About an hour into your long drive home, you realize two things: Your car needs fuel and so do you. Human fuel, that is. Thankfully, you’re on a busy highway, which means you are bound to run into several gas stations just a few miles ahead. So, which one do you visit? Pondering this question can help the average person understand why access to small business loans for gas stations is so crucial in 2018. As if cutthroat competition and rising standards weren’t financially challenging enough, a little research will reveal that gasoline sales has some of the lowest profit margins out of all retail businesses.
According to data reported earlier this month, once debit/credit card fees and other operating costs have been applied, the net profit for gasoline sales is approximately 3 cents a gallon. You’d think this number would go up when gas prices do the same, but this is not true. A remotely substantial increase in price is actually more likely to decrease profits for station owners. Drivers have a natural tendency to attribute higher prices to individual greed and look for the best prices in the area. Station owners are therefore more likely to lose money, partially because charging more for gas leaves less money to be spent at the station’s convenience store.
Surface Area Is Your Friend
So, if higher prices aren’t going to raise profits, what else can gas stations do? The idea is to increase appeal for passing drivers in a way that logistically improves profitability at the same time. Let’s get back to that drive home. Think about which features make you more or less likely to choose one gas station over another, or simply stop at the first one you see. The most obvious answer is particularly relevant for gas stations that are located on highly congested roads where drivers are too stressed out to be selective.
In such situations, it’s safe to say that drivers are naturally drawn to gas stations with an above average amount of pumps. The very sight of a large pumping area is comparable to a breath of fresh air. There is a guarantee that you’ll be able to pull right up to a pump without having to maneuver your car or wait for someone else to finish.
What Really Sets Two Stations Apart
Additional pumps are one of many characteristics of gas stations that are adapting to a changing market. These stations also understand the importance of appearance, which can easily overshadow competitive prices. One station might charge less than another gas station just down the street. The second station, however, has a much more up-to-date appearance.
Its elevated sign might be bigger, or maybe its convenience store does a better job of seeming like a legitimate shop, as opposed to a last resort for sustenance. The pumps have been upgraded as well and now play the news on small screens. An up-to-date appearance suggests that the station’s convenience store doesn’t just sell junk food, which is not exactly conducive for long drives in which you must remain comfortable and alert.
Selections Worth Remembering
The items you choose to sell at your gas station’s convenience store should be based on the other food service businesses in your immediate vicinity along with your target demographic. Some gas stations are located in “food deserts,” or areas that lack supermarkets or restaurants. Others might be in busier areas that lack a more specific kind of item, like breakfast food or cold cuts. The addition of a deli counter or equipment for cooking eggs could dramatically increase customer activity by making the need for gas less of an inconvenience.
When people know that gasoline is the only thing they’ll be getting at your gas station, they will only stop by when their tanks are almost empty. Knowing they can also grab a turkey sandwich or bacon, egg and cheese, on the other hand, makes people more likely to stop by more often.
The Right Business Loan For You
United Capital Source offers numerous types of small business loans for gas stations looking to upgrade their services and/or appearance. Since most gas station customers pay via debit or credit card, we typically recommend a merchant cash advance, aka business loan against credit card sales. Instead of having to manually make fixed payments every month, payments are deducted from debit and credit transactions. This system is very advantageous for long-term investments, or changes to your business that do not immediately increase revenue.
If business is slow or stagnant, payments wouldn’t be high enough to damage profits. The majority of the debt would instead be paid off when sales volume increases. And since the purpose of adding pumps and expanding convenience store options is to boost daily revenue, profits will have at least begun to rise by this time. It’s important to note that we are well-aware that in order to operate more pumps and/or a cooking station, you’re going to need more staff. The cost of part-time employees can most certainly be factored in to the borrowing amount and terms of your small business loan.
New Standards? No Problem!
The standards for a successful gas station and convenience store are changing. But station owners should be thankful that unlike other industries, most of the changes required for success are pretty clear: bigger is better. The funding experts at United Capital Source keep this in mind when they design our gas station business loans. Terms can be customized to suit these goals, and we are fully capable of approving multiple rounds of funding for each improvement on the horizon. As long as revenue remains steady, there is virtually nothing your competitors have that you can’t.