Due Diligence Strategies When Purchasing a Gas Station

A gas station for sale can represent a very dynamic business opportunity for an entrepreneur. More than ever in this particular type of business, location is everything. You may have found what you consider to be a “gem,” near two major arteries or near a busy intersection, but never be tempted to jump in with two feet first until you’ve done a proper due diligence process.

One of the most significant mistakes a person can make, especially if they have never run, owned, or bought a business before, is to allow their enthusiasm to override their better judgment. Even if you’re absolutely blown away by the incredible amount of traffic passing through the location in question, or worried that other buyers might bid before you, he’ll never be tempted to skip over your discovery process. Ideally, you should spend at least four weeks of your time, having a full picture of what you’re getting into, before you act.

If you’ve made the decision to buy a gas station convenience store business and for the most part you’re happy with the basics presented to you by the salesperson, and you don’t notice anything obvious that could cause red flags to appear. , then you should have a conversation with the seller right away and tell them that you would like an observation period before deciding whether or not to buy.

During your observation period, you will be able to analyze the actual operation of the gas station and convenience store and get a very good idea of ​​whether the finances you have been given represent a real or artificial position. If you are inheriting employees, you will be able to see how they operate and how effective they are at making money. This is infinitely preferable to just sitting with them for thirty minutes and asking them questions. Above all, this observation time will allow you to generate a series of ideas that you can ideally implement after the purchase to increase revenue and profits.

Be prepared to check all of the following items during your due diligence work:

– Accounting books, profit and loss accounts, balance sheets, tax returns and records.

– Inventory records, being on the lookout for discrepancies.

– Employee records: check that they are well maintained, all legal items are covered and responsibilities are unearthed.

– All equipment must be inventoried and maintenance records verified. Is a regular maintenance process scheduled?

– Review all supplier contracts and try to contact the main suppliers. Is there a clause that causes renegotiation after a sale? If so, you’ll need to make sure you’re covered before proceeding.

– A business like this can be heavily regulated. You don’t want to buy into the gas station’s business problems caused by your failure to comply with inspections or citations issued due to irregularities.

Important: Obtain environmental reports and make sure that the company complies with all the requirements. Ask your attorney to check for prior crimes. Make sure all tanks meet the latest and proposed standards. Otherwise, you may face a huge expense soon after you take over, not to mention losing business from closing to make these adjustments.

If you’re generally happy with the paperwork, use your observation period to do just that: observe. Keep your eyes and ears open at all times and see what makes this business tick. Take note of anything, no matter how small, that you think could be improved, and while you shouldn’t be living and breathing on-site for the entire time period, you should aim to be there during strategic moments: during opening, during deliveries. important, during peak periods, during slow periods, during shutdown.

It is not advisable to shorten your observation period, as the time you spend now could represent a wise investment of your time.