You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your gas station. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a gas station?
The startup costs associated with opening a gas station business are substantial. According to JUX Law Firm, business owners should expect to spend around $300,000, which breaks down as follows:
- $2,000 for legal fees
- $2,000 for insurance premiums
- $3,000 for state permits
- $5,000 for promotional signage
- $10,000 for initial inventory
- $20,000 for setting up a convenience store
- $100,00 for setting up the gas station
- $150,000 for purchasing a building
Depending on the location of a gas station and what buildout is involved, the startup costs for a particular station may be more or less. In some cases, the startup expenses can be much more than noted here.
What are the ongoing expenses for a gas station?
The ongoing expenses for gas station businesses are high. Gas stations must pay for the fuel they sell, which alone often runs over $1 million annual for many stations. They must also purchase other products that are sold, and pay employees’ wages, utilities, taxes and permit fees.
Who is the target market?
A gas station business’ ideal customer is either a family that’s traveling or a long-haul truck driver. Traveling families won’t purchase a lot of fuel, but they’ll frequently get snacks or beverages for everyone in the family. Long-haul truck drivers will also frequently purchase some food or a beverage, and they’ll also often spend hundreds of dollars filling up their truck’s tank.
While these are ideal customers, gas station business owners aren’t picky about whom they serve. Anyone who comes into a gas station is a likely customer and will probably spend at least a few dollars on an item.
How does a gas station make money?
A gas station business makes money by selling products to drivers and passengers. Stations are named for their primary product: gasoline. This is just one of many products that gas stations sell though. Most gas stations also offer:
- Pre-made food (e.g. pizza and hot dogs)
- Beverages (e.g. such as coffees, teas and sodas)
- Snacks (e.g. ice cream, candy and chips)
- Grocery staples (e.g. milk, bread and eggs)
- Basic automotive supplies (e.g. windshield washer fluid and tire pressure gauges)
- Beer and wine (if permitted by law)
- Tobacco products and lottery tickets
How much can you charge customers?
The price of gasoline fluctuates on a daily basis, but most gasoline station businesses don’t try to make a lot on the fuel they sell. Instead, they use low fuel prices to attract drivers -- and then sell other products that have higher markups. Most gasoline stations have many pre-made foods, snacks, beverages and convenience items available for less than $5. Each sale may be small, but lots of sales over the course of a day can generate a significant revenue.
How much profit can a gas station make?
Gas stations can generate millions of dollars in revenue, but much of this is often consumed by ongoing expenses. In an example that JUX Law Firm provides, a gas station that earns $2.4 million annually might have ongoing expenses of $2.1 million, and that doesn’t take into account all the salaries and some other fees the gas station must pay. According to The Nest, gas station owners make around $70,000 each year. (Profits may increase once a station’s loan is paid off.)
How can you make your business more profitable?
Gas stations can add revenue streams and increase their profit margins by incorporating sideline businesses. Car washes, auto shops and restaurants are popular side businesses to add.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your gas station is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a gas station. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Certificate of Occupancy
A gas station is usually run out of a storefront. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease office space:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a gas station.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build office space:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for you business’ location to ensure your gas station will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a gas station
The most effective way to promote and market a gas station business is through onsite signage. Highly visible signs are the best way to attract passing drivers, and people aren’t likely to go far out of their way for fuel.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Gas station businesses can keep customers coming back by providing low fuel prices and clean facilities. In many cases, these traits alone can set a gas station apart from much of the competition.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Gas Station In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Anyone who has an acumen for business and enjoys interacting with people may be well-suited for running a gas station business. Understanding how to operate a business will help ensure that a gas station is run efficiently, and it helps to be a people person because gas stations often serve hundreds of customers in a single day.
What happens during a typical day at a gas station?
On a day-to-day basis, a gas station business owner or their employees will need to:
- Accept shipments
- Restock inventory
- Prepare pre-made food and drinks (if offered)
- Ring up sales for customers
- Clean the gas station (e.g. empty trashes and clean the restrooms)
When not working on these tasks, business owners must also schedule and manage employees, place orders for products and pay bills.
What are some skills and experiences that will help you build a successful gas station?
Running a gas station business requires knowledge of many different aspects of business. Business owners must identify and source products that customers will want to purchase, hire and manage employees, place service orders when equipment malfunctions, and follow permitting laws in their area.
Business owners may want to take some business classes before opening a gas station, or they might want to work as a manager for another gas station first. Joining professional organizations, such as The Association for Convenience & Fuel Retailing, can also help business owners learn about the industry.
What is the growth potential for a gas station?
A gas station business owner may operate a single gas station, or they may have several in a region. Owners who have one station can operate as an independent business or a franchise, while those who have multiple stations in a region often elect to get franchises. Pronto Food Mart in Austin, Texas is an example of an independent station. Chevron is one gas company that has franchises available around the country.
TRUiC's YouTube Channel
For fun informative videos about starting a busines visit the TRUiC YouTube Channel or subscribe below to view later.
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting a gas station?
Many business owners opt to purchase an existing gas station rather than open a brand new one. Purchasing an existing station provides more stable and predictable revenue, and it can make the permitting process easier because the station is already operating. A current list of gas stations for sale, which are priced from tens of thousands of dollars to well over $1 million, is available at BizBuySell.
How and when to build a team
Most gas station businesses need at least a few employees to help run the station. Even a small gas station will require several people to cover all the hours that the station is open. Employees, however, often aren’t paid very much. In many cases, they make minimum wage or just slightly more.