Digital Social Hour: How I Built 3 Gas Stations Before 30: The Inside Truth | Kristofer Danielson DSH #1083

Release Date: January 10, 2025

Introduction

In episode #1083 of Digital Social Hour, host Sean Kelly sits down with Kristofer Danielson, a remarkable 26-year-old entrepreneur who has successfully built and currently manages three gas stations, generating an impressive annual revenue of $30 million—projected to exceed $40 million this year. Kristofer's journey from a business student to a thriving gas station mogul offers insightful lessons on entrepreneurship, strategic business operations, and navigating the competitive landscape of the gas station industry.

Kristofer's Background and Entry into the Gas Station Industry

Kristofer's entrepreneurial spirit emerged during his final year at Algonquin College, where he was pursuing a degree in Business Administration. While working for the Canadian federal government, he sought an alternative path that diverged from his desk job. His inspiration struck when he observed the success of his great uncle's gas station on the Fort William First Nation Reserve.

Kristofer [03:24]: "There's a lot of gas stations on Fort William, I seen. And there is a prime real estate piece of property. And when I inquired sort of who, who owned it, it was actually my great uncle."

Recognizing the significant advantage of operating on a reserve—namely, the absence of sales tax which typically stands at 13% in Ontario—Kristofer saw an opportunity to offer lower gas prices, attracting a high volume of customers. With an initial investment of $25,000 from savings accrued during his government job, he acquired land and launched his first gas station in 2020.

Business Model and Operations

Operating gas stations in Canada presents unique challenges and opportunities, particularly on reserves where tax advantages play a crucial role. While gas margins are notoriously thin—often around five cents per liter—the true profitability lies in the convenience store aspect of the business.

Kristofer [05:58]: "And specifically on the cigarettes, really that's the highest margin item."

Kristofer emphasizes that high-margin products like cigarettes, vapes, and other convenience items drive the majority of the profit. By maintaining competitive fuel prices, his stations attract a steady stream of customers, thereby increasing in-store sales. This dual-revenue model ensures sustainability even when fuel prices fluctuate.

Growth and Scaling Strategy

Kristofer's strategy for scaling involves meticulous location selection and market consolidation. Owning half of the gas stations on the Fort William reserve—three out of six—has established a dominant market presence, preventing competitors from undercutting prices and ensuring customer loyalty.

Kristofer [25:58]: "There's six gas stations on the reserve, so I have three of them."

His approach focuses on acquiring one new gas station per year, prioritizing locations that offer similar tax benefits and market conditions. By expanding within favorable markets, Kristofer ensures that each new acquisition complements his existing operations, facilitating seamless growth and increased revenue streams.

Challenges and Solutions

Entering the gas station industry is capital-intensive, with high initial investments and ongoing operational costs. Kristofer faced significant challenges, particularly in securing financing due to restrictions imposed by the Indian Act, which limits traditional banking options on reserves.

Kristofer [12:35]: "There's a lot of trucks in Canada."

To overcome these hurdles, Kristofer turned to private lenders who trusted his business acumen and vision. This alternative funding approach enabled him to invest in necessary infrastructure, such as gas pumps and store enhancements, without relying on conventional financial institutions.

Financial Insights and Strategies

Kristofer adopts a straightforward financial strategy when acquiring new gas stations, valuing businesses at two to three times their net income rather than relying on more complex metrics like EBITDA.

Kristofer [28:29]: "I like to purchase a business for like two or three times their earnings."

Focusing on net income allows Kristofer to quickly assess profitability and ensures that each acquisition aligns with his return on investment goals. This pragmatic approach contrasts with the often overinflated valuations seen in stock markets, where returns may take years to materialize.

Personal Entrepreneurial Journey and Influences

Kristofer's entrepreneurial journey began early, selling candy in grade five and later engaging in online affiliate sales during his teenage years. Influenced by his father's entrepreneurial endeavors—such as selling books on Amazon—Kristofer cultivated a strong business mindset from a young age.

Kristofer [17:07]: "I've been doing this a long time."

These early experiences laid the foundation for his later success, providing him with the skills and confidence necessary to navigate the complexities of running a multi-million-dollar business.

Future Plans and Perspectives

While primarily focused on expanding within Canada, Kristofer remains open to opportunities in the United States, though he recognizes the distinct differences between the Canadian and U.S. markets.

Kristofer [14:18]: "I don't think acquired because like I've thought about that before and it's like, you know, I'm 26 and then what am I going to do after?"

Kristofer is not currently considering selling his businesses to major gas companies, preferring instead to maintain control and continue innovating within the industry. His hands-on approach, including occasionally pumping gas himself, keeps him connected to his business operations and allows him to stay attuned to customer needs and market trends.

Conclusion

Kristofer Danielson's story, as shared on Digital Social Hour, is a compelling example of how strategic thinking, leveraging unique market advantages, and an unwavering entrepreneurial spirit can lead to remarkable success in a competitive industry. By focusing on high-margin store sales, maintaining competitive fuel prices, and carefully selecting prime locations, Kristofer has built a thriving business empire in the gas station sector by the age of 26. His insights provide invaluable lessons for aspiring entrepreneurs aiming to achieve similar heights in their ventures.

For more insights and updates from Kristofer Danielson, you can follow him on Twitter and Instagram.