If your market is like most, your costs have gone up in the past year. In some markets, due to increased minimum wage requirements, costs may have increased significantly. And, if you’re also like most pet care business owners or investors, you are not comfortable raising your prices to keep up with – or stay ahead of these increased costs.

Just the thought of even a minor price change throws many business owners into daydreams and nightmares of driving all their customers to their competition in one mass exodus. With our assistance, and sometimes a little prodding, making adjustments on what you charge for your services is a critical exercise that each of our clients regularly review.

Understanding your pricing and costs is critical to running a profitable business. You need to have revenues left over so that you and/or your partners are well compensated. Owners of a pet care business can and should receive a nice return for all the time, sweat, tears and financial investments you’ve made.

Ways To Determine Your Ideal Pricing
There are numerous ways to determine your pricing. The first important step is to determine your actual fixed and variable costs, then ensure you price your services above that cost so you have money left over to compensate the owners or investors of your business.

Calculate your fixed costs: Fixed costs are all those essential expenditures that you need to be in business whether you have zero, one, or over a hundred pets in your care. Examples include: your mortgage or lease payment, infrastructure payments, property taxes, utilities, marketing and management costs.

Estimate Your Variable Costs: Variable costs are expenses that can be easily adjusted with occupancy changes. Examples include: labor, pet food, credit card fees, etc. You’re trying to determine how much more money each additional pet staying overnight or in daycare might cost your business. In this industry, many businesses can incorporate an extra pet or pets for very little added cost. However, an extra staff member may be required to care for those additional (ten) pets. Project a realistic expected occupancy and use your best judgment to develop a reasonably accurate variable cost per pet night.

Combine Total Fixed Costs and Total Variable Costs: To determine your total costs, multiply your estimated variable cost per pet night by your expected occupancy to calculate the total expected variable cost. Add that to your estimated total fixed costs. You now have your total estimated cost. Divide this by your expected occupancy to determine your estimated cost per pet night.

Some people might make the mistake of using only this number to develop their price structure. Remember that the owner and/or investors must be paid, and there should be enough money left over to handle unexpected expenses or to make additional investments to grow the business.

Most people will not take the time to do this exercise. If they did, they would realize their services are priced much lower than they should be.

The Most Common Pricing Model in this Industry: What do you feel you should charge? What will the market bear? The way that most privately owned businesses in the pet care industry seem to determine their pricing structure is to look at what their competitors charge and then either price the same, less or more than the competition.

Should You Charge the Same, Less, or More Than Your Competition?
Imagine sitting down at a quality restaurant and deciding on which one of two cheeseburgers to order for lunch. One is $9.95 and the other is $13.95. Without looking at the details, which one do you feel is a better quality and tasting burger? If you’re like most people, you decide the $13.95 burger is better. Interestingly, due to the higher price, when you read the description, you’re likely actually looking for the details to confirm the higher cost (bigger burger, higher-quality beef, comes with side dishes, etc.).

Price Position Makes a Statement: If you provide a higher level of care or amenities than your competitors, you should be priced higher.

However, when you charge more, you need to consistently explain to both prospective and existing clients why you are worth more and do so in a concise, compelling and consistent manner. This can and should be done through your visual imagery (building, marketing materials, staff appearance, and attention to detail). It should also be demonstrated in everything prospective and existing clients hear – the words and tone of your staff, the descriptions of your services and care.

The biggest opportunity to justify higher pricing is over the phone when the prospect first calls your company. Because this is such an emotional business, prospective pet parents want to validate the company they are considering to care for their pet. This phone call provides them with peace of mind that their pet will be well cared for. It also provides a wonderful opportunity to positively promote additional services that will enhance the pet’s quality of stay.

A Pricing Myth: Many feel that pricing their services less than their competitors will result in customers flocking to you. All things equal, this is simply not true. And in some cases, you might actually lose potential customers who view lower price as lower quality.

Are You Making Enough Money?
Getting your pricing right is a critical task for the company’s owners and executives. If you don’t price your services high enough, and are unable to defend those prices, you won’t be able to repay your debts. The owners/investors won’t have enough return on investment or any money left over for themselves. This would be a tragedy.

This is a very demanding business – financially (investing in brick and mortar, staff, training, etc.) and emotionally (worrying about all the pets in your care). By pricing your services properly, you’ll be able to realize the revenues your business deserves.

Laura Laaman is president of Outstanding Pet Care. OPC helps some of the most successful pet care facilities thrive in highly competitive markets and GUARANTEES THEIR CLIENT’S SUCCESS! If you would like to receive a complementary phone evaluation, contact the OPC team at www.OutstandingPetCare.com or call 1-888-735-5667.

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