Are you interested in starting a gas station business? Do you want to become an independent petroleum marketer? Do you want to do business in the oil and gas sector of the economy? Then I advice you read on.
The oil and gas industry is one of the biggest and lucrative industries. In fact, it is probably one of the most vital sectors of the economy because every other industry is dependent on its output; which are petroleum products. This is why almost all the world billionaires and richest people own considerable investments in the oil and gas sector.
Now what is a gas station? A gas station (filling station or fuel station) is a place petroleum products such as DPK (Dual Purpose Kerosene), PMS (Premium Motor Spirit or Petrol), AGO (Automated Gasoline Oil or Diesel), Lubricants, etc are retailed and sold to end users such as motorists.
5 Reasons Why You Should Start a gas station business
- It is a tangible investment and asset
- It is a profitable business with good profit margin (volume based).
- Petroleum products sell themselves, so there’s little need for marketing
- Income / revenue is almost certain because petroleum products are a daily need for vehicle owners, industrialists and families.
- The world is still heavily dependent on oil, despite the campaign and increased awareness towards conservative or renewable energy.
Starting a Gas Station Business – Sample Business Plan Template
Before setting out to establish a gas station, you must be adequately prepared; mentally, physically and financially. Why? The reason I say this is because the petroleum industry is strictly regulated, filled with lots of bureaucratic processes, very capital intensive and risky. So it is not an industry for the lily-livered.
Success in this business is hugely dependent of adequate fore-planning and preparedness. So before investing a dime to erect a fuel station, it is important that you conduct a critical research. This step will help you avoid some bottle-necks and mistakes; and invariably increase your chances of success.
A business plan is very important because it is the only document that can prove to investors and your bankers that you have done your homework. That’s why after the feasibility study phase, the next important phase is to write a business plan.
Your gas station business plan should contain everything about your proposed business such as the cost of the project, financial projections, risk sensitivity analysis, possible problems that might be encountered and how to deal with them, your management strategy, your marketing plan, mission and vision statement, executive summary, your personal profile and biography, etc.
To avoid misquotations and miscalculations, it is advisable you conduct feasibility research and work on your business plan alongside a business consultant or a consultant specialized in the oil and gas sector.
After developing a business plan, you can now proceed to raise the needed capital. You can choose to either self finance the project, raise money from private investors or take a bank loan. Regardless of the route you choose to take, just make sure you know what you are doing.
A gas station is location-driven. What this means in essence is that establishing your filling station in a good location will almost guarantee success; as you will likely not invest much in running advertisements. Examples of good locations are:
- Commercial areas
- Areas or road intersections with high vehicular traffic
- Along major highways
- Industrial areas
- Residential areas (If you are sited here, that means you will need to focus on retailing Kerosene)
One of the prerequisite for obtaining your license of operation is your certificate of incorporation and tax clearance. So therefore, incorporating a company name is a must. I advice you seek the services of a lawyer or attorney.
7. Obtain the necessary licenses and permit
Obtaining licenses, approval and permit to run a filling station is where the major problem lies. Like I said earlier, the oil and gas industry is strictly regulated. In fact, I personally know some individuals who gave up at this phase; just because of the stress involved with getting approval for their mini kerosene depot.
To make the process easier, I recommend you seek the advice of an oil and gas consultant; or better still, you can talk to an already established gas station owner.
Now using Nigeria as a reference point and case study, there are about five regulatory bodies you may have to deal with in the quest to obtain your license, commence full operation and get regular supplies. They bodies include:
- DPR – Department of Petroleum Resources
- PPPRA – Petroleum Products Price Regulatory Agency
- PPMC – Pipelines and Products Marketing Company
- NNPC – Nigerian National Petroleum Corporation
It is also important to note that you may need to join various associations and unions such as:
- IPPMAN – Independent Petroleum Products Marketers Association of Nigeria
- NUPENG – National Union of Petroleum and Gas Workers
8. Build the gas station
A gas station business requires a huge amount of money for its establishment. There is no definite amount for starting this business as the cost may vary due to factors such as location, size of station, number of fuel pumps, type of extra services offered. Now when planning for your gas station, you need to consider some costs such as:
- Cost of land acquisition for the gas station
- Cost of gas station construction
- Cost of installing underground tanks
- Cost of equipments and facilities
- Insurance rate / fee
- Cost of getting business permits and licenses
- Cost of buying fuel supplies
9. Buy the necessary equipment
- Computer system with accounting package inclusive
- Gas supplying trucks / tankers, etc.
- Fuel pump and dispenser
- Underground and surface tanks
10. Look for petroleum product suppliers
If you have trucks or tankers, then you can go sourcing for the products yourself but if you are just starting out, then you need to strike a deal or contract with truck owners or fuel distributors / suppliers. They will be responsible for hauling products for you from the depots and ensuring you have a steady supply of petroleum products.
11. Hire employees
Running a gas station is management intensive, so you will need extra hands to cover positions such as pump attendants and a manager. Once you hire employees, you are good to go.
12. Add other income or revenue sources
Once your fuel station is up and running, you can choose to expand your revenue sources by considering additional business opportunities such as:
- A snack corner or fast food joint. This can bring in much income, as hungry drivers will appreciate buying a quick snack on the road. Food retailing is now provided by several gas stations, it is the main big trend in Gas Retail for 2013.
- You can also add a convenience store that retail items such as alcohol and tobacco, you have to carry out a research on the legal requirements for selling these kinds of products.
- You can also install a car wash service
- Or better still, you can allocate a space to a mechanic to carry out car maintenance services.
13. Grow the business
10 Marketing Ideas / Strategies for a Gas Station
Petroleum products are commodities, thus making them quite difficult to brand. Secondly, the retail prices are strictly regulated by the government. However, there are a few ways you can distinguish your fuel station. Examples of such ways are:
- Sell your products at a competitive price
- Observe loyalty programs for regular customers
- Encourage your staff to be friendly with customers and build a relationship with them
- Employ good looking boys and girls as pump attendants
- Encourage your customers to refer their friends and family
- Be honest, don’t alter or tamper with your pump meter
- Choose a good, memorable name for your fuel station
- Reward your loyal customers every festive season such as Christmas, Easter, etc
- Build a brand identity. Put your staff on smart looking uniforms.
8 Challenges of Running a Gas Station
- Setting up a gas station is a capital intensive project
- Running this business requires a technical know-how
- It is also management intensive
- This business is location driven, so you will also need to deal with the challenge of getting a nice location.
- Take it or leave it, the oil and gas industry is one of the most strictly regulated sectors, not just in Nigeria but all over the world
- Inconsistent government policies can also be a challenge
- The oil and gas industry in general is hugely affected by environmental and political events such as wars and rumors of wars, etc.
- Getting an operating license to become an independent petroleum marketer is quite difficult especially in Nigeria; as you have to go through a lot of bureaucratic hurdles.