I am giving consideration on investing in a petrol service station along a busy road along the outskirts of Nairobi. Kindly share the challenges that go along with such a venture.


best.

They have never seen a profit or they have not yet reached 'break-even point'.

If you meant 10 years annual loses, then that must be scary!

It was just a business set up for my mum to keep herself busy... But I'm pretty sure they are being funded by cash from other business!

I'm not sure if its my mothers poor management but me thinks it is just a bad business to be in!

You might make money if you own the land put up the infrastructure to standards then invite the big operators to bid for branding at a fee. Meanwhile lease out the convinient store, restaurant, ATM locations to banks, etc. You will be doing more of real estate than running the station or rather you will be making money on rent and use the petrol station to pull clients.

Your input has been of great value & insightful - thanks. I own the plot as such the options available dealing with oil marketers are;
a)setting up the infrastructure and they lease to do their business
b)setting up the infrastructure then i do the business with their brand name
c)they lease the plot and pay a lease fee
I have thought of engaging services for a bankable feasibility study on this to shed some insights going forward. Anyone with experience on this?

best.

My brother-in-law, operating a small petrol stn with kenol kobil is nearly bankrupt. I don't know wht the deal is coz he had to abandon the business. maybe selling fuel is like selling cement, it is stocked only to attract customers to other products on offer.

In some countries which I have visited its not easy to locate petrol stations they are very few and very far away, the reasoning being returns are low from stations compared to real estate on the same land.
And I can see the trend coming to Kenya, in the near future it will be very difficult to find petrol stations in the city centre and up market areas.

Wow! Interesting insights. I always thought petrol stations were cash cows!

See Legal Notice No 196 of 2010 [aka Pricing Formula]

The margin is Sh3.00 per litre. It is not a percentage.

But this is a high volume business. Dealers can easily sell a few thousand litres per day. And with the electronic pumps, wastage at the station is minimal. HOWEVER, theft between depot and station can easily cripple you. You order 10,000L and the truck drive siphons 500L and you are cooked!

Secondly, because of the slim margin, you cannot rely on external financing - the interest rates will eat you alive.

All in All, you need to be very careful about managing stock levels [don't over stock] and the structure of your working capital [don't use borrowed funds]. But with the strained supply chain [there is a permanent shortage of product meaning that you need to allow for long supply lead-times] the challenge is keeping profitable is quite high.

Kwa ufupi; hii sio biashara ya mchezo.

shock on me too!