April 24, 2023
Adam Hoeksema
The IRS publishes tax return data each year on the roughly 28,000,000 sole proprietorships in the U.S. We analyzed the 10,757 tax returns that were filed in the gas stations industry to pull out some key statistics and insights to help our customers ensure that they are creating realistic financial projections for their gas station.
We hope that this data will be helpful for you as a “reality check” for your financial projections and gas station business planning process. We hope you create a forecast for your unique situation and plan, and then use this data to make sure your projections seem reasonable based on industry averages.
Here is what we will cover in this article:
Learn How to Use this Financial Data
If you are creating projections for your startup business, or you just want to see how your existing business stacks up to industry averages, you can take your income statement and compare key ratios and percentages for your business compared to this industry average data.
How many Gas Station businesses in the US are sole proprietorships
There are roughly 10,000 gas stations businesses in the US organized as sole proprietorships. We specifically analyzed 10,757 gas station companies based on the 2019 IRS tax return data.
Average annual revenue for Gas Stations
The average annual revenue for all sole proprietorship gas station businesses in the U.S. was just $1,309,337.
Since gas stations are high traffic with multiple revenue streams, this made sense. In our blog post How to Start a Gas Station we found that gas station revenue is very volatile depending on prices of fuel. This could greatly change the revenue amount depending on the demand and density of the area.
So what gives?
I think we need to remember that this tax return data includes all sole proprietors that categorize themselves in the “gas stations”. Depending on location and region the potential revenue may vary.
This underscores the importance of actually creating your own Gas Station projections based on your potential inventory and customers.
Average annual expenses for a gas stations
The average annual expenses for all sole proprietorship gas stations businesses in the U.S. was $1,290,423.
It should jump out to you immediately that average annual expenses for a gas station will be made up of the cost of fuel and that can vary greatly depending on the time of year and location, so again let’s not focus too much on the specific dollar amounts here. What we can gain from this tax return data is an understanding of expenses and profits as a percentage of revenue rather than a specific dollar amount.
Average net profit margin for a Gas Station business
The average net profit margin for a gas station business was 1%.
How much does a gas station make per gallon?
A gas station makes roughly 1% net profit margin. With a national average gas price of roughly$3.50 per gallon, a gas station will make 3.5 cents per gallon in net profit after all expenses.
You might also want to know how much gross profit does a gas station make per gallon of gas.
Based on analyzing 10,757 gas stations, we found that the average gross profit margin was 18%. Keep in mind that a majority of revenue for a gas station will come from low gross margin gas sales, but some percentage of sales will come from high margin merchandise sales in the convenience store. So if the average gross profit margin for a gas station is 18%, it is safe to assume that the average gas station will make a gross profit of 15% or less per gallon of gas.
With a national average gas price of roughly $3.50 per gallon, a gas station would make a gross profit of roughly $0.52 cents per gallon.
How much can I make by owning a Gas Station business?
In order to calculate the earnings potential of a gas stations you can take the following assumptions:
- # of daily visitors
- Price per gallon
- Average Gallons sold
- Additional Products sold
These assumptions will allow you to come up with a revenue forecast for your gas station. From there you can apply the 1% profit margin.
Top 9 expenses for a gas station business
Based on the tax returns of roughly 10,757 sole proprietors operating in the gas station industry, the following were the 9 largest business expenses as a percentage of revenue.
Average material costs expense for a gas station business
The average gas station business spent 82% of annual revenue on material costs.
Given that a majority of the cost is spent on fuel and that the margins are very thin, this is not surprising. Any additional products that are sold outside of fuel should represent better margins for the business.
Average salary and labor expense for a gas station
The average sole proprietor gas stations business spent roughly 5% of annual revenue on Salaries and Wages.
In addition to inventory, salary and labor is the second most common cost. It requires people to find and purchase the fuel and the products as well as manage the store.
Average rent expense for a gas stations
The average sole proprietor gas station spent roughly 1% of annual revenue on rent.
Depending on the size of the property, this expense could vary. Given the size and location of a gas station could vary, this is likely to have a large variance depending on the location.
Average taxes paid for a gas station
The average gas stations spent roughly 1% of annual revenue on taxes paid, which is not surprising given the high tax amount on fuel.
Important Details about the Data
I want to point out a few key items about the data:
- You can download this data for free from the IRS website.
- The data includes 10,757 gas stations sole proprietorships in the U.S. in 2019.
- This data will include businesses that operate full time, and businesses that only operate on a part time basis.
- Because of this, you should take the raw numbers for revenue, expenses and profit with a grain of salt, but the percentages can still be quite valuable when trying to forecast expenses for your business.
- This data includes businesses from all across the country, keep in mind that revenue and expenses can vary greatly based on your specific geographic location.
- We used 2019 data because we felt it was most likely to be representative of a “normal” environment for the industry. COVID-19 caused disruption to almost every business in 2020 and 2021, so we wanted to utilize “normalized” data.
If you have any questions about the data or how to utilize the data in your financial forecasting process please don’t hesitate to reach out to us!
