Selling your pet services business requires careful planning, including establishing a selling price, planning your exit, leveraging expert advice, and finding potential buyers. This guide provides a step-by-step roadmap, offering insights and proven tactics to help you achieve a seamless and successful transaction.
With the rise in pet ownership over the years, the pet services industry has witnessed significant growth, expanding its offerings to meet the diverse needs of pet owners. This dynamic marketplace includes retailers, product manufacturers, and service providers addressing a variety of needs, from everyday essentials to high-end specialty items and niche services. The sector includes a wide variety of businesses, including dog daycare, pet boarding, grooming, pet stores, and supply businesses, each catering to distinct market segments.
Determining the value of a business is the first step owners take in preparing the business for sale. When assessing the value of a pet services business, it is important to consider both its financial performance and its ability to generate future earnings. The value of a pet training, grooming, or boarding business lies not only in its physical assets but also in intangible assets, such as its reputation and goodwill.
The three most common methods for valuing a business are income, asset, and market based. Choosing the right valuation method depends on a variety of factors unique to the business, such as the business’ structure, age, and financial history. When evaluating the value of a pet services business, the majority of owners and buyers employ a market-based approach.
The market-based valuation method finds the value of a business by comparing it to other similar businesses that have recently sold. To determine their value in comparison to recent sale prices, business owners, buyers, and brokers in the pet sector can rely on industry-specific cash flow and revenue multiples. Businesses that are reasonably profitable often use this method of valuation. The metrics used to calculate multiples are earnings (cash flow) and revenue (gross sales). For owner earnings under $1 million, seller’s discretionary earnings (SDE) is the appropriate cash flow metric to use and discretionary expenses are added back, or recast, to the company’s bottom-line profits.
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Pet Services Businesses Sold (2017-2024) |
Average Earnings Multiple |
Average Revenue Multiple |
|
Dog Daycare and Boarding Businesses |
3.15 |
1.18 |
|
Pet Grooming Businesses |
2.22 |
0.63 |
|
Pet Stores and Supply Businesses |
2.29 |
0.50 |
|
Other Pet Services Businesses |
2.93 |
0.92 |
Pet Services Business Earnings Multiples
The value of a business, even though it falls within a certain range, is ultimately shaped by its unique characteristics, including the local market, specific financials, and business operations. For pet services businesses, the average cash flow, or earnings, multiple is 2.56.
So, using the average earnings multiple, a pet business with annual owner earnings of $100,000 could be worth over $250,000 on the open market.
Valuations Based on Sales or Revenue
While cash flow or earnings multiples are often relied upon to determine the value of pet services businesses, there are instances where revenue-based valuations provide valuable insights. Revenue-based valuations offer a deeper understanding of how a company stacks up against industry benchmarks. Based on the average pet business revenue multiple of 0.76, a pet services business has the potential to be sold for almost 76% of its annual revenue.
Documents Needed to Value Your Pet Services Business
There are a variety of documents that you’ll need to gather, and you’ll want to have records going back three years. Through comprehensive and well-structured documentation, along with precise financial record-keeping, you can effectively highlight past accomplishments and future prospects of your business to potential buyers.
Among the documents you’ll want to collect are:
To optimize the outcome of your business sale, you’ll want to consider putting together a team of advisors. Having a team of professionals with unique skill sets on board to help with valuation, marketing, and negotiation allows you to run the business while it’s on the market. Accountants, appraisers, attorneys, business brokers, and consultants can help ensure the sale transaction goes smoothly.
An accountant will organize your financials to help demonstrate the value of your business based on its past performance. In the due diligence phase, buyers will closely analyze your financials, so it’s important to have a CPA to verify their accuracy. From tax advice and recasting financial statements to asset allocation, having an accountant on board is helpful not only for determining value but also to ensure compliance with tax laws and regulations.
An attorney with experience in business acquisitions is essential for navigating the legal aspects of selling your pet services business. Attorneys typically work on a flat fee basis and will offer advice on legal issues throughout the process. They’ll also draft NDAs and buy-sell agreements, as well as review incoming offers and letters of intent. Lawyers will assist in streamlining the process, ensuring the deal’s terms are in your favor and safeguarding your interests.
Business brokers act as intermediaries and advisors throughout the process of selling your business. When choosing a broker, it’s important to prioritize those with experience and specialized knowledge of the pet space, as they can offer tailored advice to optimize value. Brokers work on commission, typically 10-15% of the final sale price, and offer a wide range of services. Business brokers manage the whole process—from valuation and determining an asking price to marketing the business for sale and closing the deal.
Many factors influence the timeline for selling a business—expect the process to last between six months to a year. For business sales, 2024 saw 126 pet services businesses sold on BizBuySell, with a median of 189 days on the market. Some key factors to consider when assessing the duration of selling your business include the purchase price, industry and business type, buyer category, location, business structure, and involvement of a business broker.
In order to make your pet services business more appealing to potential buyers, determine any areas that need improvement. Now’s the time to identify individuals who have the potential to handle more responsibilities and offer training to fellow team members if needed. Careful evaluation and implementation of modifications to your business can result in a boost in its market value. For business owners in the pet industry, several key levers can significantly drive the value of their businesses. Understanding and strategically managing these factors can enhance the overall worth of the business, making it more attractive to potential buyers.
|
Improves Price Multiple |
Reduces Price Multiple |
|
Operational efficiency: Streamlined processes, effective staff management, and optimized resource utilization. |
Operational inefficiencies: Complicated or non-existent bookkeeping, unreliable vendor relationships, undocumented agreements, etc. |
|
Financial performance and profitability: Strong financial performance and profitability with clear and transparent financial records. |
Uneven financial performance history, opaque financial records. |
|
Brand reputation and niche specialization: Strong brand reputation, positive customer reviews, and customer retention. |
Unestablished brand, with no specialization that struggles to build a loyal customer base. |
|
Customer base and client list: your list of clients, customers, and prospective customers in a well-maintained database. |
Disorganized client list: customers who are not loyal to the business. |
|
Robust online presence and marketing strategy. |
Poor website, social media, and marketing strategy |
|
Owner independence and employee expertise: owner involvement is minimal, transferring an experienced team to run daily operations. |
Owner-dependent business, with few experienced employees transferring with sale. |
|
Multiple revenue streams, various services and products. |
Single revenue stream, a focused product/service offering. |
|
Supplier relationships and inventory management: Reliable source for product, with multiple suppliers. |
Over-reliant on one supplier for product. |
|
Seller financing: Business owners willing to finance a portion of the sale can often receive higher prices. |
Cash only: Sellers who insist on all cash will usually have to accept a lower offer and may receive fewer offers to consider. |
Business owners in the pet industry should proactively manage and enhance these levers to optimize the value of their businesses. Regularly assessing and addressing these factors will not only contribute to a higher valuation but also position the business for a successful sale.
There are a variety of options available when it comes to thinking about potential buyers for your pet services business. Consider whether or not you want to sell your business to family members, employees, competitors, or place it on the open market.
Most business owners prefer to maintain confidentiality during this sale process. Keeping the sale confidential helps maintain value, and if you’re working with a business broker, they are adept at fielding inquiries from would-be buyers without revealing the company name. They will market your business for sale and create a “blind listing” on business-for-sale marketplaces. They will also have an NDA prepared for anyone interested in reviewing the details of your business. However, in some cases, it may be beneficial to publicly announce the sale to trusted advisors and competitors to gauge their interest in an acquisition.
When creating a listing on business-for-sale marketplaces, it's crucial to craft a listing that leaves a lasting impression. It may be the first impression for potential buyers, so it’s important to take the time to compose a compelling listing.
The top five elements of a successful listing are:
The final steps when selling your pet services business come down to negotiating the terms and closing the deal. Due diligence can take a few weeks to a few months, depending on the complexity of the deal. The buyer will want to review your financials, business structure, operations, contracts and liabilities, customer data, employee information, legal issues, physical assets, and intellectual property. Issues may surface, so it's important to be prepared to negotiate. Making minor adjustments to the price or financing terms can effectively resolve many issues that may arise.
After the final terms of the deal have been agreed upon, it's time to bring the deal to a close. At the closing, the business owner(s), buyers, attorneys, and brokers will gather to review and sign all necessary documentation to complete the transaction. Once the sale has been successfully closed, the focus shifts to transferring the business operations to the new owner. Your attorney and broker will guide you through the final post-closing process, ensuring a smooth transition.
Selling a pet services business can be a much simpler process by understanding its value and becoming well-versed in the business-for-sale market. This will allow you to put a process into place to attract the best opportunities.
Get our free Guide to Selling Your Small Business for an in-depth guide that will walk you, step-by-step, through the process of valuing and selling your pet services business.
