How to Start a Pet Business

Target Market

According to Pet Age magazine, more than 6 out of 10 U.S. households, or 64.2 million, own at least one pet. Not all these households have designer pet strollers on the driveway or marabou-trimmed beds in the master bedroom, but enough people were buying products to pamper their pooches and kitties to make the pet-supplies industry a $5.86 billion market in 2003. Market research company Business Communications Co. predicts that by 2008, pet supplies will be a $7.05 billion industry, with an average annual growth rate of 3.8 percent. And while there are no statistics available specifically on the upscale pet-products industry, it's safe to say that the people who are selling these products are taking a big bite out of that prosperous market.

Upscale pet products run the gamut from the sublime to the sometimes ridiculous. There are ferret hammocks, faux mink dog blankets and cashmere sweaters, Halloween costumes and Santa suits, and plush beds shaped like Faberg eggs (the latter is the charming creation of one of the entrepreneurs interviewed for the Pet Businesses start-up guide). Other upscale pet products now in demand include jewelry (both barrettes and necklaces), wedding dresses and tuxedos, fashion eyewear, elaborate cat condos, stairs and ramps for elderly pets, pet toys and massagers, apparel (sweaters, dresses and T-shirts), collars and leashes.

Despite the proliferation of upscale pet products, this really is an industry in its infancy. While there have always been a lot of companies that sold pet products, as recently as 2001 there were very few companies offering upscale pet fare. Since then, there has been an explosion in the number of companies that sell these pricey products, which has made the industry much more competitive. But if you're a committed pet lover who believes there's a need for what some may consider fripperies, this is an industry in which you can make a good living.

Making Your Mark
There are several ways you can tap into the upscale pet-products industry:

  • Retail store: In this type of business, you'll buy products from a wholesaler, mark them up, and sell them in your own store.
     
  • Wholesale outlet: In this case, you supply products to boutiques and other retail stores (including online stores).
     
  • Internet store: This is a cost-effective way to enter the world of upscale product sales. You'll need inventory (which you'll buy at wholesale and sell at retail), and you'll have to store it somewhere and package it up as orders come in, but if you operate out of your home, you can save a lot of money on overhead costs.
     
  • Drop-shipping: No room for inventory? Then a business that fulfills orders on a drop-ship basis may be the way to go. Drop-shipping means you strike a deal with a product manufacturer to ship orders from its warehouse or production facility directly to your customer.
     
  • Product manufacturing: If you're a homebased entrepreneur, you may think this type of business would be outside the realm of possibility. But actually, if you have any design experience or proficiency and you're willing to learn about product manufacturing, this can be a viable business to look into.

A Day in the Life
Of course, running an upscale products business involves more than just picking out or manufacturing cool toys and market-testing them (with the able assistance of your own precious pets, most likely). There are a number of tasks you'll have to undertake on a daily basis to keep the business running smoothly and efficiently:

  • Office administration: As the nerve center of your fledgling pet-products empire, your homebased office (or possibly an office at your store or manufacturing facility) will be the place where all the action takes place, from talking to customers and suppliers to balancing the books, planning advertising campaigns, and, in short, handling all the various details involved in running a small business. For this reason, you'll want to outfit your workspace with appropriate office furniture and equipment so you can do your job efficiently.
     
  • Product research: With the internet, the process of finding new and exciting products-or inspirations for your own creations-is much easier. Business owners often spend hours a day just on this task to keep abreast of what's new on the market.
     
  • Purchasing: Obviously your assortment of products will be the engine that makes your business machine go, so you'll have to devote a fair amount of time talking to sales and manufacturers' reps. (One entrepreneur says that once you've been to a trade show, you'll start getting cold calls from reps eager to sell you product for your brick-and-mortar or internet store.) You'll also have to buy supplies for your office, like computer paper and paper clips, and packaging materials like boxes, packing peanuts and sealing tape. Finally, you'll have to purchase the raw materials that will become your pet beds, towers, collars, and so on. This may entail traveling to places like the Los Angeles or New York garment and fabric districts, since there's no substitute for actually touching and holding the materials that will become your upscale products.
     
  • Personnel management: Even if you're a one-person band, you may one day find yourself in need of help to ship out a big order or unload a truckful of holiday merchandise. If you have employees (either on your payroll or as contract workers), you have to oversee their work. You'll have to come up with work schedules, process the payroll, and handle personality conflicts. You'll also have to find and actually hire these people, then do the considerable IRS paperwork that comes along with having employees.
     
  • Inventory control and stocking: Unless you're drop-shipping, the product you sell has to go somewhere, and that somewhere is the shelves in your home storage area or the display areas or stockroom in your store. This is tedious, physical work that many business owners prefer to delegate to someone else, but if you're on a tight budget you may find yourself hefting those pet beds onto the top shelf or hanging the pet sweaters on racks in your store.
     
  • Production: If you decide to manufacture products to your own specifications, you'll be spending a fair amount of time on product design. You'll inspect and approve prototypes. Then when the assembly line fires up, you'll oversee production to make sure it meets your exacting standards. All this may take place in a city far, far away-like Beijing, for instance, or Hong Kong, which means you'll have to factor travel time into your schedule.
     
  • Trade shows: Speaking of travel time, you're likely to want to display your products at pet trade shows to generate interest, build name recognition and hopefully make a buck. This can take up several days and thousands of dollars, but in the long run you may find it's time and money well-spent. Susan Benesh, owner of VIPoochy, a wholesale/retail distributor of upscale pet products, is a big believer in the importance of trade shows, but she doesn't attend them herself anymore. Instead, she uses a company that provides trade representatives to sell for her. The company earns a 25 percent commission ("Which is a great incentive to make sure they sell for us," she says), and she's a big winner, too-she attributes 30 percent of her sales to this arrangement.
     
  • Marketing and advertising: Trade shows, ads in publications, news releases and your website are all viable outlets for promoting your business, and it's crucial that you plan the scope and timing of these efforts carefully to maximize their impact. You're likely to be thinking about these tasks literally every business day-and no doubt even in your sleep.

Setting Prices
If you're manufacturing your own products, you'll have some control over the prices you charge. These prices should be based on an equation that takes into account all your expenses, from materials costs to packaging. But if you're purchasing products to resell, your retail prices will be based on the cost set by the wholesaler or supplier, plus a markup that covers your business costs and profit margin. Benesh, who started her Columbia, South Carolina, company in 2002, suggests looking at your costs, seeing what other companies are charging for similar prices, and splitting the difference. She says, "If you have a superior product, can bring it to the market faster than anyone else, and offer excellent customer service, you're in."

Earnings Potential
It's not uncommon for a startup upscale pet-products business to have gross revenues as high as six figures in the first full year of business. However, after ponying up for product, fulfillment, office management, insurance, and the myriad other expenses required to run a business, the net revenue will be considerably lower-and maybe even minuscule. This is why it's not unusual for startup entrepreneurs who have working spouses or significant others with health-care benefits simply to plow all this revenue back into the business for the first couple of years, which gives the business the best chance of success.

Benesh, for example, takes just a small salary because her company is still in a growth curve. "If you want to take a salary immediately, the amount you take has a direct relationship to how much you want the business to grow," she says. Others, like Diane Burchard, the owner of Paws-Worthy Emporium & Deli in Santa Fe, New Mexico, depend on other income to make ends meet. When she started her business, she was a working mixed-media artist who had artwork in galleries around the country. The sales of that artwork helped to pay her monthly bills so she could sink everything else into the retail business.

Not to say that you can't depend on your business for a salary. According to Bob Vetere of the American Pet Products Manufacturers Association, the average weekly sales per employee in a retail pet-products business are $2,600, or $135,200 per year. Of that amount, an average of 19 percent usually goes to payroll and benefits, while 44.5 percent goes to inventory. The rest goes to taxes, licenses, fee, rent and/or leases. Of course, if you're drop-shipping, you won't actually have money tied up in inventory; rather, you'll get a percentage of the amount of the sale. That all becomes pure profit. And if you're working out of your home rather than a brick-and-mortar facility, you pocket the rent money as well. Or more likely, you'll put that money back into the business until it's on stable ground.

Obviously, you won't spring right from the box earning that average $2,600 per week. It takes time to develop your market and get the word out. So until then, it's really important to have a nest egg equivalent to six to 12 months of living expenses available to carry you through those lean early months. This can be money from personal savings, from a home equity loan, or from a business startup loan.

Startup Costs
As you can see, there are a lot of varied costs involved in starting an upscale pet-products business. A homebased business owner will have the lowest outlay of cash since his or her overhead costs will be much lower than those of a site-based merchant. Benesh, for instance, shelled out just a few thousand dollars for a "juiced-up laptop," as she calls it, and basic office supplies and equipment (including a color printer/scanner/fax machine).

But no matter where you do business, your most substantial cost will be for the inventory you purchase or manufacture. If you're buying product to resell, you probably will need $15,000 to $30,000 in inventory to get started, although if you're homebased, you could start for less. If you're going the manufacturing route, your startup inventory costs could be at least $30,000-or considerably more, depending on what you're producing. One of the entrepreneurs interviewed for this book says her startup inventory costs were $500,000, which included manufacturing, etc. Today, she's shipping 60 to 100 orders a day, so the initial outlay definitely paid off. Another entrepreneur launched her business with a loan from the SBA for $45,000, fortified by $5,000 of her own savings and $5,000 from her brother and sister-in-law-and she could have used more, she says.

How to Start a Pet Business

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