Website design By BotEap.comIn most cases, the process of conducting a gas station valuation can be a complicated task. Far from the usual question of how you progress through the steps of the valuation itself, there are still a wide variety of variables to keep track of, including primarily whether the property in question is leased or owned and whether it is owned as part of a franchise agreement with a large oil company. First, always remember to apply a detailed due diligence process and pay considerable attention to finances when you’re working towards a world-class value proposition.

Website design By BotEap.comAs a buyer, you should be prepared to make certain assumptions and decisions yourself and not rely on the often biased information provided by the seller. It is up to you to determine the value of the business to you personally, since the amount the business owner believes the gas station is worth has little or nothing to do with its actual value.

Website design By BotEap.comTraditionally, there are two different ways of looking at gas station convenience store valuation, and these are asset-based, where income-generating assets are individually valued and added together to make the purchase price, or based on cash flow, which is the most popular. . In this scenario, the total profit is adjusted according to certain expenses, multiplied, and used to set a price. The multiple is essentially the premium awarded to the business and can be anywhere from one to five times this figure.

Website design By BotEap.comBefore you can arrive at a value you’re happy with, you need to have some fundamental questions answered. If the business occupies a rental property, it must make a commitment to the owner. Many landlords are not interested in issuing a new lease unless they can be sure that the incoming person has experience running this particular type of business. However, they are almost always willing to negotiate since they do not want to see the property empty.

Website design By BotEap.comAs a gas station and convenience store owner, you will have many different suppliers and vendors, some of whom are absolutely critical to the continued success of the business. Never assume anything and make sure you can enjoy an ongoing good relationship and great business terms with these entities.

Website design By BotEap.comWhen considering cash sales, if the seller can’t prove part of the sales you’re talking about, then you can’t include that as part of your assessment of value. Often times, gas station owners will proudly talk about the incredible volume of cash sales and tell you about it almost as if it were something magical. Don’t forget that they have benefited from avoiding tax on this part of their income, they can almost never prove that it exists, and therefore cannot expect to make a profit through the sale of their business.

Website design By BotEap.comMost of the time you will want to consider using the total owner benefit as the basis for creating a valuation for the business. This is defined as the business’s net income plus the owner’s salary, any fringe benefits, depreciation and interest minus any amounts you must set aside for assessed capital projects. Relative to average business valuation, full-service gas stations or convenience stores will often demand 2-3 times whatever the owner profit figure is. If it is a smaller, self-service establishment, 1-2 times. Consider the volume of trading versus the number of hours you will have to put in. A 24/7 facility requires a lot of management and supervision.

Website design By BotEap.comWhile business finances and owner profit multiples are paramount to your decision-making process, remember to consider a number of other variables:

Website design By BotEap.com– During the observation process, use a period where you actually count the number of users entering and leaving the station so that you can get a good traffic average.

Website design By BotEap.com– Remember that you should aim for a 25-33% return on your cash investment when purchasing a business like this, although if you are going to be an absentee owner you should be prepared to accept a lower return.

Website design By BotEap.com– Be wary if the owner appears to be working excessive hours or relies on multiple family members to help staff the operation. Pay attention to employee records and costs, and ask yourself if you’re prepared to be as hands-on as you appear to be.

Website design By BotEap.com– Check with local authorities to see if there are any major road construction projects planned. Sometimes these are unavoidable, but they can have significant disruptive forces.

Website design By BotEap.comTo really focus the seller’s attention while establishing a purchase value for your business, why not ask them to participate in a “win” scenario, where a portion of the sales price is returned to you over a period of time. subject to certain conditions. This will ensure that you have your full attention during the disclosure phase!