In a previous newsletter, we discussed how to market and sell your gas station/c-store successfully. We now turn our focus to the buy-side of the equation. We will discuss strategies to help you not only be a successful bidder for a specific property but also to help you create a framework that will bring you more opportune deals.
1. Solidify your network. You should certainly cultivate relationships with brokers, but also with your banker, accountant, suppliers – anyone who deals with a lot of people in the industry. They often have a good idea of who is selling.
2. Get a good handle on what you are looking for. The more specific you can be, the easier time you will have weeding out the opportunities you aren’t interested in.
3. Get your finances in order. They will help you better understand what you can afford. Establish a good relationship with a lender or financier before you find a c-store for sale. This could be a bank, but it could also be a friend or relative. If you’ve built a successful track record, you might be surprised at who would like to invest in you.
If you don’t have any loans currently, you should track down a loan officer at your bank. Some banks are fine with investing in gas stations, some prefer to stay away. Your banker may tell you that they will look at everything, and he or she will. However, that doesn’t mean the committee who approves the loan will.
Ask your banker how many similar loans he or she has done, and where the bank is in relation to their quota of gas station/convenience stores. Banks like to diversify their portfolios. If they are too heavily loaded in one area, they will stop lending there. That is why it’s best to get the lay of the land ahead of time so there are no surprises when it comes time to close.
4. Have working capital – this goes handin-hand with #3. Your bank will likely require it but if you are getting financing from other places they may not. Once you buy the site you will still need to operate it. Things can get tight, so try to have as much cushion as you can ahead of time. You don’t want to buy the place of your dreams and find out in six months that you can’t cover costs.
5. If you are interested, make an offer. You don’t want to waste anyone’s time if you have no chance of putting a deal together, but if you like a location go after
it. Don’t worry about where the offer is in relation to the price. If the seller is willing to negotiate, he or she will let you know. Be prepared for silence if your offer is too low, but even silence will give you information about how to make your next move.
6. Be ready to do your due diligence if your offer is accepted. There is a lot of work to do once you have an accepted offer. You need to line up financing, learn about environmental issues, confirm sales figures, inspect the property, and many other things. Be ready to do this. You don’t want to waste your time (or money!) as well as the seller’s time. The seller may not be patient with you or give you extensions to get your work done. You will be spending money here and you don’t want to throw your money away.
7. Be prepared for surprises. There are always surprises, some big and some small. You will need to roll with them if you want to get the deal done. Of course, there may be things that kill the deal, but many issues can be overcome with a little creativity, so be ready to get creative.
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