Gas Station

If you are planning to have your gas station built from scratch in the United States, get ready for an investment of at least $300000. The investment will vary as per the scale of your proposed gas station.

The bigger the station, the more will be the cost. The investment mainly will comprise purchasing the building, setting up the gas station, and additional costs if you want to add for car wash service workshop, convenience store, etc.

9. Arrange Finance

The gas station business is a cash-intensive business. If you are looking for funds, it is wise to create a professional business plan. This plan will be extremely critical while pitching for finance with investors or financial institutions.

10. Start Constructing the Gas Station

After securing the necessary financing, you need to start the construction process. It is advisable to hire a reputable contractor experienced in constructing a gas station. Also, you need to purchase and install modern fuel dispensers, robust underground storage tanks, and payment systems. Furthermore, take every measure to ensure that your station meets all safety and building codes.

11. Select Fuel Suppliers and Contracts

One of the most important steps in establishing a successful gas station is to find reliable fuel suppliers. You need to explore and negotiate favorable contracts with reputable fuel distributors. These fuel suppliers must be able to consistently supply high-quality fuel at competitive prices.

12. Hire Manpower

You first need to create an organizational flowchart before starting to hire manpower. Decide on the number of staff required to operate the gas station along with job descriptions of the vacancies. Post advertisements with local newspapers or contact a recruitment agency and fix appointments for selected candidates.

13. Set Up Proper Business Accounting

Setting up a proper business bookkeeping process is extremely critical as it is a retail-based operation and lot many financial transactions are expected. Choose proper accounting software for daily accounting needs.

14. Promote Your Gas Station

The most popular way of attracting customers to the gas station business is to put catchy signage which is visible to people crossing the station. In addition, distribute brochures and pamphlets in the launching phase. Create a website, and social media pages and keep posting the activities of your business.

In conclusion, though most gas station earns their primary income from fueling vehicles, the secondary income through selling food items and facility service like the car wash is the cake in the pudding. Hence, anyone planning to start a gas station must include a convenience store for more profitability.

FAQs

Is prior experience necessary to start a gas station business?

It is without saying, individuals having previous experience in the energy sector will have certain advantages. However, it is not mandatory. If you are truly passionate about owning a gas station as a beginner, it is critical to seek expert advice and learn about the industry as a whole.

What are the profit margins in the gas station business?

Profit margins in the gas station business can vary depending on various factors. It includes location, level of competition, fuel prices, and operational efficiency. However, on average, profit margins in the gas station business range from 2% to 5%.

How long does it take to construct a gas station?

The construction timeline for a gas station can vary depending on factors. It includes site preparation, obtaining permits, and weather conditions. However, on average, it can take anywhere from six to twelve months.

What are some emerging trends in the gas station industry?

There have been some significant developments in the gas station business in the last few years. One of the most important emerging trends seen is an increase in electric vehicle charging stations. Also, more and more owners of gas stations are adopting advanced technology for faster customer support.