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When Buying a Gas Station, is it Good Business to Combine It With a Convenience Store?
By: Richard K Parker

A few decades ago, a gas station was simply gas station, and a convenience store was simply a convenience store. If somebody had said back then that these two completely different businesses would join together and become the norm on America's highways and byways, I genuinely would have though they were mistaken.

But when you stop to think about it, it's a marriage that makes a lot of sense. When people pull in for gas, why not give them an opportunity to spend a bit more cash on a few things that they may also want - coffee, soft drinks, snacks, and other inexpensive items? Maybe even a pair of sunglasses to cut the glare of the road?

So, why not go for it and purchase a convenience store when you purchase a gas station?

Well, perhaps... But before you make a snap decision, you have these two fundamental questions to answer:

Question #1. If a convenience store is already part of the gas station business, is it profitable? If it isn't, can you turn it into a money-maker?

Question #2. If a convenience store isn't already part of the business you're considering, does it make sense for you to add one? Remember that you don't need to hurry to add one, if one isn't there. You can add one later, when it makes financial sense.

Estimating Potential Costs and Profits.

Whether or not a convenience store is already part of the business you're considering, here is a checklist of expenses that can help you evaluate the associated costs. Compare these costs to profits (or potential profits) and you will be able to make an educated estimate of a convenience store's profit potential. Never believe the Seller's figures that have anything to do with these expenses. You'll have to look through everything you can find and produce cost estimates which you can personally verify.

Insurance - If there is already a convenience store, how much does insurance cost? Remember, the coverage that's already in place might not be enough. Talk to an insurance broker to find out what sort of coverage you actually need along with the total cost. You'll rapidly realize that if a convenience store is part of the deal, you're going to need quite a bit of extra coverage for liability, workers compensation for employees, and more...

Payroll - You'll have to hire and pay employees to staff your convenience store. You may also have to pay out for benefits. Ask the Seller of the business about who staffs the store. If he or she is using underpaid relatives to staff it, it can be difficult to arrive at an accurate picture of what your payroll will be once you are the owner.

Utilities - Convenience stores need to be well lit. They also need to be heated in winter and cooled in summer. Those costs can really add up.

Retail Payment Systems - These include accounts to process credit cards, cash registers and more. If up-to-date systems aren't in place, you will need to upgrade all of them.

Lottery Terminals - Many customers purchase lottery tickets when they purchase gasoline. Putting in a lottery terminal may seem like a fantastic way to develop extra income, but before you begin counting on this additional income, look up your local state lottery authority to find out about the expenses involved with having a terminal.

Signage - To maximize profits, you'll need well placed signage to show customers that a great convenience store is also part of your business. If signs aren't already present, you will have to buy them and add them yourself.

Paving, Snow Removal, Landscaping and Other Associated Costs - Customers need to be able to park in convenient locations and walk safely to your store. Those points make it more costly to operate a gas station/convenience store than it otherwise would be to run a gas station by itself.

Questions to Ask the Seller If a Convenience Store Is Already Part of the Business You're Buying:

* What is your current inventory and what is it worth? (Remember not to count perishable items such as dairy products or returnable products such as magazines.)

* How much profit have you been generating from convenience store sales?

* Please provide an approximate breakdown of your revenues between gas sales and retail, and a further breakdown of the retail sales.

* Is your convenience store a franchise that is separate from your fuel operations?

* Do you operate the convenience store as well as the gasoline station part of your operation - or is the business split? If the operations are divided, how is that structured?

* Do you have automated inventory tracking and control systems in place?

* What products are you selling in your convenience store, and how much volume/profit is tied to each of them?

* Who are your suppliers for tobacco, beverages, coffee and all of the other retail offerings?

* Do you sell lottery tickets? What are the costs and profits?

* What hours are you open? Which hours of operation are the most - and least, profitable?

So, should a convenience store be part of the package when you buy a gas station? Should you think about adding one, if none is already there? To find out, you need to take out a sharp pencil and work with the checklist above. You need to make sure you're buying a station that is profitable both today and in the years to come.

Copyright (c) 2009 Richard K Parker

Article Source: http://www.excitingdestiny.com/articles

Richard Parker is the President and founder of the Diomo Corporation - The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream of buying a business. Want to learn more about effective business buying strategies that actually work, then look no further than=> www.howtobuyagasstation.com/

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