Selling Your Pet Care Business

I recently sat down with Craig Pollack of Cantara Pet to talk about something most pet care operators eventually have to consider, even if a sale is still years away: what actually makes a business valuable to a buyer?

The obvious answer is revenue and profit, but that is only the starting point. Two facilities can produce similar financial results and still receive very different offers because a buyer is not simply paying for what the business earned last year. They are paying for the likelihood that the business will continue producing reliable cash flow after the current owner leaves, and they use the company’s history, team, facility and operating structure to determine how confident they should be in that future.

Buyers want a business they can understand

According to Craig, clean financials are the foundation of the sale process. Most buyers will want to examine the previous 36 months so they can understand where revenue comes from, how expenses behave and whether the reported profit accurately reflects the performance of the operation. They are not expecting every business to have perfectly pristine books, but they do need to be able to follow the numbers and understand how the seller arrived at the earnings being presented.

As Craig put it later in our conversation, every business has some “hair on the dog.” Owner expenses and one-time costs do not automatically create a problem, provided they are clearly identified, reasonably supported and presented honestly. The larger concern is when the financials do not hold up under scrutiny or when the seller attempts to characterize normal, recurring costs as expenses that a future owner will not have to bear.

“Every business has some hair on the dog.” Craig Pollack, Cantara Pet

Craig gave the example of a seller who enters the process claiming the business generates $500,000 in annual profit. A buyer may sign a letter of intent based on that figure, only to conclude during due diligence that the true number is closer to $400,000 because some of the proposed add-backs are not defensible. At that point, the buyer may lower the offer to reflect the reduced earnings. If the discrepancy is significant enough, it may also damage the buyer’s trust and cause the deal to fall apart entirely.

That was one of the clearest lessons from our conversation. Buyers expect to find imperfections, but they do not like surprises. A problem that is disclosed early can usually be evaluated, priced into the deal or addressed before closing. The same issue discovered late in the process can make the buyer question not only that particular item, but everything else they have been told about the business.

The owner cannot be the operating system

Many pet care businesses are initially built around an owner who knows the customers, handles the difficult staffing issues, approves every important expense and makes most of the meaningful decisions. That level of involvement may have helped the business grow, but it becomes a source of risk when the company is being sold because the buyer has to determine what will remain once the owner is no longer there.

According to Craig, buyers generally prefer to see an owner who spends roughly 10 to 15 hours per week providing oversight rather than managing the daily operation. That level of involvement usually indicates that the business already has a leader in place who understands the employees, the customers, the operation and the financial performance of the facility. It also suggests that the company can continue functioning without every decision flowing through one person.

That does not mean an owner has to remove themselves from the business years before a sale. It does mean they need to be honest about the role they currently play. If the owner is the glue holding the operation together, the business can still be sold, but the buyer will have to account for the cost and disruption of replacing that person, whether that means hiring a general manager, redistributing responsibilities or retaining the seller for a longer transition period.

For an owner who hopes to maximize the value of the business, that should be a wake-up call well before the sale process begins. Sharing responsibility, developing leaders and removing yourself from routine decisions is not only an exit-planning exercise. It is one of the most practical ways to build a more resilient company while you still own it.

Employee stability is part of the asset

One of the most useful insights Craig shared was that, in pet care, the relationship a buyer is acquiring is often the relationship between the customer and the employees caring for their pet. An owner may know many customers personally, but no owner maintains a close relationship with every boarding, daycare, grooming or training customer. Those relationships are carried every day by the front desk team, attendants, groomers, trainers and managers.

That makes employee stability important in a way that goes beyond simply looking at a turnover percentage. A buyer may review how many employees have remained with the company over the previous 24 months, how long senior leaders have been in place and how much responsibility those leaders actually hold. If half the staff has turned over in two years, the buyer may reasonably question whether the team, culture and customer relationships are durable.

The quality of the leadership team matters as much as tenure. A general manager who can run the schedule is helpful, but a leader who understands labor, revenue, customer retention and profitability is far more valuable. Buyers want to know that someone besides the owner understands how the business works as a whole and can make decisions that protect both the quality of care and the financial performance of the operation.

A stable team does not guarantee that every employee will remain after a transaction, but it does show that the business has created an environment people have been willing to stay with. In a labor-intensive industry where customer trust is closely tied to the people delivering the service, that stability becomes a meaningful part of what the buyer is purchasing.

Revenue quality matters as much as revenue quantity

Craig described boarding and daycare as the two foundational revenue streams buyers most often expect to see. A common mix is approximately 60% boarding and 40% daycare, or the reverse, because the two services tend to complement one another. Daycare generally provides recurring weekly revenue, while boarding produces more revenue per pet because it includes overnight care.

That ratio is not a hard rule, and the business model still needs to be understood in context. Craig used the example of an airport-adjacent facility that generated 90% of its revenue from boarding. That would be unusual for many operators, but it may make perfect sense for a location serving customers who are traveling. The question is not whether every facility fits the same formula, but whether the revenue mix is logical, sustainable and supported by the market the business serves.

Additional services such as grooming, bathing, training, cat boarding and paid add-ons can make the company more attractive when they are healthy and profitable. They create more ways to serve an existing customer, increase the value of each relationship and reduce dependence on a single service line. A boarding customer may also become a daycare or grooming customer, which gives the buyer more opportunities to grow revenue without acquiring an entirely new audience.

The buyer will also look closely at the trend behind the numbers. Stable revenue is generally better than declining revenue, and growing revenue is better than stable revenue, but a decline does not automatically disqualify the business. It does require an explanation. The seller needs to be able to show whether the decline resulted from a temporary disruption, a deliberate operational change, a capacity issue or a larger problem that is likely to continue. The explanation does not need to make the decline disappear, but it does need to give the buyer enough information to evaluate the risk honestly.

A facility can reduce the offer before negotiations even begin

Pet care facilities absorb an enormous amount of wear, and experienced operators know how quickly flooring, drainage, ventilation, fencing, enclosures and other physical systems can deteriorate under constant use. Buyers understand this as well, which is why they will evaluate the condition of the facility with the same seriousness they apply to the financials.

A clean, well-maintained building that does not require major tenant improvements gives the buyer more confidence and allows them to preserve capital after the transaction. By contrast, a facility that needs $250,000 in repairs or upgrades changes the economics of the deal. If a buyer plans to pay $3 million for the business and immediately invest another $250,000 to bring the facility up to their standards, their total capital commitment is no longer $3 million. That additional cost reduces their expected return and will influence what they are willing to pay.

Not every improvement carries the same urgency. Cosmetic upgrades may be delayed, but flooring, drainage, ventilation, enclosures and other items tied to safety, sanitation and day-to-day operations may need to be addressed immediately. A buyer will not view those as optional improvements. They will see them as required capital expenses that need to be accounted for in the transaction.

The takeaway is not that every facility must be fully remodeled before going to market. It is that the owner should understand the current condition of the property, know which improvements a buyer is likely to require and avoid being surprised when those costs become part of the valuation discussion.

The lease can be more important than the brand

Operators naturally take pride in their name, reputation and operating procedures, but a transaction can still collapse over something far less visible, such as a lease assignment clause. If the seller does not own the real estate, the buyer needs to know whether the lease can be transferred, whether the landlord must approve the transfer and whether the assignment triggers penalties, new terms or other conditions.

Craig recommended involving the landlord early when the relationship makes that possible. That may feel uncomfortable, particularly when an owner is concerned about confidentiality or does not want employees and customers to learn about a potential sale. Even so, uncertainty around the lease can become a much larger problem if it is discovered after a buyer has invested months in the transaction.

Zoning can create an even more serious obstacle. Some businesses operate legally under grandfathered zoning, but a transfer of ownership can trigger a new review. In some cases, the current use may no longer qualify under updated regulations. In others, the use may still be permitted, but the building must be upgraded to meet current standards before the buyer can continue operating.

Craig has seen required improvements range from approximately $100,000 to as much as $500,000. At that level, zoning is not a minor legal detail or a small negotiation point. It can make the transaction financially unworkable. Owners preparing for a sale should verify the lease, zoning, permits and transfer requirements well before a buyer begins due diligence, because these are exactly the kinds of issues that are difficult to solve under the pressure of an active transaction.

When the seller owns the real estate, a different set of questions emerges. The property should have an up-to-date valuation, and the business should be carrying a fair market rent expense in its historical financials. If the company has been paying the owner $5,000 per month in rent but the seller expects the buyer to pay $10,000 after the transaction, the buyer will immediately reduce the business’s earnings by the additional $60,000 per year. That difference will be reflected in the price.

Strong procedures create value through performance

One of the more interesting parts of our conversation was Craig’s perspective on standard operating procedures. Owners often believe their procedures should add a separate premium to the value of the business, which is understandable. They may have spent years refining how dogs are grouped, how medications are administered, how incidents are documented, how staff members communicate and how the customer experience is managed from booking through checkout.

Those systems absolutely matter, but the buyer is rarely paying a premium simply because the procedures exist in a binder or shared folder. The procedures create value when they produce better employee retention, a stronger customer experience, fewer operational failures, higher revenue and more dependable profit. In other words, the buyer pays for the results of the procedures rather than the procedures themselves.

That distinction is useful because it forces owners to evaluate whether their systems are actually working. A detailed playbook that employees do not consistently follow is less valuable than a simpler process that produces a safe, repeatable and profitable operation. The quality of the documentation still matters, particularly when responsibilities need to transfer to a new owner, but the proof of a good system is visible in the performance of the business.

Enterprise value is not the amount the owner takes home

The sale price is often discussed as though it is the final amount the owner receives, but the headline valuation and the seller’s net proceeds are two very different numbers. Craig walked through a basic example using normalized EBITDA, which is the company’s earnings before interest, taxes, depreciation and amortization, adjusted for legitimate personal expenses and one-time costs that will not continue under the new owner.

For a single-location business, Craig suggested that a multiple of five can be a reasonable starting point in the current market. A stronger company may justify a multiple of six or more depending on its location, leadership structure, facility condition, reputation and the other risk factors we discussed. If a business produces $300,000 in normalized EBITDA and receives a 5x multiple, the resulting enterprise value would be $1.5 million.

That is the headline value, not the amount the seller takes home. Debt generally needs to be paid off, working capital may need to remain in the business and prepaid boarding stays, packages and other customer obligations must be reconciled. The seller will also incur accounting, legal and advisory fees, followed by taxes.

Craig used an example in which a $3 million enterprise value could result in approximately $2.1 million in net proceeds after the required deductions. While the exact numbers will vary from one transaction to another, his point is that the gap can be substantial. Owners need to understand that difference before making retirement plans, committing to another investment or deciding what sale price they need to achieve.

The best time to prepare is before the business is listed

An owner who may want to sell within the next few years should begin by determining what the business is worth today. That requires a clean look at the previous 12 months of financial performance, a realistic calculation of normalized EBITDA and an honest estimate of the multiple the business may support.

From there, the owner can compare the current valuation with the amount they hope to receive. If the business is worth $3 million today and the owner wants a $4 million enterprise value, there are only two practical options: adjust the expectation or increase the revenue and profitability required to support the higher value. Starting with a realistic valuation gives the owner a useful target and makes it easier to decide where additional effort or investment will have the greatest effect.

The next step is a legal and operational audit. Review the lease, zoning, permits, facility condition, leadership structure and employee turnover. Look closely at how much of the business still depends on the owner, which decisions continue to flow through them and which responsibilities need to be transferred before a buyer begins asking those questions.

Customer reviews can support the story, but they should not be treated as a last-minute cosmetic exercise. A healthy review profile is evidence that customers are consistently having good experiences and that the business has maintained its reputation over time. Buyers may look at the overall score, the number of reviews and the recency of those reviews, but this is still one signal among many. A strong online reputation cannot compensate for weak financials, an unstable team or unresolved legal issues.

Sale readiness is good business discipline

My biggest takeaway from Craig was that preparing for a sale is not only useful for owners who are ready to exit. Looking at the operation through a buyer’s eyes forces an owner to confront issues that are easy to ignore while the business is still generating revenue and paying the bills.

Are the financials clean enough that an outside party can follow them? Can the lease be transferred? Is the zoning secure? Does the general manager understand the financial side of the business, or only the daily schedule? How much capital will the facility require over the next few years? What happens if the owner steps away for a month?

Those questions improve the company whether a sale happens next year, five years from now or not at all. They reveal where the business is fragile, where too much knowledge or responsibility sits with one person and where an unresolved issue could eventually become expensive.

Every pet care business has complications. The goal is not to pretend they do not exist or to wait until a buyer uncovers them. It is to identify them early enough to understand the risk, make a plan and address the issues that can be fixed before the company goes to market.

Doing that can produce a better outcome for the seller, but it also creates a stronger business for employees, customers and the eventual buyer. That may be the most useful part of viewing the business through the lens of a sale: even if you are not ready to leave, the same work that makes the company more valuable also tends to make it better run.

Looking for help selling your pet care business? Craig brings a rare combination of operating and transaction experience to this process. He has owned, built and sold pet care businesses, worked on the buy side with private equity and advised both buyers and sellers throughout the industry. That perspective allows him to understand not only how a business runs, but also how a buyer will evaluate its risks, opportunities and long-term value. You can hear more of his perspective in the full video linked at the top of this article, or learn more about Craig and Cantara Pet at cantarapet.com.