How to Tell if a Gas Station's Sales Are Real

A gas station has two sets of numbers. There are the ones the seller controls — the printout from the register, the spreadsheet the broker emailed you, the story told across the counter on a Tuesday afternoon. And there are the ones the seller does not control, because somebody else generated them.

Almost every bad gas station purchase comes down to a buyer who worked from the first set.

The good news is that this business is unusually hard to lie about. Fuel is delivered by a third party, metered by a third party, and paid for through a third party. A convenience store leaves a paper trail in four or five places at once, and those places have to agree with each other. When they do not, you have your answer.

The only rule that matters

If the seller can print it, the seller can edit it.

That one sentence does more work than any checklist. A profit-and-loss statement is a document of opinion. So is a summary of monthly sales, a hand-written ledger, and anything that arrives as a spreadsheet.

What you want are documents generated by somebody with no stake in the sale: the fuel supplier, the credit card processor, the bank, the state lottery, the tax authority. Those are the numbers that settle arguments.

Everything below is a version of that one rule.

The store that is busy on the day you visit

Here is how one of these actually comes apart. It is worth reading in order, because no single step proves anything and all of them together are conclusive.

The store looked excellent. Busy counter, steady flow, everything a buyer hopes to see.

Then I asked to work the register. This is the step most buyers never take, and it costs nothing. What I noticed was not what anybody rang up — it was that nobody objected. I rang items at the wrong price. I over-rang people on purpose. Not one customer said a word.

Think about what that means. Real customers know what a drink costs. They look at the screen. Somebody who is overcharged says something, every time. A room full of people who do not care what they are charged is not a room full of customers.

Then I looked outside. Nobody had driven in. People were walking up to a gas station — arriving on foot, in numbers, at a business that exists to sell fuel to cars. The forecourt was not doing what the counter was doing.

Then I asked to see the cameras. I said something had happened at my car and I wanted to look at the footage. On the recording, everybody was arriving from the same direction, on foot.

Then I brought someone who was not me. On the next scheduled visit I had a friend stand across the street while I was inside. He watched customers leave the store and get into a van. The van drove off, came back, and dropped more people.

Then I stopped announcing myself. I came back at random hours across the following week. The crowd was gone.

What to take from it

You do not need the camera trick. You need the principle underneath it: never evaluate a store on a day the seller chose.

• Go back unannounced, three or four times, at hours you pick.
• Count cars from across the street for an hour. At a gas station, cars are the business. Foot traffic that does not match the forecourt is a question.
• Work the register if they will let you, and watch the customers rather than the screen.
• Ask for the credit card batch covering the day of your scheduled visit, and compare it to the same weekday in surrounding weeks.

A store that does one number on the day the buyer visits and a different number every other Tuesday has already told you what you need to know.

The cash test

This is the fastest check on this page and it needs one document.

A store claimed $85,000 a month. The bank and processing statements showed $20,000 a month in card sales. Everything else was said to be cash — roughly $65,000 of it.

Ask yourself when you last saw somebody pay cash for fuel.

At a modern forecourt, cards are the overwhelming majority of sales. The exact share varies by neighbourhood and by store, but nothing close to three-quarters of revenue arrives as paper money. A card figure of $20,000 describes a store doing somewhere near $25,000 to $30,000 — not $85,000.

There is a physical version of the same test. Stand there when the day shift closes out and watch the drawer. If the books say tens of thousands of dollars in cash are moving through that register every month, you should be able to see it being counted. If the count does not look like the claim, the claim is wrong.

What to do. Get twelve months of bank statements and twelve months of processing statements, and work out the cash share for yourself. Then ask the seller to explain it. A high cash share is not automatically fraud — but it is always a question, and the answer should be specific.

The purchase test

The cash test checks the money coming in. This one checks the goods going out, and it is just as hard to beat.

You cannot sell what you never bought.

Vendor invoices are third-party documents. The beverage distributor, the snack distributor, the cigarette wholesaler, the grocery supplier — none of them work for the seller, and all of them keep records. Add up twelve months of merchandise purchases and work forwards to the sales those purchases could possibly support.

Be careful which way round you do the arithmetic, because this is where the test gets misread:

• Markup. Cost × 1.30 → $100 of goods becomes $130 of sales. That is a 23% gross margin.
• Margin. Cost ÷ 0.70 → $100 of goods becomes $143 of sales. That is a 30% gross margin.

Different numbers, and the gap widens as the percentage rises. Decide which one you mean before you start.

Now run it. Take the store claiming $85,000 a month. Say the vendor invoices show $30,000 a month of merchandise coming in the door. For $85,000 of sales to come out of $30,000 of goods, the store would need a gross margin around 65% — on a product mix where cigarettes alone are often a third of volume at famously thin margins.

That number does not exist in this business. At a realistic blended margin, $30,000 of purchases supports something closer to $42,000 of inside sales. Half the claim.

What to do. Get twelve months of invoices from every vendor, not a summary. Total the merchandise purchases, apply a realistic margin, and compare the result to claimed inside sales. Then do the same thing with fuel delivery invoices against claimed fuel sales.

Purchases and sales have to agree. When they do not, the purchases are the honest half — because somebody else wrote them.

The prices that are not the real prices

A store was ringing Corona at $3. Stores in the surrounding blocks were selling it at around $2.23. A margin that beats every competitor nearby is not a feature; it is a thing to check.

So I sent somebody in to buy one. They were charged $2.

The price in the system and the price a customer actually pays were two different numbers.

Stop there, because that fact alone is enough. You do not need to know why it happened. Every margin calculation built on the higher number is unreliable, and the store is selling below the street — which is a different business from the one the statement describes, and a harder one to run.

What to do. Do not accept daily totals. Ask for item-level POS data across twelve months, walk the store with the report, and compare shelf price against ring price on twenty items. Then send somebody the seller has never seen to buy five of them and keep the receipt.

Treat an unusually high inside margin as a question rather than a selling point. Cigarettes are often a third or more of inside sales and carry famously thin margins, so a blended figure well above the norm is either something genuinely clever that you need explained, or it is not real.

Sales that are not sales

Some of what sits in a top-line revenue figure is not revenue at all, and this is where a lot of padding hides.

Lottery is commission income. A store earns a small percentage of what it sells. Presenting gross lottery sales as store revenue inflates the top line enormously and adds almost nothing to the bottom. Get the statements from the state lottery.

Gift cards are not a sale. Selling a $100 gift card for another company moves $100 across the counter and earns the store a few cents or nothing at all.

Cash back is not a sale either. It is handing a customer their own money. Ring it through the wrong way and it inflates reported sales without a single additional item leaving the shelf.

ATM, air, vacuum, car wash. All small, all easy to overstate, all verifiable against the processor or the vendor rather than the seller.

What to do. Make the seller break the revenue figure into categories and strip out everything that is not merchandise or fuel. Then look at what is left, because that is the business.

Sales that climb right before the listing

Look at three years of monthly numbers, not one. You are looking for a step — flat for two years, then a sharp rise in the nine or twelve months before the business went on the market.

Sometimes that is real, and a seller who earned it can tell you exactly what they did: a remodel, a food programme, a road project that finished, a competitor that closed. A real answer is specific and checkable.

The other explanation is that somebody ran money through the register to buy a better multiple. It costs them sales tax and income tax on money nobody earned, which is exactly why buyers dismiss it. On a business priced at a multiple of earnings, it can still pay them to do it.

The cross-check that catches it

Inside sales and fuel volume move together. They are the same customers — people buy fuel and walk in, or walk in and buy fuel. The ratio is reasonably stable for a given store and does not swing wildly without a reason.

Put them side by side, monthly, for three years. Gallons from the fuel delivery invoices. Inside sales from the POS and the sales tax returns.

If gallons are flat and inside sales climbed forty percent in the year before the listing, nothing about the traffic changed. The customers did not start buying more per visit. Somebody put money through the register.

That comparison costs nothing beyond documents you should be collecting anyway, and it is very hard to argue with.

Revenue that can be taken away

This is the part buyers think about last and should think about first.

Some stores earn real money doing things that will not survive a change of owner — or a visit from the police. Sports betting behind the counter. Hot food rung through on EBT. Items that should not be on the shelf at all.

That revenue is real today. It is not sellable, it is not financeable, and it is not yours. It disappears the moment the store is looked at properly.

Ask the only question that matters: strip out every dollar that depends on something illegal, and can the store still cover its costs, service the debt, and pay you? If the answer is no, you are not buying a business. You are buying a problem with a fuel canopy.

Permits, and the gap after closing

A gas station is a stack of licences. Fuel. Beer and wine. Tobacco. Lottery. Food service. Each one sits with the current operator, and several of them do not simply transfer on the day you sign.

Two things to establish before you commit.

Is the seller current on all of them? Ask for every permit and verify each one with the issuing authority rather than looking at the paper on the wall. Forgeries exist, and so do permits that lapsed quietly last year.

What happens in the gap? Between closing and your own approvals landing, you may not be able to sell lottery, or beer, or tobacco. That can be weeks. Work out what the store earns without those categories, and make sure you can survive the interval — because the revenue stops while the rent does not.

The lease, which is where deals die quietly

If you are buying the business and not the dirt, the lease is the asset. Read it in full. Read every amendment. Then check three things.

Is it actually a lease? More than one buyer has discovered that what they were handed is an operating agreement, a management agreement, or a handshake written down — not a lease conveying a real leasehold interest. If it is not a lease, you have no security of tenure and very little to finance.

What happens if the landlord sells the building? A lease that does not bind a future owner, or that lacks basic protection on transfer, means the next owner of that dirt can put you out. You bought a business that occupies land it has no right to stay on.

What does the rent do? An escalation that triggers shortly after closing can quietly remove the profit you just paid for. Model the rent for the full term, not the first year.

Have a lawyer read it. This is not the place to save a few hundred dollars.

The wages nobody is paying

Usually not deception at all, and it still ruins more deals than any trick here. There are two versions, and most statements contain both.

The family. An owner works the counter. So does a spouse, a brother, a son after school. None of them are on payroll, so the statement shows a labour cost no buyer can reproduce — because you will be hiring people and paying them.

The owner. This is the one buyers miss even when there is no family involved. A sole owner running the store alone is still working, often sixty or seventy hours a week, and that time has a market price. It is frequently missing from the statement altogether, which means what is being presented as profit is partly just the owner's wage with a different name on it.

Sellers do this openly, and it has a name — the figure quoted is often discretionary earnings, which deliberately includes the owner's compensation. That is a fair way to present a business. It is not the number you can live on.

The test. Rebuild the labour line at market rate for every hour the store is open, including the hours the family works free and the hours the owner works unrecorded. Put a real manager's salary in there, at what you would have to pay somebody to do that job.

Then ask the only question that matters: after a manager is paid properly and the loan is serviced, is there anything left?

If yes, you are buying a business. If the profit only exists because nobody is paid, you are buying a job with a mortgage attached — which is a legitimate thing to buy, as long as you know that is what you are doing and you have priced it that way.

What the seller cannot fake

Six documents, all generated by someone other than the seller. Get all of them.

1. Fuel delivery invoices, from the jobber. You cannot fake how much gasoline you bought. Twelve to twenty-four months of bills of lading establish real fuel volume, and everything else is checked against it.

2. Vendor invoices for merchandise. The other half of the same idea, and the basis of the purchase test above. Beverage, snacks, cigarettes, grocery — every distributor keeps records the seller did not write.

3. Tank monitor and pump records. The automatic tank gauge logs inventory continuously and every dispenser carries a cumulative totaliser. Deliveries in, pump sales out, stick readings — they should reconcile. Persistent unexplained variance is a measurement problem, a theft problem, or a leak, and all three become yours at closing.

4. Bank and credit card processing statements. Third-party, dated, and impossible to edit. This is what the cash test above runs on.

5. Tax returns and state sales tax filings. Federal returns plus the state sales tax returns, which are sworn. Sellers very rarely overstate income to a tax authority. Where the filings and the broker's spreadsheet disagree, believe the filings.

6. Cigarette scan-data and rebate statements. Manufacturers pay participating stores based on units actually scanned, which makes the rebate statement a third-party record of real volume in what is often the largest inside category.

What normal looks like

Every test above needs something to compare against, so here are working benchmarks. Treat them as the shape of the industry rather than a promise about any particular store — a busy corner in a dense neighbourhood and a highway site forty miles out are different businesses, and local conditions move all of these.

Fuel volume. A typical site moves somewhere in the range of 80,000 to 150,000 gallons a month. Meaningfully under 50,000 is a weak forecourt and the store has to carry the deal. Over 200,000 is a strong site.

Inside sales. Commonly $40,000 to $90,000 a month. This varies more than any other number here, which is exactly why the purchase test matters — the vendor invoices tell you what is real regardless of what is typical.

Fuel margin. Gross margins have generally run in the twenties to forties of cents per gallon in recent years. Remember that card fees take a real bite out of that — a meaningful share of the gross margin on a fuel sale goes straight back out to the processor, which is why fuel volume alone never tells you whether a site makes money.

Inside margin, blended. Usually somewhere in the high twenties to low thirties as a percentage. Cigarettes are the anchor dragging it down: they are often a quarter to a third of inside sales and carry margins in the mid-teens. Foodservice pulls the other way.

Card share. Cards are the large majority of money through a modern forecourt — commonly somewhere around three-quarters of dollars, often more at the pump and less inside. This is the benchmark the cash test runs on. A store reporting a cash share far outside the local norm is not automatically lying, but it owes you a specific explanation.

Rent. Too location-specific to give a dollar figure, so test it as a ratio instead: what share of the store's gross profit does occupancy consume? When rent is eating a large slice of gross profit before the loan is serviced, the deal is tight regardless of how the top line looks.

Build your own benchmark, because yours is the one that counts

These ranges get you started. A local benchmark is better, and it is not hard to assemble:

• Ask the jobber. Fuel suppliers know what sites in the area actually pump, and they will often talk in general terms about what is normal nearby.
• Use the target's own history. Three years of its own monthly numbers is the fairest comparison available — it controls for location automatically.
• Price the street. Walk into three nearby stores and write down what they charge for the same ten items. That took one visit to catch the price discrepancy described above.

A number that sits far outside both the industry range and the local one is not proof of anything. It is a question that deserves a specific, checkable answer before you go further.

The tank question nobody asks early enough

Underground tanks are the one item that can cost more than the business is worth, and the easiest thing in the deal to postpone.

Ask the age of the tanks and the material. Get the compliance file and the state environmental record. Order a tightness test early enough that a bad result kills the deal before you have spent real money. A lender financing the property will want much of this anyway — better to learn it in week two than week nine.

Before you sign

1. Visit unannounced, more than once, on days you choose. Count cars.
2. Run the cash test. Card sales against claimed revenue, twelve months.
3. Run the purchase test. Vendor invoices marked up against claimed sales.
4. Send a stranger in to buy five items and keep the receipt.
5. Strip lottery, gift cards and cash back out of the revenue figure.
6. Plot gallons against inside sales, monthly, three years.
7. Remove every dollar that depends on something illegal, then re-run the deal.
8. Verify every permit with the issuing authority, and budget for the gap after closing.
9. Have a lawyer read the lease, and confirm it is a lease.
10. Rebuild wages — family, and a real salary for whoever runs it — then check there is profit left after debt service.
11. Test the tanks before you are emotionally committed.

A seller with real numbers hands all of this over without much fuss, because it proves their case. Reluctance is information. When a seller will not produce third-party records for a business they are asking you to buy at a multiple of its earnings, the question has answered itself.

Financing follows diligence, not the other way round. Once you have real numbers the financing conversation gets much shorter, because lenders are looking at the same gallons, the same margins and the same tank file you are. If you are working on a gas station purchase and want a second read on the numbers before you commit, get in touch or see how these deals get financed.

Biscayne Lending finances gas station acquisitions; we are not your accountant or your attorney. Everything here is a starting point for your own due diligence, and no article replaces having a CPA review the books and a lawyer review the lease and the purchase agreement before you sign.