Reader Mail #12: Gasoline Station Business ROI Computation and Sari-Sari Store Business Management

Posted by Fitz Villafuerte under Business, Reader Mail on January 27, 2010

For today’s Reader Mail, we’ll talk about how to do a simple computation of the business ROI and how to manage and grow a retail business.

Specifically featured are two emails I received from a couple of enterprising individuals. The first one is set to start a gasoline station business while the second one wants to grow their sari-sari store business.

Let’s now read their letters and I hope you can learn some business tips from my replies.

Please note that the senders have been made anonymous to protect their privacy and some details have been edited for purposes of clarity and brevity.

Hi. I am putting up a gas station and this is the first time that I will be dealing with a more “structured” business venture. more structured in the sense that I have other investors which are family members as well.

I have been running a transportation business but in an informal kind of way. This time around I have to make the forecasting, ROI and the like.

Hence, I would like to seek your expertise on how to do about this. I am making a business plan and I hope you can provide me with a template and a sample ROI computation. Many thanks and more power!

Hi. Are you franchising the gas station? If so, I’m sure your gasoline supplier or franchiser can help you with details on how to manage the business, specially the data that you need to monitor and analyze.

However, when it comes to ROI computation, it’s always good to start with a simple and general approach.

First, list the start-up costs and the expected monthly (overhead) expenses. Be as detailed as you can – consider the licensing and business permit registration fees aside from the leasehold improvements and others for the start-up costs. And include a depreciation cost and a modest miscellaneous costs for the monthly expenses.

Second, do a survey of your planned location – determine how many customers you can conservatively get in a day. This will give you an idea of your gross daily sales and the net daily income (profit)

So as an example, let’s say that your start-up will be 2 Million and the projected monthly expenses will total P500,000. Then we have these rough estimates with regards to your sales and income:

  • Estimated gross daily sales: P100,000
  • Estimated net daily income (assuming you earn P20 for every P100 of gas): P20,000
  • Estimated net monthly income: P100,000 (20,000 x 30 days less monthly expenses of 500,000)

What you do now is simply to divide your start-up capital with your estimated monthly net income to get your projected ROI. So in our example, that will be 2 Million divided by P100,000 which equals to 20 months.

In my opinion, less than 2 years ROI is good for a long-term business.

As for the template, I suggest that you search the internet for that as there are a lot of them online which you can use. However, there is really no required template you must follow when doing these. As long as it’s detailed and easy to understand, then you’ll do just fine.

Lastly, it may also help to read this: How To Write a Business Plan.

Hi. By luck, I happen to chance by your site and it made me truly inspired to take stock of the sari sari store business that my mom has asked me to manage.

It’s been with our family since 1982 and has managed to survive and support our needs since then but in my opinion, there hasn’t been any growth in the business. It’s basically the same store since 1982.

I have no background in management but am very eager to learn. This would be a great challenge since I am also employed at the moment.

Please share your tips on financial management of a sari sari store. I need to know what to do like inventory, how to plot expenses versus profit and those kind of stuffs. Thank you.

Hi. In my opinion, if the sari-sari store survived that long, then it must be doing something right. So the very first thing I’d advise is to ask your parents how they managed the business.

From experience (we also had a sari-sari store several years ago), I learned that the most important thing that a sari-sari store owner should remember is to never get anything from the inventory for personal use.

I know it’s so easy to just grab a bottle of soft-drink once in awhile when you’re feeling thirsty. If ever you need to, be sure to pay for it. 😉

And with that said, let’s move on to how you can grow the business.

I don’t really know how big your sari-sari store is and the space you have, but I believe that the next step for growth would be to make it into a mini-grocery.

A grocery store is strict with its inventory – which means everything should be accounted for. All brands and sizes of all the products you carry.

So as not to disrupt your current operations, you can just start your inventory count in your next purchases. Using an inventory program or just a simple computer spreadsheet like Excel.

List down everything you buy – the stockgroup, the item, the size, the brand, the buying price, the supplier, the quantity bought, date of purchase, and selling price

For example: canned goods – corned beef – 200gms – Purefoods – P50 – SM Supermarket – 5 cans – December 1 – P60

Furthermore, you should also have an itemized list of everything that is being bought in your sari-sari store on a daily basis. A point-of-sales program can help in this case but again, doing it in Excel is also good.

Do this for a couple of months and you’ll eventually have an idea how much the sari-sari store is really earning (net income).

But more importantly, you’ll discover which items are fast moving and which ones take time to sell. With these information, you can really do a lot to analyze which products you should invest in. Stock on the sellable items and hold off with the non-moving products.

Meanwhile, as for the profit analysis, all you really have to do is to sum up the net income of your daily sales. Since you’re listing down all the items being bought and you know how much you bought them, then you’ll know the net profit for the item.

In our example above let’s say: Corned beef – 200gms – Purefoods – For December – 4 cans sold – P40 net income

Let’s say in a month, your total net income is P20,000. Then just subtract from it the store’s monthly expenses – salary of staff, electric bill, rent, etc. And you’ll get how much your profit in a month really is.

Knowing this figure can help you determine if the sari-sari store has potential to become a mini-grocery. And further plan the direction of the business.

Lastly, while you’re doing this, it would also help if you can do a survey of nearby sari-sari stores so you can monitor the prices of the competition and you can adjust yours accordingly.

I hope these advise can help you get started on the right direction towards growing your family sari-sari store.

That ends our Reader Mail for today. I hope you were able to pick up a few pointers from it.

Please remember that my answers are solely based on my business knowledge and personal experiences. And that’s why I welcome any correction, suggestion and additional information from my readers.

So if you have one, please don’t hesitate to share them below as a comment. Thanks!

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Photo credit: tlindenbaum and nezume you

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10 Responses to “Reader Mail #12: Gasoline Station Business ROI Computation and Sari-Sari Store Business Management”


  1. Allan @ Rich Money Habits says:

    Interesting article. I wonder whether the gasoline station is the Bulilit franchise being promoted by Petron. Maybe Petron can help you out? 🙂

    Its inspiring to hear a story of a sari-sari store since 1982. Imagine almost 30 years in business! All I can say is…WOW! I totally agree with Fitz, if it lasted that long there must be something they’re doing which allows the business to endure decades of business challenges.

    My suggestion would be to ask your customers what other needs they may have that is currently not being addressed by the sari-sari store…once you identify those “extra” needs, then build your business to satisfy those needs and gain more customers to expand.

  2. Robert Fernandez says:

    Good day. May I know how much will a P300k , P 500k , P 1M worth of business get you? Like a pizza parlor the size of Shakeys Greenhills be worth? Thank you very much.

  3. bendoria says:

    Greetings, mabuhay.

    Your business advise is exciting about ROI (return on investment) on gas station. However, in calculating ROI, here is the simple formula:

    Net Income divided by average capital investment (Beg + Ending divided by 2). Apparently the calculated 20 months is called pay back period instead of ROI (the length of time to recover your investment).

    For your information.

    Regards/Bendoria

  4. Andie says:

    Dear Ma’am
    I would like to ask im also running a business like Sari-Sari Sore
    but the problem is almost of the capital (nasa utangan na at wala ng maipang rolling pa)its very hard for me to handle…nahihirapan akong maningil….and aside from that laging promises or na TY nalng lage….mayron po bang security or any legalities na sumasakop sa isang sari-sari store in terms of pautang kasi kawawa naman kaming maliliit na capital.Any advice rin po tungkol sa pagpapa utang?

  5. zack says:

    My personal opionion lang po.. never get involved in pautang system specially in a sari sari store kumbaga parang sasakyan lang yan 4 ang gulung mo pinahiram mo isang gulong mo so paano kapa uusad nun?

  6. Milan says:

    The actual profit profit margin for gasoline station is only cents per liter depending on the location, if it has competition nearby the profit margin will be less. Unlike in the 90’s were the profit margin ranges from P1 per liter now it ranges only to 10-35 cents per liter.

  7. Ed Soriano says:

    Hi,

    Re ROI for gas station,

    Perhaps you heard that Franchised gas stations earn not on their core business, but on complimentary business such as rental, servicing and others. This is due to the fact that the margin is minimal. ROI may take up to 7 years

    If you are serious of putting up a gas station, id rather suggest that you take a look putting up an idependent gas station.The margin is 200% to 300% than the franchised ones.ROI may take 3-4 years only

    For more details email me at ofwalliance@gmail.com

  8. Marites Hernandez says:

    Re: Gasoline Station ROI

    Are sales, income and monthly expenses you cited as example to compute the ROI, the average among gasoline franchisee.

    I have a financier who is interested to put up business in the Philippines and considering his willingness to invest big funds, we thought gasoline franchise would best fit the significant profit margin. I was given a due date by end of this month, and I hope you could provide more substantial information on gasoline franchise.

    Regards,

  9. vhie says:

    Hello…my sister runs a petron gasoline station…kumikita naman but just to share you how much it earns per liter of gas say P50/liter..it is just 2 pesos..or sometimes less pa…maliit lang…you have to sell by really big volumes to realize a big profit…so pag namuhunan ka ng 1,000,000 for the gas kikita ka lang ng mga 40,000…sana hwag ka pa makupitan ng mga workers mo…ang dami pa pandaraya sa mga ganyan…my sis had experienced yung gas truck driver eh babawasan yung delivery ng mga 500 liters w/o her knowing it kasi namamanipulate yung gauge…she will just discover later on na kulang yung delivery pag di na nagmatch yung kita nya sa dineliver sa kanya…pati yung mga nasa maintenance, tuturuan yung mga pump attendant kung pano makakuha ng gas every after magkarga ang isang motorista without you knowing it kasi nga di naman nagrereflect sa reading…mababalitaan mo na lang na may binebenta na galon galon ang mga pump attendant in a cheaper price…andyan yung makikipagsabwatan yung workers mo sa driver ng isang company na kunwari nagkarga sya ng gas pero hindi naman pala…madami pa nangyari sa sister ko…my advise is if you plan to open a gas station be there always…as in super bantay…ang dami pandaraya dyan…yung isa kakilala ko ay nagsisi sa pagopen nya ng same business…and whenever i ask my sis if given the chance, would she choose to do the same business? The answer is a big NO…napasubo na lang sya…namuhunan na kasi…she just have to sacrifice her social life…im sorry i dont mean to discourage you but i feel oblige to share this to everyone since i happen to read this article…but still the decision is yours to make…good luck!

  10. shamey says:

    maraming salama miss vhie sana ganto mga ibang commentator

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