Is it the right time to invest in your fuel site? Five questions to ask
“Planning a new site build takes good gut instinct, and that means instinct that’s well informed with data-driven scenarios,”
Anila Siraj, Managing Director, Kalibrate Insights
Are you planning to invest in refurbishing an existing fuel retail site? Perhaps you’re building a new site from the ground up. Either way, it’s important to consider the feasibility of your investment, and its financial impact.
The problem is, there are so many factors to consider before making a financial decision. Assessing performance alone isn’t enough to fully ascertain the viability of a potential site. You need to look at the market conditions, competitor activity, and historical trends to fully understand if it’s the right time to invest and what level of funding to put forward.
Here are five important questions to ask when you’re deciding whether or not to invest in an existing or new site:
1. What is the earning potential?
You may have already looked at the current sales revenue of the site and built an investment case around that, but it’s also important to consider potential future revenue and the scope to make changes to achieve this. For example:
- Is there potential space to add more pumps?
- Is there capacity to improve the offer inside the convenience store?
- Are there cosmetic changes that could be made to boost your profitability?
When making new investments, it’s also a good time to consider how you could diversify your revenue streams. For example, have you considered a car wash facility or a QSR?
2. What are the market conditions?
Next, consider the demographics and potential needs of the local population. What is the size of the population and average income? Is this a transient location or residential?
Also, do you know if demand for gas is coming down in the area? Perhaps there’s a movement towards using public transport, or potentially fewer cars? Look up the government census data and check if there are any red flags before you invest.
3. What is the competition doing?
Before spending any money on expanding your network, it’s essential to understand which competitors operate in the area. What are their strengths and weaknesses? Also, are there any construction projects planned? Check with local building and planning departments to see if any of your major competitors have plans to build near the site.
There’s a fine balance to look for here; too many competitors may dilute the market and damage your revenue. But if there is almost no competition, that could be a warning sign. At the end of the day, it’s impossible to make strategic decisions for your business until you understand the market landscape; download this comprehensive checklist to make sure you’ve considered everything up front.
4. How has the fuel site performed in the past?
Analyzing a site’s current performance only gives you one metric to ascertain potential earnings and predict return on investment. Have you researched into how the site has been managed in the past five to 10 years? Has it performed well? Or is the land new to industry; never used as a fuel station before? If so, you may want to check local traffic data to establish the sales potential of the location.
It’s also a good idea to look at the history of the area. Are there any concerns with the location overall? Take a look at this checklist to make sure you’ve considered the site’s true feasibility.
5. What is your brand strategy?
Some gas retail sites do exceptionally well based on the brand recognition of the supplier, the convenience store name, or stocked products. Other sites, meanwhile, excel based on their convenient location and passing traffic.
Have you considered which will drive the most value at your site? Branded sites naturally offer better recognition but may also require a larger investment. An independent gas station is a more flexible option as long as the location is good.
Have you established where this fuel site will fit into your wider network strategy? Is there potential for fewer supplier contracts across multiple sites, delivering greater negotiating power? Can your staff work across different sites for increased cover and flexibility? Have a look at this checklist to make sure you’ve considered the full potential of your wider strategy.
Whilst it’s essential to ascertain site viability, sourcing this in-depth information can sometimes be incredibly time consuming, leading to poor fuel site investments. Working with an insight partner like Kalibrate can step up your site feasibility and guide your financial planning. Single Site Analysis provides unbiased, accurate predictions of a site’s performance, and delivers key market insights. These insights can in turn empower your investment planning and operational decision making.
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