18
May

What To Consider Before Purchasing A Petrol Station

Many of our members are interested in the prospect of purchasing a petrol station. Purchasing a new petrol station is an exciting opportunity to expand current business ventures, or to begin a new career as an owner and operator of a new service station. As is the case with the purchase of any business, there are many challenges and factors to keep in mind during the process. However, there are some aspects of purchasing a petrol station which are unique, and distinct to the industry.

In order to ensure that your newest endeavor goes smoothly, there’s a few key factors you should keep in mind. From finding the right location, to taking care to properly vet your prospective purchase, completing the proper steps before purchasing a service station will help you avoid potential issues.

1. Location
Location is important for many types of businesses. However, it becomes especially relevant to consider when deciding where and if you should purchase a petrol station.

The location of a service station directly affects its volume of business. For example, a service station located on a busy road or highway is likely to do more business simply based on proximity. This not only leads to higher profit for you down the road, but means investors and those financing your purchase will be more interested in backing your venture.

On the same note, petrol stations located in quiet or residential areas may fall victim to lack of traffic, be less appealing for financiers, and may be a source of disruption for neighbors. Before deciding a certain station is right for you, assess how the location will impact your revenue and your financing.

2. Fuel Supplier
Unlike many other businesses, a petrol station’s main source of income is based around the sale of one product–fuel. And this reality comes with its own unique challenges. Before buying a petrol station you will need to make key decisions about how you obtain the fuel you are going to sell at your location. Two main options exist: supply and branding with a large company such as BP or Shell, or independently branded sale of fuel through an intermediary.

Each comes with a different list of pros and cons, but each consideration should be weighed carefully before a decision is made. Even within franchises, there are a handful of companies to choose between which will impact the course of your business. Being thoroughly informed of which arrangement is best for your prospective station will eliminate unexpected surprises.

3. Cost and Financing
Before you can buy a petrol station, you must assess the financial aspects of the decision. Namely, the existing financial position of the service station, and the financing you must obtain to make your purchase.

It’s critical to ascertain the viability of your purchase. While no one can predict the future, covering all of your bases in terms of inspections, repairs, and other factors can help you be confident that your investment will be profitable. Financers often will base their financing decisions on the profitability of your petrol station, and many of the same factors discussed in this article will influence their decisions (location, fuel supplier, inspection results). Unfavorable results in any of these areas can lead to a lack of financing.

4. Lease
When buying any business, you will be required to negotiate and fully understand the terms of the proposed lease prior to purchase. Though this is undoubtedly an exciting process, it’s important to always carefully consider the terms of your lease before signing. Getting caught up in the excitement without reading the fine print can spell trouble later on.

Among other things, leases determine the time frame of your ownership, who truly owns the business and assets such as tanks and fuel lines, and who is responsible for items such as site maintenance and inspections.

Negotiating can be uncomfortable for some, but it is worth it to ensure that the lease you sign is bringing you the best conditions and deal possible.

5. Environmental Site Inspection
ServoPro makes it a priority to frequently discuss the importance of diligently monitoring the environmental conditions on and around your site. The risk of unforeseen environmental contamination is far higher at petrol stations than at other commercial sites, and can cause significant issues if left unresolved. From closures, to costly repairs, purchasing a petrol station without carrying out a complete search and inspection to determine whether the site is listed on environmental registers can result in disaster.

Even if the petrol station has had no previous reported problems with contamination, prospective owners should always do their due diligence to have new tests performed to check soil and groundwater. Failing to do so can result in situations where unwitting owners become liable for contamination they didn’t know existed.

Looking to Buy? ServoPro Can Help
ServoPro is committed to assisting our members in the process of buying and leasing new petrol stations. To make the process easier, we’ve compiled a continuously updated database of listings. Let us help you find the perfect fit for your next business venture today!