Do you want to start gas station business?
Are you thinking of starting a gas station? A gas station also known as a petrol station is a business that retails diesel, gasoline and various types of motor vehicle lubricants. The increase in the number of automobiles has pushed up the demand for gasoline and diesel which makes gas station business a lucrative venture. The oil and gas industry has in the recent times gone through various challenges, but it still remains one of the most lucrative business sectors. Investing in a gas station requires a significant amount of investment, but with a sound business strategy, you can be assured of recovering your entire investment.
2.1 The Business
The gas station will be registered under the name Savoy Gas and will be located in Princeton, New Jersey on Exit 2 off the New York Philadelphia interstate highway. This is an excellent location considering the high amount of vehicular traffic that uses the highway on a daily basis. Savoy gas station will be owned and managed by Mike Wall who is a Petroleum Engineer.
2.2 Management Team
Mike Wall is an expert Petroleum Engineer who has had a successful career spanning over twenty five years. Mike has worked for large and reputable international organizations in the oil and gas industry. He has overseen numerous large scale industry projects that have earned him respect and recognition in the industry.
2.3 Customer Focus
Savoy Gas Station aims to offer a fully equipped gas station facility for motorists using the busy Interstate highway. Identifying potential customers is a critical step of starting your own gas station.
2.4 Business Target
To succeed in its mandate, the gas station intends to focus on harnessing the latest technologies in the oil and gas industry to offer quality and reliable services to motorists.
3.1 Company Owner
Mike Wall is a Petroleum Engineer who has worked for several high profile oil and gas companies across the United States. He is credited for his professionalism and spearheading of numerous technical projects. Mike has worked in various senior capacities in different organizations, as well as participated in numerous local, regional and global petroleum conferences.
3.2 Aim of Starting the Business
Starting your own gas station requires a good understanding and knowledge of the oil and gas industry. Having been in the industry for almost three decades, Mike was deeply involved in policy making and technical implementation of gas station projects. Working closely with gas station stakeholders, Mike thought it would be a great idea to transfer his expertise to entrepreneurship.
3.3 How the Business will be Started
As a Petroleum Engineer, Mike Wall already has the technical knowhow of the infrastructure and technologies required to start a gas station. However, he has closely worked with financial experts to formulate a sound financial plan to support the business model. The following is key financial information for Savoy Gas station.
|Research and Development||$7,000|
|TOTAL START-UP EXPENSES||$51,500|
|Other Current Assets||$14,000|
|Start-up Expenses to Fund||$25,000|
|Start-up Assets to Fund||$20,000|
|TOTAL FUNDING REQUIRED||$0|
|Non-cash Assets from Start-up||$8,000|
|Cash Requirements from Start-up||$0|
|Additional Cash Raised||$50,000|
|Cash Balance on Starting Date||$20,000|
|Liabilities and Capital||$0|
|Accounts Payable (Outstanding Bills)||$0|
|Other Current Liabilities (interest-free)||$0|
|Additional Investment Requirement||$0|
|TOTAL PLANNED INVESTMENT||$150,000|
|Loss at Start-up (Start-up Expenses)||$50,000|
|TOTAL CAPITAL AND LIABILITIES||$45,000|
Services for Customers
Savoy Gas station is focused on offering a professional service in line with the growing demand for well-equipped gas station facilities in Princeton, New Jersey. Opening a gas station requires great innovation in service delivery. Savoy Gas station will offer the following diversified services.
- Provision of retail gasoline and diesel
- Selling automotive related products such as oil and lubricants
- Automotive repair services i.e. Wheel Balancing, Wheel Alignment and Vulcanizing
- Selling soft drinks, snacks, groceries and selected household items.
Marketing Analysis for Gas Station Business
For Savoy Gas station to be successful, a comprehensive market analysis was carried out to pinpoint areas of focus that will drive business development. This gas station business plan sample explains the strategy the gas station intends to follow to meet its targets. Using this strategy, the business intends to get a good amount of revenue considering it lies on a main interstate highway that is used by thousands of commuters on a daily basis. Currently, commuters don’t have a well-equipped shop where they can get adequate food supplies while travelling since the nearest gas station is over 15 miles away.
5.1 Market Segmentation
After realizing there are few gas stations around Princeton area off the interstate highway, Savoy Gas has found a market it can effectively explore and provide a critical service for its customers. Based on market research and findings, the business is targeting the following customers for inclusion in its gas station marketing plan. Anyone looking for gasoline and diesel as well as a well-stocked food and drinks outlet is a potential customer for the business.
5.1.1 Automobile Owners
Automobile engines rely on gasoline and fuel in order to operate efficiently. Savoy Gas station will be located on the main New York to Philadelphia Interstate highway at Princeton, New Jersey. This is an extremely busy highway with thousands of vehicles using the highway on a daily basis. The nearest gas station is about fifteen miles away and Savoy gas station knows it’s located in a strategic location to offer key services to vehicle owners. In addition, the business intends to sell automotive products such as oil and different types of lubricants which are essential products to car owners. Given the scarcity of gas stations in the area, Savoy gas station intends to capitalize on the untapped market by setting up a fully equipped and professionally managed gas station. Motorists are the key customer target included in this gas station business plan template.
5.1.2 Commuters and Travellers
Because of the gas station’s strategic location on a main highway, services and products offered will help regular commuters, as well as long distance travellers using the interstate highway. With the wide range of services offered by the gas station, the business intends to rely on the high number of people using the highway to stop and buy food, snacks, drinks and other products at the facility.
Princeton, New Jersey has nearby residential households that will benefit a great deal when the gas station is set up. The business has focused on stocking a wide variety of foodstuffs, drinks and other products that primarily cater for household consumers. Starting a gas station business plan should include a strategy that incorporates the local community as customers. Local communities living around the gas station are excellent customers because the business will get steady revenue from them. Savoy gas station is expected to be nearest shopping facility that stocks basic items.
The vicinity of the gas station has many educational facilities including the famous Princeton University. Savoy gas station plans to market its products especially drinks and snacks to students from nearby high schools, colleges and universities.
|Potential Customers||Growth||YEAR 1||YEAR 2||YEAR 3||YEAR 4||YEAR 5||CAGR|
|Communters and travellers||30%||22,000||23,000||26,000||29,000||32,000||8.00%|
5.2 Business Target
Savoy gas station intends to open in an area with a lot of business potential. There is no doubt one of the greatest strengths and advantages outlined in this gasoline station business plan is the strategic location. The plan is to implement a unique business model that focuses on an exemplary customer service approach and provision of topnotch products and services. Savoy gas station will recover its entire startup capital after three years in operation. There is a projection of annual sales growth of between 20-25%.
5.3 Product Pricing
A good gas station business plan & startup guide should always give guidance on how product pricing will be implemented. In the case of Savoy gas station, prices for various products and services have been determined using a competitive approach. After considering price ranges from nearby gas stations, the business has carefully priced its products.
In order to understand how to open a gas station and be successful, there must be a well-defined sales strategy. Mike Wall has cooperated with business startup and strategy gurus to find a creative and smart way of boosting business revenue. The following is a detailed sales strategy for Savoy gas station.
6.1 Competitive Analysis
Savoy gas station is located in an excellent location off a busy interstate highway and near a large residential area. This is the only gas station within a fifteen mile radius, the demand for business and products is expected to be high.
6.2 Sales Strategy
To ensure Savoy gas station captures the intended market, the gas station business model will rely on the following sales strategy to increase customer numbers and boost sales.
- Create awareness of the gas station by distributing introductory letters to local residents, merchants, transport companies and other interested parties.
- Conduct a grand opening party of the gas station to capture the attention of residents who are a priority customer segment for Savoy gas station.
- Advertise the business on various media channels i.e. local TV stations, newspapers and popular radio stations.
- Invest in a search engine friendly website and market using various social media platforms such as Facebook, Twitter and Instagram.
- Hire expert marketing firms to formulate innovative sales strategies that will be used on a continuous basis to attract customers.
- Always meet customer expectations and learn to listen to what customers are saying to better understand their needs.
- Erect billboards on the highway and within strategic locations in the neighborhood to let potential customers know about the gas station.
- Come up with an exciting loyalty program to reward regular clients.
6.3 Sales Forecast
Savoy gas station is keen to implement its sales strategies to achieve its targets. Below is a summary of sales forecasts for the gas station.
|Unit Sales||Year 1||Year 2||Year 3|
|Retail gasoline and siesel||310,000||350,000||390,000|
|Selling automobile products||150,000||170,000||190,000|
|Automobile repair services||200,000||220,000||240,000|
|Selling soft drinks||300,000||320,000||340,000|
|TOTAL UNIT SALES||950,000||1,060,000||1,160,000|
|Unit Prices||Year 1||Year 2||Year 3|
|Retail gasoline and siesel||$150.00||$170.00||$190.00|
|Selling automobile products||$120.00||$140.00||$160.00|
|Automobile repair services||$110.00||$130.00||$150.00|
|Selling soft drinks||$100.00||$120.00||$140.00|
|Retail gasoline and siesel||$300,000||$320,000||$340,000|
|Selling automobile products||$170,000||$190,000||$210,000|
|Automobile repair services||$100,000||$120,000||$142,000|
|Selling soft drinks||$200,000||$220,000||$240,000|
|Direct Unit Costs||Year 1||Year 2||Year 3|
|Retail gasoline and siesel||$2.20||$4.20||$5.00|
|Selling automobile products||$2.00||$3.00||$4.00|
|Automobile repair services||$1.60||$2.60||$5.00|
|Selling soft drinks||$3.00||$7.00||$5.00|
|Direct Cost of Sales|
|Retail gasoline and siesel||$120,000||$140,000||$160,000|
|Automobile repair services||$160,000||$180,000||$190,000|
|Selling soft drinks||$125,000||$135,000||$150,000|
Savoy gas station has diversified its product range and service niche meaning the business requires staff of different expertise and backgrounds to run the business. When determining how much does it cost to start a gas station, the issue of staff and their salaries has to be considered.
7.1 Personnel Plan
Savoy gas station is owned by Mike Wall, a Petroleum Engineer who will also be the Chief Executive of the gas station. The business will employ the following staff to work in various departments.
- Gas Station Manager
- Assistant Manager
- Convenience Store Manager
- Three Pump Attendants
- Two Marketing Executives
- One Cashiers
- Two Security guards
- Two Automobile Repair Technicians
Successful applicants will undergo an intensive training and induction session before the gas station opens to the public.
7.2 Average Staff Salaries
Savoy gas station intends to pay its staff the following salaries for the first three years after launching operations.
|Year 1||Year 2||Year 3|
|Gas Station Manager||$62,000||$70,000||$75,000|
|3 Pump Attendants||$75,000||$80,000||$86,000|
|2 Sales and Marketing Executive||$60,000||$65,000||$70,000|
|2 Security Guards||$50,000||$55,000||$64,000|
|2 Auto Mobile Repair Technicians||$50,000||$55,000||$70,000|
Savoy gas station has an elaborate financial plan that will serve as the business roadmap towards attaining success. Opening a gas station cost must be known and other key financial variables that will steer the business to prosperity identified. The gas station startup capital will come from Mike’s personal savings as well as a loan to supplement initial capital. Two investors will also contribute to the initial business startup capital. Aside from determining how much does a gas station cost to open, other important financial variables have been captured in the sections below.
8.1 Important Assumptions
Savoy gas station’s financial forecasts are based on the assumptions shown below.
|Year 1||Year 2||Year 3|
|Current Interest Rate||15.00%||12.00%||10.00%|
|Long-term Interest Rate||3.00%||3.00%||3.00%|
8.2 Brake-even Analysis
Savoy gas station Brake-even Analysis is illustrated in the graph below.
|Monthly Units Break-even||8000|
|Monthly Revenue Break-even||$25,000|
|Average Per-Unit Revenue||$320,000.00|
|Average Per-Unit Variable Cost||$2.50|
|Estimated Monthly Fixed Cost||$370,000|
8.3 Projected Profit and Loss
Profit and Loss information for Savoy gas station calculated on a monthly and annual basis is shown below.
|Pro Forma Profit And Loss|
|Year 1||Year 2||Year 3|
|Direct Cost of Sales||$31,000||$41,000||$51,000|
|TOTAL COST OF SALES||$31,000||$41,000||$51,000|
|Gross Margin %||50.00%||56.00%||63.00%|
|Sales and Marketing and Other Expenses||$5,300||$7,300||$9,500|
|Total Operating Expenses||$320,000||$350,000||$380,000|
|Profit Before Interest and Taxes||$40,000||$50,000||$60,000|
8.3.1 Monthly Profit
8.3.2 Yearly Profit
8.3.3 Monthly Gross Margin
8.3.4 Yearly Gross Margin
Below is Savoy gas station’s Profit and Loss Analysis.
8.4 Projected Cash Flow
The diagram below shows pro forma cash flow, subtotal cash received, subtotal cash from operations, subtotal cash spent on operations and subtotal cash spent.
|Pro Forma Cash Flow|
|Cash Received||Year 1||Year 2||Year 3|
|Cash from Operations|
|Cash from Receivables||$4,000||$9,000||$13,000|
|SUBTOTAL CASH FROM OPERATIONS||$410,000||$502,000||$530,000|
|Additional Cash Received|
|Sales Tax, VAT, HST/GST Received||$0||$0||$0|
|New Current Borrowing||$0||$0||$0|
|New Other Liabilities (interest-free)||$0||$0||$0|
|New Long-term Liabilities||$0||$0||$0|
|Sales of Other Current Assets||$0||$0||$0|
|Sales of Long-term Assets||$0||$0||$0|
|New Investment Received||$0||$0||$0|
|SUBTOTAL CASH RECEIVED||$410,000||$502,000||$530,000|
|Expenditures||Year 1||Year 2||Year 3|
|Expenditures from Operations|
|SUBTOTAL SPENT ON OPERATIONS||$55,000||$64,000||$74,000|
|Additional Cash Spent|
|Sales Tax, VAT, HST/GST Paid Out||$0||$0||$0|
|Principal Repayment of Current Borrowing||$0||$0||$0|
|Other Liabilities Principal Repayment||$0||$0||$0|
|Long-term Liabilities Principal Repayment||$0||$0||$0|
|Purchase Other Current Assets||$0||$0||$0|
|Purchase Long-term Assets||$0||$0||$0|
|SUBTOTAL CASH SPENT||$55,000||$64,000||$74,000|
|Net Cash Flow||$22,000||$27,000||$32,000|
8.5 Projected Balance Sheet
Depicted below is Savoy gas station Projected Balance Sheet that shows capital, assets, liabilities, long term assets and current liabilities.
|Pro Forma Balance Sheet|
|Assets||Year 1||Year 2||Year 3|
|Other Current Assets||$11,000||$15,000||$17,000|
|TOTAL CURRENT ASSETS||$750,000||$775,000||$862,000|
|TOTAL LONG-TERM ASSETS||$6,000||$7,000||$9,500|
|Liabilities and Capital||Year 1||Year 2||Year 3|
|Other Current Liabilities||$0||$0||$0|
|SUBTOTAL CURRENT LIABILITIES||$23,000||$250,000||$30,000|
|TOTAL LIABILITIES AND CAPITAL||$250,000||$280,000||$310,000|
8.6 Business Ratios
Business Rations, Business Net Worth and Ratio Analysis for Savoy gas station have been show below.
|Year 1||Year 2||Year 3||INDUSTRY PROFILE|
|Percent of Total Assets|
|Other Current Assets||5.00%||4.00%||3.24%||24.00%|
|Total Current Assets||120.00%||132.00%||139.00%||40.00%|
|Percent of Sales|
|Selling, General & Administrative Expenses||50.00%||65.00%||72.00%||55.50%|
|Profit Before Interest and Taxes||20.00%||22.00%||25.70%||3.10%|
|Total Debt to Total Assets||4.31%||3.00%||2.50%||45.00%|
|Pre-tax Return on Net Worth||92.00%||85.00%||92.00%||4.10%|
|Pre-tax Return on Assets||78.00%||65.00%||56.00%||8.00%|
|Additional Ratios||Year 1||Year 2||Year 3|
|Net Profit Margin||14.00%||17.00%||20.00%||N.A.|
|Return on Equity||60.00%||52.00%||56.00%||N.A.|
|Accounts Receivable Turnover||10||5||4.3||N.A.|
|Accounts Payable Turnover||8.2||12.9||16||N.A.|
|Total Asset Turnover||1.9||0.6||0.4||N.A.|
|Debt to Net Worth||0||-0.07||-0.04||N.A.|
|Current Liab. to Liab.||0||0||0||N.A.|
|Net Working Capital||$270,000||$290,000||$320,000||N.A.|
|Assets to Sales||0.6||0.4||0.3||N.A.|
|Current Debt/Total Assets||9%||7%||5%||N.A.|
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