Generally, the markup (or “margin”) on a gallon of gas is about 15 cents per gallon (gross profit before expenses). Factoring in expenses, a retailer is left with about 2 cents per gallon in profit.
When it comes to understanding how much money a gas station makes off each gallon of fuel sold, there are several factors to consider. The most important factor is the profit margin, which is the difference between the cost of the fuel and the price at which the fuel is sold.
Most gas stations make an average net margin of just 1.4% on their fuel. The initial costs of opening a gas station ranges on average from $250k to $2 million. Convenience store sales generate higher profits than gasoline.
To calculate Gas Station Profit, multiply the average annual fuel margin by the number of gallons of gas sold in the year. After inserting the variables and calculating the result, a gas station will make a gross profit of 15% or less per gallon of gas.
Gas stations operate on thin profit margins, with a significant portion of their revenue going towards purchasing fuel from wholesalers. Additionally, they have to cover overhead costs such as rent, utilities, employee wages, and maintenance expenses.
In general, gas stations have a relatively low-profit margin on gasoline, usually ranging from 5 to 10 cents per gallon. However, high-volume gas stations might have smaller margins yet generate more profit due to increased sales.
Gas stations follow market trends and factor in various costs when setting their fuel prices like wholesale fuel prices, taxes, transportation costs, credit card fees, and expenses associated with maintaining and operating the gas station all contribute to the final price.
Calculating the monthly profit margin of a gas station is essential to determine potential earnings. First, total all revenue, including sales inside and outside the store. Do not count discounts or refunds. Next, add up all expenses like payroll, utilities, taxes, and fuel costs. Subtract expenses from revenue to get monthly net profit.
A station’s location significantly impacts its bottom line. The average gross margin on gasoline is 15 cents per gallon. After expenses like rent and labor, about 2 cents per gallon profit remains. Additional contributors are car wash services and food sales.
Building a new four-pump gas station costs $500K. Upgrading an existing station costs $200-300K. SBA loans best finance stations. Starting a profitable gas station takes significant effort and capital.