Off-Balance Sheet Financing in Gas Stations: A Hidden Risk (or Opportunity)

 When evaluating a gas station, I came across an interesting situation that perfectly illustrates why buyers need to dig deeper than the income statement. https://youtu.be/PNGKaRg9uWU

Here’s what happened:

⛽ Two ways gas stations work with fuel:

1. Buy and resell the fuel (you own it).
   
   

2. Dispense the oil company’s fuel for a commission (per liter/gallon).
   
   

In this case, the owner had accepted money from the oil company to replace tanks and pumps. Instead of recording that advance as a loan, the repayment was buried in the operating results:

• They earned just 1¢ per liter, while the industry standard was 2.5–3¢ per liter.
  
  

• Why? Because the oil company was deducting repayment from their commission.
  
  

On paper, the business looked weak.

 In reality, once repayment ended, profits would rise dramatically.

👉 The accounting problem:
They should have:

• Recorded full commissions as income
  
  

• Shown the oil company’s advance as a loan on the balance sheet
  
  

But because it was buried, the business looked like it was underperforming.

💡 Key Takeaways for Buyers

• Learn industry benchmarks (margins, cost structures, typical commissions).
  
  

• Watch for off-balance sheet obligations — they distort performance.
  
  

• Misstatements aren’t always bad news. Sometimes they hide upside.
  
  

This gas station wasn’t struggling — it was on the verge of becoming more profitable once the “hidden loan” was repaid.

📚 Want to go deeper?
Check out my program: businessbuyeradvantage.com — a course on how to properly analyze and buy small businesses.

Don’t forget to join my email list for early access to my latest videos and insights at DavidCBarnettList.com . You’ll even receive 7 FREE gifts when you sign up.

– David C. Barnett

Top 10 SMB Terms you need to know

 

***New Video Alert!

Confused by some of the terms you come across?

This week, I run down a list of the top 10 SMB deal making terms you need to understand to avoid bad deals.

Even if you believe you’re experienced, you may learn a thing or two in this week’s video: https://youtu.be/xVU_HofGDys 

Cheers

See you over on YouTube

David C Barnett

Are FedEx Routes Good Businesses to Buy?

 A while back, I did a video about bread routes (or “bread routes,” depending on where you’re from). Since then, I’ve had a lot of comments and questions about FedEx routes. Are they good businesses? Are they like franchises? What are the risks?

I’ve actually evaluated a few of these businesses, so let’s break it down. https://youtu.be/lp6OB_8yRYI 

Are FedEx Routes Franchises?

The short answer: No.

A FedEx route is not a franchise. You’re not buying a protected territory like you would if you bought a McDonald’s or Subway franchise. Instead, you’re entering into a contract for services with FedEx.

Here’s what that means:

• FedEx hires independent contractors (corporations only, not sole proprietors or partnerships).
  
  

• You and your employees use your own trucks to deliver packages.
  
  

• FedEx pays you based on volume or mileage.
  
  

You are not buying a business opportunity from FedEx. You’re becoming one of their suppliers.

The Illusion of Buying a “Business”

Here’s where it gets tricky.

Contractors who’ve built profitable FedEx delivery operations sometimes sell those operations to other buyers. People pay big money sometimes millions for the trucks, employees, and the assumption of the FedEx contract.

But here’s the risk:

• The contract is renewed annually.
  
  

• FedEx can change the rules at any time.
  
  

• If they pull your contract, your business evaporates overnight.
  
  

At the end of the day, what you’re really buying is a business with one customer. And if that customer goes away, so does everything you’ve built.

The Risk of One-Customer Businesses

I’ve evaluated other courier operations that served multiple companies. For example, one rural delivery service worked with five different courier companies at once.

That business had:

• A built-in barrier to entry (no single courier had enough volume to go it alone).
  
  

• Diversified revenue (losing one client didn’t destroy the whole business).
  
  

That’s a real delivery business with intrinsic value.

A FedEx route? By contrast, you’re tied 100% to a single customer. That’s what we call customer concentration risk.

How to Protect Yourself if Buying a FedEx Route

If you’re considering buying one, you must structure the deal carefully. Here’s my rule of thumb:

• Down payment: No more than the value of the hard assets (trucks, equipment). That way, if the contract ends, you can sell the trucks and recover your investment.
  
  

• Goodwill: Should be financed by the seller through vendor financing. If FedEx cancels the contract, you’re not stuck paying off millions in goodwill that no longer exists.
  
  

• Payments: Tie them to the continuation of the FedEx contract.
  
  

Otherwise, you’re taking on massive debt for an asset that could disappear with one letter from FedEx.

Bottom Line

FedEx routes can be profitable but they’re not franchises and they’re not low-risk businesses.

They are supplier contracts with one customer. If you lose that customer, you lose everything.

If you’re going to buy one, make sure the deal structure protects you and that the seller shares the risk of FedEx changing its mind.

Don’t forget to join my email list for early access to my latest videos and insights at DavidCBarnettList.com . You’ll even receive 7 FREE gifts when you sign up.

– David C. Barnett

BBA Online Training v4 0 Launch

 

***New Video Alert!

Double the content of the original deal education modules.

Completely new sections.

If you’re planning to buy a business, don’t do it without learning how we can help you: https://youtu.be/ErWE6G8LIG8 

Check video show notes for a special offer from David for new students.

Cheers

See you over on YouTube

David C Barnett

LIVE Mark Willis- The Business Fortress Book Launch

 

How to turn your business into a resilient fortress to protect you and your family from your mortal enemies.

New Livestream guest- Mark Willis

I’m happy to have my friend and show sponsor Mark Willis join me on a live broadcast.

As you know, Mark is a certified in financial planning and works with business owners all around the US.

Tune in and as we’ll be discussing how to make any small business stronger and more resilient and how being a business owner makes financial planning different from the advice given out to employees.

Mark and I just finished writing a book together and we’ll be discussing the covered topics in this broadcast.

This is a ‘must see event’ for anyone who owns a business or will one day.

Learn what you’ll find inside our new book, The Business Fortress. Available  now on Amazon.

Be sure to join live so that you can ask questions, replay will be available.

Set yourself a reminder on YouTube here: https://youtube.com/live/uErQ8Sckbcc 

We’ll be going live Monday August 18, 2025 at 1:00 PM Atlantic Time 12 Noon Eastern Time

See you there!

David C Barnett

The Future of Business: What’s Coming, and How It Could Impact You

 Last week, I got back from a trip to Europe. It was part vacation, part business and full of fascinating conversations.

As some of you know, many entrepreneurs in their 40s (myself included) are in “round two” of life: new relationships, new perspectives, and, often, new ventures. On this trip, I noticed something interesting: many of the other guests were also business owners or professionals.

I found myself inside conversations about our own businesses with people ranging in age from mid-30s to late-60s, including some very seasoned entrepreneurs. https://youtu.be/2gdoI_KGSOU 

One evening, a group of us started talking about the future big shifts that could reshape the economy and everyday life. Some people had already made major business moves based on these predictions.

Here’s a condensed version of the list.

The Decline of Cities as We Know Them

Cities have always thrived because people needed to be physically close to do business. But that’s changing.

Several entrepreneurs on the trip had already sold off expensive commercial properties, believing their long-term value will fall maybe in 5–10 years, almost certainly in 20.

Why?

• Telecommuting is becoming more mainstream.
  
  

• The original reason to “live near the action” is fading.
  
  

• Rural and smaller-town living offers a better lifestyle and lower costs.
  
  

If fewer people need to be in cities for work, demand for urban real estate could fall — and when demand drops, prices can drop fast.

2️⃣ Commercial Real Estate’s Ripple Effect

If offices and retail space are worth less, city governments will feel it. Many rely heavily on commercial property taxes. Lower values mean:

• Higher residential taxes or
  
  

• Cuts to services
  
  

This could shift the balance of where people want to live and do business.

3️⃣ Self-Driving Cars & the Shrinking Auto Industry

Autonomous vehicles could radically reduce the number of cars we need.

Imagine:

• Your car drops you at work
  
  

• Drives Grandpa to the bowling alley
  
  

• Pick up your uncle for the dog park
  
  

• Returns to get Grandpa later
  
  

If families can share fewer cars, demand for vehicles plummets and so does demand for everything tied to them (sales, repairs, fuel, parts).

One entrepreneur pointed out:

• Location won’t matter for repair shops once cars can drive themselves.
  
  

• Large, low-cost, centralized facilities could replace today’s high-traffic “quick lube” spots.
  
  

4️⃣ Why Long-Term Business Financing Gets Riskier

If you’re buying a business especially with a 10-year loan you can’t assume the world will look the same in a decade.

We already know recessions happen roughly every 10 years. Add in technological shifts, real estate changes, and evolving industries, and the long-term risk increases.

Shorter payback periods give you more flexibility and less exposure to unpredictable change.

Takeaway for Buyers & Owners

If you’re thinking about:

• Buying a business
  
  

• Purchasing a building
  
  

• Taking on long-term debt
  
  

…be sure to factor in big-picture trends. These shifts may not happen overnight, but over the next 5–20 years, they could dramatically reshape the business landscape.

Smart entrepreneurs look ahead and act before the change is obvious to everyone.

Don’t forget—join my email list for early access to my latest videos and insights at DavidCBarnettList.com . You’ll even receive 7 FREE gifts when you sign up.

– David C. Barnett