Here are 5 tips on how to run a successful petrol station! Learn what the pros and cons are of running a petrol station and if you can make a success out of it!
The Bigger Picture
In South Africa, there are approximately 4,600 petrol stations that pump about 300,000 litres of fuel per month nationally. Petrol stations not only offer consumers the essential service of filling up their vehicles, but they also provide a wide variety of additional products and services which are key contributors to their bottom line.
Is Running a Petrol Station Profitable?
Fuel provision is an essential service (at least for now) and contributes more than 6% to South Africa’s Gross Domestic Product (GDP). It is one of the most resilient South African industries, and with the right mindset, can yield healthy profits even during economic downturns.
How much does it Cost to Open a Petrol Station Business?
The setup costs for a local petrol station range from R15 million to R100 million, depending on the size and location. Additionally, the operational fee payable to the oil company ranges between R2.5 million and R15 million, based on development costs, projected volumes, and profitability. Normal working capital for stock and operational expenses can range between R1.2 million and R1.5 million.
Contrary to popular belief, petrol stations don’t profit directly from fuel price increases. For every R1 increase in the fuel price, the average service station requires an additional R100,000 in working capital. The retailer margin, determined by the Department of Energy's Regulatory Accounting System (RAS), often results in an under-recoveryof nearly seven cents per litre.
Beyond the high setup costs, running a successful petrol station requires ongoing access to quick working capital to manage financial demands.
Here are 5 Tips for Owning and Running a Successful Petrol Station:
- Join a Franchise Benefit
There are various franchise models, ranging from independent fuel retailers to semi-independents and full franchises. Owning a franchise means that operations are closely monitored to maintain high standards, but it also provides start-up assistance, mentorship, and operational support. Additionally, franchise benefits and corporate partnerships, such as Woolworths with Engen or Seattle Co with Caltex, can support a petrol station's growth. - Open up Additional Revenue Streams
While petrol stations specialise in fuel, offering additional services is key to boosting turnover due to fixed fuel margins. By partnering with other service providers, stations can increase their offerings through convenience stores, ATMs, courier services, grocery stops, artisanal coffee, pharmacies, online depots, car washes, and loyalty schemes that drive brand loyalty and market share. - Keep an eye open to Future Opportunities
Fuel will remain necessary, but petrol station owners should stay on top of energy trends. Introducing electric charging and biodiesel stations, or providing services that cater to the person driving the car (such as hot desks and Wi-Fi), can help transform petrol stations into experiential destinations. - Fight the Margin and Squeeze where you can
While fuel margins are fixed, other costs like card swipe fees and supplier expenses can be negotiated. It's essential to secure the best deals from suppliers to maintain lean operations and competitive services. - Use Funding for the Right Reasons
Like any entrepreneurial business, access to working capital is crucial. Using funding wisely, such as a Merchant Capital Cash Advance to build a car wash or hot desk base, can help boost convenience store turnover and differentiate your station from competitors.
The Bottom Line
Running a petrol station requires an entrepreneurial mindset, focusing on streamlining fuel efficiency while expanding services to increase customer basket sizes and loyalty. Having access to reliable working capital is essential.
For more information on how Merchant Capital can support your petrol station’s future, contact us today.
