Business Pro Consultants

The retail filling station is a highly capital intensive business.

The return on investment depends on the individual site but can be calculated between 30 - 40 times the Nett profit.

When investing in a petrol station the following steps must be taken in chronological order:

1. Select the site and enter into an afgreement of sale with the owner/franchisee. The contract must contain three essential suspensive conditions (a) due dilligence, (b) approval of finance and (c) acceptance by oil company as new dealer/franchisee.

2. Have you accountant do the due dilligence to establish the profitability of the business. If the return is acceptable, proceed with the purchase.

3. Prepare your business plan. If you need assistance, we can help. (Click on business plan tab on our home page)

4. Apply for finance (if required.)

5. When finance is approved, apply to oil company for approval.

6. The process may take up to three month to complete.

Over and above the purchase price which is due and payable on the effective date, allowance must be made for the following:

1. Preperation of business plan - cost approx R12 000.00

2. Fuel supply guarantee - approximately R350,000 - R500,000 depending on the oil company.

3. Rental deposit

4. Municipal deposits 

5. Oil Company training (compulsory) approx R32,000

6. Oil company Isometric test (compulsory) - R4,000

7. Working Capital. Depending on the volumes the site pumps, this can range from R 1 million to R 2 million . Remember fuel is a cash business.

8. It would be prudent to allow for miscellaneous expenses - R25,000

All the oil companies operate in a very strict set of rules. There is no one better than the others. Since you will be dealing with people, it is essential that a very good working relationship be established between yourself and the oil company business advisor.

Essentally you need to look at the specific site and decide if you want to be involved in the site and secondly the oil company.

The average dealer will operate the site for 4 - 5 years before selling. There are of course exeptions where dealers operate sites for many years.

The most frequent reason for selling is stress regarding family life. A petrol station is a 24/7 business and dealers do get tired.

More often than not the seller re-invest in a larger site.

Of primary importance is not where the site is located but how profitable it is.

You may find a very upmarket location in say, Sandton pumping 300,000 liters per month and making a net profit of R100,00. The you may find a site in Brakpan also pumping 300,000 lpm but netting R160,000 per month.

Selling prices in upmarket areas are usually higher than other areas.

Another important factor is the distance beween your residence and the site. It is not advisable to live in Pretoria and operate a site in Springs. Driving time will eventually take it's toll on you.

Please contact us and we can assist you with some contact numbers and organisations doing this.