Kennel Profitability: How to Calculate Margins & Profit?

There are two ways to calculate profit margins for pet service businesses: gross profit margin and net profit margin. 

• Gross margin measures the profit you make after covering the direct costs of providing your service.
• Net profit margins provide a more comprehensive picture of profitability by accounting for all expenses, not just the costs of delivering your service.

If you’re wanting to open a dog boarding facility or currently own a string of kennels, learning how to calculate profit margin and running a basic profitability analysis is a key step in determining if your business will be successful.

What is Profitability Analysis?

In short, a profitability analysis is a way for you — a dog boarding facility owner — to determine if your business is making enough money. It’ll look at:

1. How much money is coming in (revenues)
2. How much is being spent (costs and expenses), and
3. How much profit is left over 

By having this basic financial information handy, you can see how things like pricing, the number of customers, and different costs affect your profits. It also helps you figure out what’s working well and what needs improvement; you may need to make some changes and decisions to keep your business successful and financially healthy.

Cost Analysis

Cost analysis is all about understanding and managing the different expenses of your dog boarding facility. Knowing what your costs are will ultimately help lead you to higher profit margins. 

There is pet boarding software available to help run these analyses and manage your costs long-term for even more efficiency. Here's a breakdown of the different types of costs you'll need to keep an eye on:

1. Fixed Costs. These are your regular, monthly expenses like rent and insurance.

2. Variable Costs. These costs fluctuate depending on how busy you are, like dog food, cleaning supplies, and utilities.

3. Customer Acquisition Costs. This is the money you spend to attract new customers, like advertising and promotions.

4. Staffing. This includes wages, benefits, and any training for your employees.

5. Time Tracking. Keeping track of how much time you and your employees spend on different tasks to boost efficiency.

6. Operations Standards. Ensuring that all aspects of your business run smoothly and efficiently according to your guidelines.

Revenue Streams

Understanding different revenue theories can help you maximize the long-term profitability of your dog boarding facility. Here are some key concepts to consider:

1. Sales per Square Foot. These determine your space’s performance and efficiency. They’ll help you understand how well your current location or layout is profitable; do you need more room, or do you have unused space that should be utilized?

2. Loss Leaders. These are services or products you sell at a low price to attract customers. Once they’re in the door, they’re more likely to continue using your services—hopefully increasing how much they spend.

3. Upsells and Cross Sells. This involves encouraging customers to buy additional or upgraded services. For example, if someone books a boarding stay, you could offer grooming or special play sessions as add-ons while their dog is with you.

4. Retention & Loyalty. It’s easier and less expensive to keep customers rather than constantly find new ones. Loyalty programs or discounts for repeat customers can help maintain a steady stream of business.

5. Lifetime Value. This is the total amount of money an average customer is expected to spend at your facility over their lifetime with you. Focusing on increasing this value can help you plan for long-term growth.

Profit Margin

Learning how to calculate profit margin is essential for knowing how well your dog boarding facility is doing financially. It’s also essential to understand the difference between net and gross profit to know how sustainable your business will be over time.

1. Profit & Loss Statements. This is a financial report that calculates your revenues, costs, and expenses over a certain period. In other words, it shows the money you’re making, how you’re handling your costs, and where you might be losing money. 

2. Net Profit vs. Gross Profit. Gross profit is the money you make from your services after subtracting your cost of providing those services. (For example, if you charge $100 for boarding and it costs you $40 to care for the boarded dog, your gross profit is $60.) Net profit is the money left after subtracting all of your expenses (everything mentioned in a cost analysis, for example). It gives a clearer picture of your overall profitability.

3. How to Calculate Profit Margin. There are different profit margin formulas to calculate gross profit versus net profit. 

• Gross Profit Margin. Divide your gross profit by your total revenue and multiply by 100 to get a percentage. (For example, if your gross profit is $60 and your revenue is $100, your gross profit margin is 60%.)
• Net Profit Margin. Divide your net profit by your total revenue and multiply by 100. (For example, if your net profit is $20 and your revenue is $100, your net profit margin is 20%.)

Trend Analysis

This section orients the business owner to several factors that may influence profit over time

1. Supply & Demand. Supply is the number of dog boarding facilities in the area (you + the competition), while demand is the number of pet owners looking for dog boarding. When demand is high and supply is low (lots of customers, not as many competitors), you can typically increase pricing. If there are a lot of boarding options, you may need to lower your prices or offer special deals to get customers to choose you versus a competitor.

2. Competition. Keep an eye on other boarding facilities nearby. Learn what services they offer and what they charge. This falls back to supply and demand; maintaining great customer service and offering unique services can help you stand above the rest.

3. Economic Conditions. Changes in the economy can affect how much money people spend on pet care. During tough times, pet parents might cut back on non-essentials, such as boarding. For example, boarding businesses were especially low during COVID-19 when owners couldn’t travel.

4. Seasonal Conditions. Pay attention to whether demand for boarding services goes up or down throughout the year. Holidays or vacation seasons tend to be busier as pet parents go out of town and need to board their pet. You’ll want to have staffing prepared and adjust prices during these busy times.

How much can you make with a dog kennel?

Determining how much you can make with a dog kennel involves looking at different factors and calculations. These numbers can vary depending on your location, the services you offer, the competition around you, and your overall efficiency.

Let's break it down for a hypothetical scenario based on a 1000 sq. ft. facility that’s open seven (7) days a week.

Capacity & Pricing. Assume your facility can comfortably board 20 dogs at a time. If you charge $30 per day per dog, your daily revenue would be: 

20 dogs × $30 per dog = $600 per day

Monthly Revenue. Multiply the daily revenue by the number of days your facility is open in a month. Seven days a week would equal (on average) 30 days per month:

$600 per day × 30 days = $18,000 per month

Annual Revenue. Calculate the yearly revenue based on the monthly revenue:

$18,000 per month × 12 months = $216,000 per year

Expenses. Your expenses would include rent, utilities, salaries, supplies, insurance, and maintenance. Let's assume your expenses are $10,000 per month, or $120,000 per year.

Profit Calculation. To find your annual profit, subtract the total annual expenses from the annual revenue:

$216,000 − $120,000 = $96,000 in yearly profit

Profit Margin: Lastly, calculate your profit margin to see what percentage of your revenue is actually profit by dividing the annual revenue by the annual profit, then multiplying by 100 :

$96,000 ÷ $216,000 = 0.444 

0.444 x 100 = 44.4%

Maximize Your Kennel’s Profitability with PetExec Software

If you’re wanting to start a dog boarding business or are searching for ways to increase efficiency and profitability in your current kennel, PetExec has you covered. 

Manage boarding stays and customers, tailor the entire portal specifically to your needs, send out branded confirmation emails or marketing blasts, offer quick check-ins with barcode scanning, and more to keep your business running smoothly. Use the detailed reporting software to track all of your income and expenses, manage employee schedules and time cards, and integrate your payment processes system to plan and execute your profitability. This boarding business software helps streamline your business every step of the way.