Do you want to start a gas station but don’t know how or where to start? Foremost, you need to understand that much must be done before you can begin fueling cars or motorcycles. For instance, you need a business plan, cost breakdown, and a person conversant in the industry to guide you, as having the know-how will propel you to start on the right foot. After all, this industry has high returns as we have many drivers compared to existing gas stations. Hence, you must carefully plan your entrance to the car fueling business. This guide will provide a rough estimate of the costs needed to start a gas station, factors influencing the price, and other crucial elements to consider before you begin the gas station.
How to Open a Gas Station
1. Create a Business Plan
Planning is the way to any successful business. Remember, with a business plan, you can quickly secure a loan or look for donors to finance your business. It will also help you understand the overall scope from the target market audience to competitors to even developing a marketing strategy and so much more. Hence, have your business plan ready. Learn how to create a successful business plan here.
2. Understand the Target Market
A gas station targets families, truck drivers, or people travelling along their location. For instance, night family travellers will only need a little fuel but also snacks and drinks for every member. Truck drivers will spend on fuel and need a place to purchase snacks or beverages for their journey. Hence, when planning, include more products than fuel to increase cash flow.
Cost Breakdown of Starting a Gas Station
You are probably wondering, “how much does it cost to start a gas station?’ Some factors like size and location entirely influence the start-up costs of a gas station. However, the average cost of starting a gas station can range from $250,000 to $ 1,200,00. The price can extend to $ 2 million, depending on your scope. Notably, this scope includes permits, construction, land acquisition, equipment needed, and all other crucial infrastructure. After conducting thorough research, we have the estimated breakdown cost of starting a petrol station that is influenced by the following items:-
Land Acquisition
You can decide to buy a piece of land or lease it. Both buying and leasing prices depend entirely on the location and its proximity to highways. If you want to buy/lease land in a prime location, be ready for higher price ranges. Luckily, prime locations have higher returns than other low-key areas, which have cheaper rates for land. Here, you have to ensure you conduct thorough research on the site before you invest in it. Look if the area has your target consumer before making any agreements. Notably, it can cost upto $30,000 to $70,000 to lease the land, but ask your lawyer to help you strike a fair deal.
Construction Cost
The construction cost of a gas station varies based on the structure, design, size of the building, landscaping, architectural features, and construction materials. After land acquisition, expect the construction part to be the most expensive. Here, plan well with the architects and ensure they provide sample plans. Based on your selected design, constructing or remodeling a gas station would cost $70,000 to $450,000.
Permits
Every business needs a permit to ensure they comply with local authorities. Similarly, you must have access to necessary licenses, compliance measures, and environmental assessments before running a gas station. You should factor in the prices of each requirement and have them before the construction begins. Additionally, gas stations must abide by stricter regulations since they provide fuel and hence need more lice than other businesses. To ensure you have all the required documents, liaise with the county officials. Also, per your rules and regulations, permits would cost between $5,000 to $5,000. Lastly, the environmental assessment depends on your location, costing $1,500 to $ 5,000.
Fuel Transport
Remember, you need a constant supply of fuel. Hence, you must budget for transportation, additional permits, and freight charges. The price of gasoline, as well as transportation, fluctuates almost daily. Therefore, it takes time to get a specific cost. Ensure you regularly liaise with fuel and transport providers to bring new market prices.
Also, you have to research suppliers and find one supplying fuel to your station. To maximize your profit margins, thoroughly research and compare rates from different wholesale suppliers. If you prefer to use a franchise, ensure you have a lawyer to review your agreement to ensure there are no hidden charges and you are maximizing the profits. In addition, franchise fees cost between $25,000 and $ 100,000, and the legal fees go up from $12,500 to $ 55,000. The prices depend on the parties you engage in. Always agree on payment fees before hiring a service provider.
Insurance Costs
Insurance is an additional essential cost. It protects your station from potential risks and liabilities. The insurance cost will vary based on different factors like the size of the gas station and the number of employees. Also, it will be affected by the location of the station and the type of coverage, i.e., general liability or property. Insurance will cost you between $5,000 and $20,000 per year.
Equipment
To have a fully functional gas station, you will require various infrastructures like underground storage tanks, fuel dispensers, pumps, signage, lighting, canopies, an eatery or a mini-mart, a toilet, and a point-of-sale system. Each item’s price should be factored into the overall budget.
Also, you can add other amenities like a car wash, charging station for electric vehicles, and convenience stores, among others, and each item comes with an additional cost. It entirely depends on the type of gas station you want to start; the price varies based on what you want.
Marketing and Promotion
Now that you plan to open a new business, you must set aside money for marketing and promotion. It is essential to create awareness to attract customers. Some of the marketing expenses include:-
- Online advertising, like social media
- Website development
- Loyalty programs
- Traditional advertising channels like print
- Influencers
- Grant opening event
Notably, the scale of marketing is dependent on your budget. Some budgets run between $5,000 to $ 20,000. Remember, we have existing gas stations; hence, advertising will help give you a good starting foot.
Recurring Expenses to Consider When Starting a Gas Station
It would help if you knew there would be ongoing expenses when running a gas station. For instance, you must pay for fuel, which will cost over $ 1 million annually. Remember, you need a constant flow of fuel to avoid losing clients. Another recurring cost is employees’ salaries; hence, in your plan, include precisely which amenities you shall have and how many employees you shall employ. In addition, factor in permit fees, taxes, and products you sell. They are all under recurring costs.
Additionally, add the budget to your recurring costs. It is advisable to advertise your business all year round. To ensure you run your business smoothly, have finances ready for the regular costs for the one year. Don’t depend on that year’s profit to purchase fuel and pay employees. Depending on your agreements, your employee’s payroll could range between $8,000 to $12,000. Also, another crucial recurring fee is rent; ensure you negotiate before entering into any agreement and involve a lawyer.
Factors that Affect the Cost of Building a Gas Station
Starting a gas station could be more complex than starting any other business. You will need to observe strict guidelines. Hence, it is crucial to understand the factors affecting the cost of starting a gas station.
Type of Gas Station
We have different types of gas stations, for instance, large gas stations with many entities or self-serve gas stations with few pumps. Here is more explanation of the types of gas:-
i. Full-service gas station
A full-service gas station offers more services like tire pressure checks, windshield cleaning, and fueling assistance. Remember, extra amenities and staffing will increase both construction and operational costs.
ii. Self-service gas station
You could opt for self-service gas stations if you have a tight budget. They have lower construction costs, need fewer employees, and have fewer amenities. Before opting for self-service, consider your customer’s preferences and the local market’s demands.
iii. Truck stop or travel plaza
It would help if you built a higher-tie gas station to cater to commercial truck drivers or long-distance travelers. You must include additional features like shower facilities, truck parking, and a large convenience store. Notably, this will help attract many truck drivers and meet their needs.
Conclusion
Building a gas station is an excellent investment with good returns. However, it requires a lot of planning, effective management, and a deep comprehension of the fuel industry. Hence, conduct a lot of research and inquire from people who already exist in the business to know how it’s run. Also, ensure you have the needed resources before you begin. Now that you have a rough idea of the estimates of starting a gas station business develop a business plan, learn all you can about managing a business, where to get funds if you need to, and begin your business.
Frequently Asked Question
Is opening a gas station a profitable business?
Yes, a gas station is a profitable business. You will be good to go once you plan carefully, adequately manage finances, and fully understand the field. Also, ensure you hire well-equipped managers if you won’t directly manage the business.
