There are two main ways to get involved with the pet industry: sell products and supplies or sell services. They both have their pros and cons but here’s why I like the service aspect more and why you may want to consider a combination of the two at the very least.
Anyone who sells pet supplies, whether online or via traditional outlets like a store, will tell you that it’s a volume business. Profit margins on most pet supply items are relatively small compared to items like cameras or other types of consumer electronics.
So even if you sell $1,000 worth of pet supplies you may actually only have a gross profit of $400 — if you’re lucky. And that’s not even accounting for expenses such as advertising, salaries, electricity, etc. That means for every item you bought for 60 cents you sold for a dollar — hence, GROSS profit, not net profit. Factor in all the ancillary expenses I just listed and you’ll be lucky to earn a 20% NET profit.
Now, take the dog walker who earns $100 a day. That’s $100 in pure profit. There were no expenses or inventory items applied to that profit. The only “cost” was time.
The negative with many service businesses, like pet sitting and pet grooming, is that there are only 24 hours in the day, 7 days in the week, so you are inherently limited to how much you can earn based strictly on your time, unless, you’re able to grow your business by hiring and MANAGING other people to do what you do.
This is often referred to as working “on” your business and not working “in” your business.
Many smart petropreneurs who provide services figure out a way to scale their business up by hiring other people to do what they do. The groomer opens a grooming shop; the pet sitter buys a pet sitting franchise that specializes in hiring and managing other pet sitters, etc.
In fact, look at what some of the retail leaders in the business are doing and you can see why adding services to the retail mix can be very good for the bottom line.
According to a recent PetSmart annual report:
“PetSmart generated $4.23 billion in net sales in 2006, up from $3.76 billion in net sales a year ago. Comparable store sales grew 5.0 percent in 2006, on top of 4.2 percent growth in 2005.
During the fourth quarter, pet services sales were $97.2 million, up 22 percent from the same period last year. For the full year, pet services generated $376.0 million in revenue, or 26 percent growth over 2005.”
Check it out: pet services were up 26 percent vs. 5 percent for product sales!
If you’re already offering pet services — keep doing what you’re doing but also look to add additional services to your repetoir. Dog walker? Add poop pick-up services. Groomer? add dog walking services. And why not sell some products as well? While the margins won’t be as good, every additional revenue stream helps!
3 responses so far ↓
Stacy // March 3, 2007 at 7:46 pm |
With a pet service business, you still have overhead. Gas and car maintenance as well as advertising can take a big chunk out of your profits.
petbizop // March 3, 2007 at 8:11 pm |
I agree. Any business will have overhead. But inventory is a large part of “overhead”, and one aspect that the service-type business will have next to zero of. Inventory also ties up capitol. So I guess rather than suggesting that the dog walker in my example gets to keep 100% of the $100 they earn, perhaps it should be compared in percentages. I know from running my Lucy The Wonder Dog Dot Com website (which I sold in January) that inventory costs were approximately 40% of my “overhead”. That’s in addition to all the other expenses like office supplies, advertising, etc.
Pet Supplies Guru // October 27, 2007 at 1:19 pm |
You are right on the money with those figures, great topic