How much does it cost to open Gas Station in the US?

How much does it cost to open Gas Station in the US?

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Are you planning to open a gas station? If so, you should be ready with your business plan. The process of starting this venture involves many steps than knowing how to launch one. This comprehensive guide will help you understand how to open a gas station efficiently. Here’s what you need to do to open a fuel station of your own:

Write Your Plan

Starting a gas station requires careful planning. Your business plan is more than a summary of your objectives. It’s an essential tool for identifying, characterizing, and evaluating the details of your company. Also, the plan plays a major role in obtaining funds for your business.

The following details should be included in your plan:

Analysis of Markets

Any gas station company competes in a market where profit margins are narrow, usually less than 2%. For this reason, you must investigate and understand your competitors. It will help you benefit from their successes and steer clear of their errors. Additionally, you must define your customers effectively.

Location

The site of the gas station is a top consideration because it can make or break your venture. You must know if the location will help your business grow and whether you did market analysis correctly. Investigating emerging neighborhoods or industrial parks is a smart strategy to consider when picking a place for your gas station.

Cost

Establishing a fuel station is an expensive venture. You must budget between $250,000 and $2,000,000 to launch your enterprise. Include detailed expense estimates in your company plan.

Use this list as a reference for the expenses you must look into:

  • Leasing or purchasing the location
  • Registering your business
  • Securing a franchise agreement
  • Trademarking a business name
  • Securing a supplier
  • Insurance, permits, licenses, and other legal fees
  • Inventory (gas, consumables)
  • Setting up your gas station
  • Setting up a convenience store
  • Hiring and training employees
  • Marketing materials
  • Royalties as per your franchise agreement

In addition to the initial cost to open gas station points, estimate the cost of operating your business. This should cover all costs, including payroll, inventory, licensing, and insurance.

List Your Products/Services

These days, gas stations are much more than just a row of fuel pumps. You’ll hardly find a profitable station without other services. Based on your market research, your business strategy should outline how many gas pumps you want to run. Pay attention to other products and services that will increase your profit margins. The following are the most common goods and services at fuel stations:

  • Convenience stores selling drinks, snacks, car accessories, and lottery tickets
  • Car washes (self-service or full-service)
  • Air pumps
  • Restrooms
  • Mechanic for repairs and oil changes (increasingly rare nowadays)

Remember, each of these services also needs permissions and maintenance. If you choose to run your gas station as a franchise, your options for services and goods will be restricted as well.

Form an Entity

The next stage is to create a formal business entity. Make sure you discuss the right type of legal entity for you with your attorney.

Running a fuel station as a sole proprietorship is not advised, even though it has some tax advantages. Gas stations are dangerous businesses. You will be solely responsible for any damages if there is an accident or a robbery.

For these reasons, the majority of entrepreneurs choose an LLC.  Forming a gas station company protects you from personal liability for any legal concerns. Plus, it provides some of the tax benefits enjoyed by single proprietors. Some businessmen prefer a corporation, but it attracts double taxation.

Next, register for taxes and buy a franchise. Do a thorough research when purchasing a franchise. In addition to this, open your business bank account and get a credit card.

Get Funds For Startup Costs

Now that your company is officially recognized, it’s time to secure money for your fuel station. Starting a gas station can cost anywhere from $250,000 to $2,000,000. So, most people will need outside finance. 

You’ll be ready to apply for a loan after completing your homework on your plan. Small businesses have several options for obtaining loans. Popular choices include a business bank loan, small business administration loans, and private lending. Explore all possibilities and consider the gas station cost properly to take the best course of action.

Buy Equipment and Property

After arranging funds, purchase or lease the land where your fuel station will be located. A few traps to watch out for before signing the purchase (or lease) agreement include who owns the equipment, the maintenance costs, and major damages. Additionally, conduct a phase 1 environmental assessment to comply with the requirements of opening a gas station.

Find a Supplier

If your gas station is run as a franchise, review your franchise agreement to determine whether you have to use a particular gas provider (which you probably are). If not, it’s time to investigate several gas providers and compare their rates in-depth to make the best choice.

Gas suppliers frequently take a cut of your sales, so do your research to pick the best ones.

You should be able to determine from your business plan how much fuel your gas station company will require and how frequently you should restock your reserves.

Don’t agree to something you shouldn’t by having an attorney review both your supplier contract and your franchise agreement.

Get the Necessary Permits

Getting the necessary permissions is a crucial step that should not be overlooked when starting a gas station. Licensing requirements vary from state to state. You must ensure compliance.

Some standard licenses and permits include:

  • Building and fire inspection
  • Water discharge permit
  • Tank and pump inspections
  • Lottery ticket licenses
  • Food and beverage distributor licenses
  • Health Inspection
  • Certificate of occupancy

Buy Gas Station Insurance

Many startup entrepreneurs ignore this vital aspect when opening a fuel station. Unfortunately, most of them pay a hefty price after a fire or other accidents. Insure your venture by choosing the best coverage. Remember, gas stations require more than basic coverage. Other insurance options include fuel tank contamination insurance, franchise insurance, liquor liability insurance, and workers’ compensation coverage.

While it may add up to your cost to open gas station points, you can recoup it with time. Plus, you enjoy a cover against possible risks. Above all, you can subtract these expenses from your business profits. Just ensure you contact a reliable insurer such as Exceed Insurance to pick the best insurance. Such a plan comes with various benefits:

  • You’ll enjoy a comprehensive policy for your gas station. 
  • If anything unfortunate turns up, your coverage will recover the losses and damages. 
  • Most importantly, the premiums are fairly affordable.
  • Above all, you can charge those premiums to your profits. 

You can checkout our detailed blog to know more – Detailed Guide on Gas Station Insurance

Set Up Your Daily Operating Activities

Determine Business Hours

You’ve probably chosen your business hours when developing your business strategy. It may be necessary for you to be open around the clock. That will make you competitive with other gas stations that are running in busy locations.

Manage Inventory

Your gas station will sell a variety of products in addition to gas. So, you’ll have to keep your inventory organized. Maintaining a daily running inventory will let you determine when restocking is necessary before you run out of merchandise.

Security Systems

Crime is one of the biggest threats to any gas station company, particularly those that are open 24/7. You should have bought insurance against theft, but it’s still crucial for your employees’ safety as well. As an added security step, put security cameras and windows that are resistant to breakage. You should also set up procedures so that your employees know what to do in case of an emergency.

Promote Your Gas Station

It’s time to start marketing your fuel station now. If you choose the ideal location for your gas station, some consumers may come in only to look at your operation and decide to stop. But you’ll have to spend money on an effective marketing plan if you want your fuel station to succeed. Some common options for marketing your venture include social media promotion, highway exit signs, pole signs, creating a loyalty program to retain customers, and competitive pricing.

Get Ready For the Future

Business is declining at gas stations. The US had about 115,000 petrol stations as of early 2020. However, that number is rapidly decreasing. People are still driving, but they are doing so in electric vehicles instead of gasoline-powered ones. You must establish several electric vehicle charging stations. This will not only get your fuel station ready for the future, but it will also guarantee a consistent stream of consumers. Plus, it should get your business on the map for the electric vehicle community.

Conclusion

At this point, you know how to open a gas station. So, make sure you have a thorough business plan before you begin. Also, don’t allow the inevitable setbacks to deter you. Although their margins are narrow, gas stations can make a decent profit if planned and managed well. Despite the rise of electric and hybrid cars, there will be traditional fuel stations for a few more decades. So, open gas station points to harvest the diverse benefits.

FAQs

  • How profitable is a gas station?

The typical net profit margin for a fuel station is between 1% and 2%. However, a lot of full-service stations who run a convenience store have profit margins of 5% to 30%.

  • Are gas stations a good investment?

Fuel stations are a wise investment, indeed. They consistently make profits given that they are situated in a busy neighborhood. You can also provide customers with value-added services and goods to make large profit margins with your gas station company.

  • How much revenue do gas stations earn in a month?

Selling fuel can bring in annual revenue of $40,000 to $100,000 for a full-service gas station. Fuel stations can make a lot more money if they provide extra services such as air pumps, vehicle washes, convenience stores, and others.

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