From the November 2005 issue of Entrepreneur

Editor's note: What kind of pet business should you start? Read "10 Pet Businesses to Start" to get some ideas.

Susan Benesh, president of Posh Poochy Inc., a Columbia, South Carolina, manufacturer of clothing, collars and accessories for dogs, thanks her beloved bichon frisé and pug for their inspiration. The idea of launching a pet company began when strangers stopped Benesh in the street to ask her where she bought the cute sweaters and collars her two pooches were wearing. Benesh realized that the items she enjoyed crafting for her own canines could make her some money.

Benesh, who formerly owned a small publishing company, began investigating the field by visiting independently owned, high-end pet boutiques in cosmopolitan markets such as Atlanta, Los Angeles and New York City. They instantly wanted to carry her items, and she soon had trouble keeping up with demand. She sent out free samples to other retailers around the nation and listened to their feedback. In addition, she conducted Google searches to obtain information and statistics on the pet industry. Benesh also compared her pricing and offered a differential that other high-end dog apparel makers didn't provide. For instance, instead of charging $1,200 for dog beds that few people will buy, Benesh's beds cost between $195 and $225.

With sales already surpassing $1 million this year, Posh Poochy's merchandise is sold at 400 pet shops in the United States and around the world, as well as online. Benesh and her three employees work out of an office and warehouse, totaling 3,000 square feet.

"You've got to have a specialty, be more affordable than what's out there and not try to compete with the big pet stores if you're starting out," says Benesh, 47, who launched Posh Poochy in 2003.

Hot Market
Benesh is part of an explosion in pet businesses that is inspiring many new entrepreneurs to start their own ventures offering a product or service for Rover, Fluffy or almost any kind of animal you can think of. Since many animal businesses can easily be launched at home with little capital, entrepreneurs are lining up by the dozen to sell their wares. Based on attendance at the American Pet Products Manufacturers Association's recent annual trade shows, an estimated 125 to 150 new pet business are created each year, and there are no visible signs of a slowdown anytime soon, says Andrew Darmohraj, vice president and deputy managing director of the Greenwich, Connecticut-based organization.

Just look at the numbers spurring this continuous growth. Pet spending has more than doubled in the past 11 years--from $17 billion in 1994 to a projected $35.9 billion by the end of this year, according to statistics from the APPMA. Fueling this trend are empty nesters lavishing attention and money on their pets, young adults who are having children later and currently put their time and energy into their animals, and a pet industry that has become more sophisticated at consumer marketing, points out James Chung, president of Reach Advisors LLC, a Belmont, Massachusetts, business strategy and research consultancy. The influence of mass media--including popular cable channels like Animal Planet--has also made the family pet more revered than ever, Darmohraj adds.

In fact, the pet business is now the seventh largest retail segment in the nation, with consumers spending more on their beloved creatures than they do on candy or toys, according to the APPMA. And a whopping 63 percent of all U.S. households--or 69 million homes--have a pet.

But don't think it's too late for you. There is still plenty of room for new ventures--as long as they offer something novel or really useful. "The pet industry, unlike many others, is almost recession-proof," Darmohraj says. "Consumers will always be willing to spend money on their animals no matter what, like they would on their kids."

Despite the existing demand, you need to carefully research a product or service to find out if there is enough of a need for it, or conversely, if your segment of the market is oversaturated. You also need to put aside the notion that just because you adore your dog or cat, owning an animal business will automatically be fun and easy.

"People think, 'Oh, I love dogs, so I'll start a dog-sitting business in my home.' It's not that easy when you're dealing with animals that aren't your own, and you shoulder a tremendous responsibility when you're taking care of someone else's pet," says Gene Fairbrother, Dallas-based lead business consultant for the National Association for the Self-Employed and president of MBA Consulting Inc. "You also have to check with your state licensing board to make sure you have the proper license and liability insurance."

For instance, about half the states have some kind of kennel ordinance and licensing, says Jim Krack, executive director of the American Boarding Kennels Association in Colorado Springs, Colorado. Dog day-care and boarding centers are rapidly expanding to include services like hydrotherapy for dogs, even offering video access for pet owners who are traveling and want to see their pets in action at such facilities. If you are considering starting a business with such services, Krack says, you definitely could have a leg, or paw, up on the competition.

Pet Project

Scott Smith, 34, CEO and co-owner of New York City's Biscuits & Bath, can attest to the long hours involved with running a canine overnight, day-care and grooming center. Even though he and COO and co-owner John Ziegler, 34, unequivocally adore dogs, operating the three locations of their full-service facility and managing their 95 employees is a nonstop commitment.

"I love dogs and am fascinated by this industry, but it is hard work," says Smith, who owns a black Labrador retriever. "I sleep with my cell phone on right next to my bed. After all, the dogs we handle are like children to their owners, and we have to treat them as such, with the utmost care and attention."

The business began in 1990 with Ziegler dog-walking and pet-sitting in other people's homes. He eventually opened a dog gym and boarding facility in 1998, after his clients complained that they had no reliable, comfortable place to leave their pets when they traveled or even while they were at work. He conducted more research, speaking to Manhattan doormen, who are often left with the responsibility for apartment owners' dogs when the owners are away. They, too, attested to the lack of quality boarding facilities. Ziegler began paying doormen $50 referral fees when they recommended clients to him, and the business grew from word-of-mouth, Smith says.

But Biscuits & Bath also blossomed due to major points of distinction that set it apart from other Manhattan boarding centers. It had staff working in the locations 24 hours a day; provided cageless boarding with large corrals instead of harsh, steel cages; and charged affordable rates ($55 for a day of boarding)--even for pricey Manhattan. Armed with a background in consulting and an MBA, Smith joined the business in 2003 with hopes of growing it even more. The company, which had sales of more than $3 million in 2004, plans to open two more locations by year-end, and hopes to add two or three more centers in the New York City area next year, says Smith.

Just as Ziegler spoke to doormen for feedback, you need to query your market. If you are looking to distribute a product or service, for instance, talk to independent pet-shop owners or kennels to obtain their input. They also can distribute your product or help you promote your service, with a cut of sales given back to them. It's easier to break in this way than through the large pet-store chains, which have a set protocol for buying products on a national level and are usually less likely to take on the wares of a local entrepreneur.

"This is a very fragmented industry, and it makes the most sense to sell your product or service through the mom-and-pop retailers first, not the big guys," Chung says. "You also want to test the waters before you invest your money in your own shop or kennel, since that requires a much bigger capital investment."

Alisa Puga Keesey, 41, owner and founder of SheaPet, which manufacturers natural shea butter skin-care products for dogs and cats, test-marketed her merchandise in about 20 pet shops across her state before she began her company three years ago. She also sent product catalogs to 1,000 high-end boutiques nationwide. Puga Keesey's three-employee Santa Cruz, California, company projects sales of $1 million for 2005, and her products--which include shampoos, sprays and creams--are currently sold in 300 pet stores and at 30 veterinary practices worldwide.

"We even hired a publicist to get the word out on our products, which had never been seen before in the pet industry," says Puga Keesey.

In addition to surveying your market, experts recommend that you attend some of the many pet expos offered across the nation. There are 30 trade and consumer shows held every year both regionally and nationally, Darmohraj estimates. You'll have the chance to see what other entrepreneurs are offering, and which products or services are popular with the buying public. For instance, the World Wide Pet Industry Association Inc.'s annual trade show, called SuperZoo, is held every September in Las Vegas. It attracts 10,000 attendees and 500 exhibitors, says executive vice president Doug Poindexter. The Arcadia, California, organization also sponsors three large annual consumer shows--two in Southern California and one in Michigan. And there's the APPMA's Global Pet Expo, which is the largest and most attended annual pet products trade show in the world.

Says Puga Keesey, "By going to about three shows in our first year of business, we soon realized that we had a unique kind of product that was attracting a lot of attention."

Secrets to Success

If you have no background in the pet field, first consider working part time for a noncompetitor for a few months to see what is and isn't selling, and what you can do better or differently with your proposed product or service, Poindexter says. This is especially true if you are considering opening a day-care or boarding facility. These are labor-intensive businesses and may not be quite what you had expected, Krack says.

It also helps if you've been a consumer of the product or service, either through your own pets or through others you know. For instance, Puga Keesey found that shea butter soothed her Rhodesian Ridgeback's itchy skin. She then brought in a chemist to refine the shea butter into a sellable product and launched her company. Doug Grabe, 40, chairman of Bridgeport, Connecticut-based Atomic Pet--which manufactures illuminated pet collars and leashes--first used his merchandise for his two dogs. If you don't have personal experience like Puga Keesey or Grabe, form a focus group of pet owners, and ask them what they want and don't want.

A related background can also serve you well. Grabe, who has 10 employees and expects sales to reach $2.5 million in 2005, used his experience as a sales and marketing executive in the technology field to help promote his products. He was able to sell his items through small retailers as well as big-box stores like PetCo by knowing how to approach their buyers. His high-tech know-how even enabled him to create the special power pack that illuminates his accessories, which sell for $20 (collars) and $25 (leashes).

"If you have a passion for pets, related skills, and an innovative product or service, you can enter this industry and make real money," says Grabe, whose company manufactures about 400,000 leashes and collars a year that are sold through distributors worldwide.

In addition, observe the market closely by visiting several competitors in your area--perhaps with your own pet. "If you notice that a doggy day-care center or pet boutique in your area is getting a high volume of business--but no repeat business--then you know there is a demand out there and they are just not doing something right," Chung says. "That may leave an opportunity for you to come in and do it right."

Also, be willing to tinker and alter your product or service often, since trends in the pet arena can come and go quickly. "You want to keep tabs on any population shifts, to make sure that item will still be popular in a couple of years," says Poindexter. "This is why you need to be flexible in the pet world and go with the flow. It's just that kind of industry."

What's Hot?
While kitty litter and dog and cat toys have become oversaturated segments of the pet industry, Andrew Darmohraj, vice president and deputy managing director of the American Pet Products Manufacturers Association, says the following areas are growing fast and continue to offer opportunities for entrepreneurs:

Fastest-growing pet service businesses
1. Grooming shops
2. Dog day care
3. Dog hotels and spas
4. Care and maintenance of high-end aquariums
5. In-home and mobile grooming services

Fastest-growing pet product businesses
1. High-end clothing, beds, jewelry and other accessories for pets (largely dogs and cats)
2. High-tech convenience gadgets, such as self-cleaning kitty-litter boxes and automatic water dispensers for dogs
3. Leashes and carryalls (for instance, tote bags to carry dogs in)
4. Natural and organic foods, soaps, shampoos, lotions--all designed to mimic similar human products
5. Nutritional supplements

For More Information

Laura Koss-Feder is a freelance business and features writer in Oceanside, New York, who has written for Business Week, The New York Times and Time.