Owning a gas station is like grabbing a slice of the American Dream. Imagine this: the oil and gas station industry is a gold mine, having a market size of $148 billion in 2023. With so many people driving every day and only 100,000 gas stations around, it seems smart to think about owning one now.
You’ll need some serious cash at the start, but remember, gas pumps are always needed. They can make you money for a long time if you do it right.
But hold up, don’t just start pumping gas yet. There are some basics you gotta learn first. That is why we’ve put together a simple step-by-step guide to help you kickstart your gas station business.
What is the Profit Potential of Gas Stations?
After paying for things like the staff, the electricity, insurance, and the fees for credit card payments, many gas station owners only keep about 3 to 7 cents from each gallon of gas you buy. For every $100 of gas sold, they might only make $2 or less after all those costs.
Now, where most gas stations start to see money coming in is inside the convenience store. When you grab a snack, a drink, or a pack of cigarettes, these items have a much bigger profit for the gas station owner.
Pros and Cons of Starting a Gas Station
Pros
- Complete control over business decisions and operations.
- Boost earnings by selling snacks or offering car repairs
- Protection against environmental liabilities with franchising.
Cons
- Gas station profits can swing wildly with market changes
- To maximize earnings, expect to keep your doors open around the clock.
- High self-employment taxes can impact your gas station profits.
How to Open a Gas Station: The Ultimate Checklist
Table of Contents
- Select the Right Gas Station Type
- Prepare a Gas Station Business Plan
- Register Your Gas Station
- Determine Startup Costs and Seek Financing
- Get Necessary Business Licenses and Permits
- Gas Station Supplier Contract
- Gas Station & Convenience Store Equipment
- Get Business Insurance
- Outline a Marketing Strategy
- Build a Team
- Open Your Gas Station
1. Select the Right Gas Station Type
Making money with a gas station isn’t just about fuel sales. It’s important to select the right kind of gas station. Here’s a quick guide:
Franchise Gas Stations: If you have your own property, consider a gas station franchise. You’ll earn from every sale, but you’ll need to cut checks for fees and stick to the franchise’s game plan.
Full-Service Gas Stations: This kind of gas station is run by the company that owns its land. It’s not just about a gas station; you might also find a little store where you can grab snacks, a place to get your car fixed, or even a spot to get a coffee.
Quick Service Gas Stations: this gas station is all about speed. You might see just one pump, and only a few people can use it at once. You pay at the pump, and then you’re back on the road—no need to step inside for anything.
2. Prepare a Gas Station Business Plan
Every gas station business should have a plan. It’s like a roadmap for your startup that helps you navigate your journey from start to end. In addition, it also allows investors to understand your company. Here’s what a gas station business plan should include:
- Executive Summary
- Business Overview
- Product and Services.
- Market Analysis
- Competitive Analysis
- Sales and Marketing
- Management Team
- Operations Plan
- Financial Plan
- Appendix
Creating these parts requires a lot of careful effort and time. You must pay close attention and stay dedicated. To make this task simpler, we can assist you in creating your gas station plan.
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3. Register Your Gas Station
Let’s break it down: you’re opening a gas station, and the first step is deciding its legal structure. Your options include:
- Sole Proprietorship
- General Partnership
- Forming a Limited Liability Company (LLC)
- Starting a Limited Partnership
- Creating a Corporation
Many recommend creating an LLC, as top sources like Forbes point out. It’s a shield for your finances against business mishaps, and it can provide tax advantages.
Find a Registered Agent
Next, if you’re going with an LLC or Corporation, you must pick a Registered Agent. This is a crucial player who’ll manage your company’s official mail and legal documents, ensuring you’re in good standing with the law. They must be based in your business’s home state.
Register with the state and local laws & obtain business EIN
Moving on, it’s time to make your gas station official with the state. This usually involves a visit to the state Secretary’s office, and the rules can vary, so look closely at the requirements. Also, grab an Employer Identification Number (EIN) from the IRS. Think of it as your company’s ID for taxes and banking.
Apply for tax registration
Lastly, get your taxes in order. Sign up with the state and federal tax authorities to handle sales tax, income tax, and payroll taxes if you’re planning to have employees.
It sounds complex, but your Registered Agent will help you navigate these steps, ensuring you’re ticking all the legal boxes.
4. Determine Startup Costs and Seek Financing
opening a gas station isn’t cheap; you’re looking at an initial investment of about $248,000 to over $1 million for a small gas station. And if you’re thinking big—with lots of extra services and a sizeable operation—you might even need up to $2 million.
Now, let’s talk about earnings. Gas stations make very little on each sale—picture earning just 1 to 2 cents from every dollar. That’s what we call slim profit margins. These margins can characterize gas station businesses. But, if your gas station has a convenience store and goes the full-service route, you could see profits jump to as much as 30%.
If you want to learn more about the initial investment, check out this Gas Station Startup guide.
5. Get Necessary Business Licenses and Permits
Understanding the steps to open a gas station is just the beginning. Next, you must gather the right permits, licenses, and insurance to operate legally.
The gas station permits and licenses you’ll need can vary depending on where you are, but it’s your job to ensure you meet all the local regulations. Common requirements include:
- Inspections for your building and fire safety
- Tank and pump checks (states often do surprise inspections through their Agriculture Departments)
- A water discharge permit, if your state requires one (though you won’t need an NPDES Permit)
- Licenses to sell alcohol, tobacco, and lottery tickets
- Licenses for distributing food and beverages
- A Certificate of Occupancy
- Permit from the Occupational Safety and Health Administration (OSHA)
Each state, and sometimes individual counties or cities, will have their own set of rules and fees for gas station licensing. A good starting point is to search for your state or county’s licensing information online.
The key gas station license you’ll need is the Motor Fuels Retail Outlet License, allowing you to sell fuel. While the name might slightly differ from state to state—for example, in Massachusetts, it’s called a Motor Fuel License—you’ll find the correct application on your state’s government website.
The Small Business Administration (SBA) guide can point you to your state’s specifics, but a service like MyCorporation can take the guesswork out of compliance. They’ll find and provide the exact forms you need.
If this process feels confusing, consider hiring a professional. They can ensure you check off every legal requirement without missing a beat.
6. Gas Station Supplier Contract
To make your gas station successful and make money, it’s essential to know what works and what could cause problems. Making good deals with the people who supply your gas and watching your spending are key steps.
Getting the right supply contracts is essential for gas stations. You need to make sure you have enough gas to sell, and gas prices change for lots of reasons. You should look for the best places to buy gas in bulk near you and make sure their prices are reasonable. Suppliers usually get some of the money you make from selling gas, so getting a reasonable price from them helps you earn more.
For example, if your gas station is in Dallas, you should check out SEI Fuels or Martin Eagle Oil to see if they offer good deals.
If you have a gas station that’s part of a bigger brand, like Chevron, you often have to buy gas from them at their prices.
Even though selling gas gets customers to come to your station, it usually doesn’t give you the most profit. But even more profit for every dollar, from one cent to three or five cents, can add up after a while.
7. Gas Station & Convenience Store Equipment
Gas stations are more than places to fill your car; many also have little shops to buy snacks and drinks. Depending on what services you want to offer, you might need various equipment for your gas station and convenience store.
If you want to wash cars, you’ll need car wash gear. If you’re going to fix cars, you’ll need things like hydraulic lifts. And if you want to serve food, you’ll need kitchen gear.
Of course, you’ll need the basics for selling gas, too, like pumps for both regular and diesel fuel, dispensers, hoses, and nozzles. Plus, don’t forget the tools for cleaning windshields and stocking up on items to sell in the shop, from snacks to car gadgets.
Most gas station owners opt to talk with a company that sells these things in bulk or someone who already runs a gas station to figure out exactly what you’ll need to get started.
8. Get Business Insurance
When you’re running a gas station business, it’s essential not to forget about insurance. It’s like a safety net for your business, catching you when things go wrong that you didn’t see coming.
Here’s a quick list of different kinds of gas station insurance you might need:
- General liability: It covers lots of things, like if someone gets hurt at your business or if you accidentally damage someone else’s stuff.
- Business Property: This one takes care of your gear and the things you sell if something terrible happens to them.
- Equipment Breakdown Insurance: If your machines stop working because they’re old or break down, this helps you fix or replace them.
- Worker’s compensation: If someone working for you gets hurt while working, this helps them out.
- Property: This protects where you do business, like your gas station or convenience store.
- Commercial auto: If you have a vehicle you use for work, this keeps it protected.
- Professional liability: If you make a mistake or forget something in your work, and your client loses money, this can help protect you.
- Business owner’s policy (BOP): Consider this a combo meal – it bundles many of these insurances together.
Having the right insurance can save your business when things go wrong, so it’s worth considering what you need.
9. Outline a Marketing Strategy
With the groundwork for your gas station laid, it’s time to spread the word about your new spot. If your gas station is in a good location, you’ll naturally draw in some drive-by traffic. However, for real success, you need a solid marketing plan.
Get Noticed Online
Even if people happen to come across your gas station business, it’s wise to get into digital marketing. For a new business, spreading the word online helps attract customers and make your brand known.
Getting your gas station listed on Google Maps, Apple Maps, and Waze can lead drivers right to your pumps. Make sure your business shows up when they look for nearby gas.
Also, set up a Yelp business account and get listed in local directories. Don’t forget to map out a social media plan for big networks like Facebook, Twitter, Instagram, and TikTok.
Signage
Classic signs by the highway are still effective, especially near busy exits for most gas stations. Many drivers aren’t tied to a gas brand; they want the nearest gas station. If you’ve got deals or discounts, use signs to tell them and draw them in.
Loyalty Program
Keep customers returning with a loyalty program. It’s often cheaper to keep the customers you have than to find new ones. Work out how much you can afford to give back to make sure they choose you repeatedly.
Competitive Pricing
Since gas doesn’t bring in much profit, consider dropping your prices a little to attract customers who might also visit your convenience store.
Food Franchise Partnerships
Teaming up with food franchises can make your gas station’s go-to spot for travelers. A good gas station location can make such a partnership valuable, turning your gas station into a pit stop and bringing more customers to your store.
10. Build a Team
Starting from a small home office means you might not need any extra hands right away. But when your business grows, you’ll need to bring in some help.
To find employees without spending money, you can put up job posts on places like LinkedIn, Facebook, or Jobs.com. If you want to invest a little, you can put ads on Indeed, Glassdoor, or ZipRecruiter. And if you’ve got the budget, you could even work with a hiring agency to find great people.
11. Open Your Gas Station
As your gas station’s opening day approaches, it’s time to polish up some important parts of your business.
Software and Tools
Running your own gas station means you’ll be doing a bit of everything—marketing, selling, bookkeeping, and more. It’s a big job, but there are lots of digital tools to help you out. Consider using specialized software like LS Retail, SSCS, or PDI to track what you have in stock, your fuel, buying stuff, and reporting.
Accounting
There are websites like QuickBooks, FreshBooks, and Xero that are good for accounting and suitable for small businesses. If you find numbers challenging, consider hiring an accountant. Making mistakes on taxes can cause big problems, so accuracy is essential.
What Makes You Special?
Your unique selling points (USPs) make your business different from others. With so many choices, customers will notice if you clarify how your gas station fits their needs. Ensure people can see what’s unique about your place on your website and in your ads. For example, you could be known for:
- A quick stop for all your travel needs
- Fuel up your car and get a hot coffee
- More than gas – snacks, coffee, and more!
Networking
You might not be keen on networking, but your contacts could be a goldmine for your business. That old college friend on Facebook might have a gas station, too, or a LinkedIn connection could know potential customers. Your neighbor may have lots of experience in gas stations. Get in touch with your contacts—you might find new customers or partners for your business.
Related Gas Station Resources
Conclusion
You’re now equipped with the steps to get your gas station up and running. Start with a detailed gas station business plan and stay resilient through the tough times.
Gas stations can be profitable with careful management and strategic planning. And while the world is shifting towards electric and hybrid vehicles, traditional gas stations will stick around for a while yet.
Do your homework, prepare for unexpected events, and adapt to changes. With this guidance, you’re on the path to making your gas station a buzzing hub.
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