Hi There,

I am looking to buy and run a gas station with a group for investors in Northen California - San Francisco Bay area.

The asking price is 4.5 Mil for the station+land+C store.
The net profit per year is 225,000.00

I have very few details at present and am meeting with the current owner this week end.

I want to be able to ask relevent and meaningful questions when I meet the owner.

Are there any evaluation forms etc that I can use.
Set of question that I can pass on to a financial analyst ?

Sorry for being so vague. I'm looking for a starting point.

Thanks,
Chris

Hello Chris..

You need to determine what the cash flow is and in detail. What the 87, 89, 91, and Diesel gas is doing in volume (gallons) and what the margin is. ($0.12-$0.18 cents etc.) C - Store department sales, car wash, lottery, phone cards etc. We have a lot of experience with many large franchise gas stations (mobil, chevron, valero, etc..) If you need to talk to someone and get a better idea please e-mail me with your contact information. (click on my name and go to e-mail)Good Luck..
Matt Fowler

Cash flow is king.

Get three years historical financials.
Interim financial to the end of August 2005
Current balance sheet
Breakdown of revenues and expenses by type (fuel, store, car wash etc)
Information on the pumps and equipment, age installation date etc.
Ask when the last Phase I environmental was performed and if there were any problems indicated.

You will need to determine non-cash and non-recurring expenses such as depreciation, mortgage payments, interest payments etc and recast cash flow.

You did not say the source of the numbers you gave, so I will assume that you did not make any adjustments in the cash flow as noted above.

If the true recast cash flow on the property is $225,000, then the business is over priced.

At 4.5m, assuming 25% down, rate of 6.75%, 20 yr amortization the annual debt service would be $307,950 which is greater than the net profit. Typically a property like this should debt service at 1.35 or better.

My contribution:

Find out about any possible regulation affecting the business that might have been passed by your state, and the level of compliance of the station that you are interested on.

For example, my State passed a law about ten years ago requiring that single walled tanks be replaced by double walled tanks. That was a substantial expense for most owners.