• Buying a Pet or
    Dog Business

Article 1 - franchise opportunities

Find out more about franchises themselves, their darker secrets and franchise opportunities

Article 2 - a mobile dog grooming franchise

Want to know what you can really earn from a mobile dog grooming franchise? Click and see …

Article 3 - buying an existing dog/pet businesses

Thinking about buying an existing dog business or pet business? Then this is a must read article.

Article 4 - how to start your own pet care business

Looking at how to start a dog grooming business? Then this article will help you out.

Article 5 - setting up your business from home

If you’re setting up a dog grooming business from home (UK or overseas) then read Lisa’s story.

Article 6 - an alternative to a classic franchise

Is there another way? Something fairer on you, your time, your loved ones and your pocket? Find out.

Buying Dog and Pet Grooming Businesses

Alongside an accountant and lawyer I did work with my brother in law, Tim, who took over a garage (http://www.cartechservices.co.uk/) to sift through the minefield that is the process of buying a business. From this process, we uncovered several things that need considering and should be applied when looking at buying any dog grooming businesses for sale.

These observations are also based on my own business experience with taking over a nightclub (leases especially), as well as helping people preparing to sell their business.

I’d suggest they are as relevant to a pet business or dog business as any other business for sale.

Should I buy a dog business or pet business?

We’ve already looked at dog grooming franchises and how the franchise model works with franchise opportunities. Now we’ll look at the essential things to consider when looking at a dog businesses and especially dog grooming businesses for sale (or a pet grooming business for sale).

If you’re looking for pet business ideas, or more specifically dog business ideas, then buying an already established dog business or pet business is possibly one of the best ways to establish yourself quickly.

Buying a dog business or pet business – what about the company books?

First and foremost, if you’re looking at pet business ideas and are considering buying a business, looking over the previous three years trading accounts is essential. Turnover is always important (ie the money in the till each year) but more importantly it is vital that you look at the bottom line or the ‘net profit’ of the business.

If they are taking lots of money but also spending lots so not turning in a profit, it’s important to understand why. Sometimes this is not quite as bad as it seems, as the owners draw a decent amount of money out as their income. After all that’s why they started the dog business in the first place no doubt!

Go back a couple of years

If the vendor has been serious about cultivating their business in recent years ready to exit or sell, there should be some healthy profits showing on at least the last two years of accounts. On this point always get the most recent accounts. Even having ‘last years’ accounts may actually represent a trading period from as long as 18 months ago and a lot can happen between then and when you are looking to buy the business.

Often there are draft accounts available for the most recent year so ask for those too. If you encounter any objections from the seller then alarm bells should ring. I’d speak further with an accountant or lawyer if this became the case. If you’re looking at a pet grooming business for sale, the last thing you want to do is buy a business that is slowly failing.

The best practice here is to get the business accounts and take them to a reputable accountant. They can then act on your behalf and cross examine both the current business owner and their accountant. We did this for Tim (my brother in law I mentioned earlier) and uncovered a director’s loan to the sum of £8,000 buried in the figures.

This loan (standard practice with limited company finances) meant that the former owner could have come back to Tim at any point in the future and demanded that this loan be repaid to him. Even though Tim was buying the business and taking over the limited company itself. That could have been a very costly oversight indeed.

Seriously, please get this right.

Buying a dog business or pet business – how about limited companies?

In many cases when buying already established dog businesses, you’ll probably be taking over a limited company. There are most likely some dog businesses for sale out there who are sole traders (ie individuals trading under their own name) but nevertheless ensuring you don’t inherit any debts or problems associated with the seller is essential.

Always do your checks and get a legal professional to give you guidance. With a limited company this due diligence and investigation is even more essential.

Two main options present themselves with limited companies (similar applies to LLPs – Limited Liability Partnerships).

Option 1: you can take over the trading company and simply carry on trading with minimum paperwork to complete and become a new director of the company.

Or option 2: you can set up your own new limited company to run the business.

Option 1 – should you take over a limited company?

Draw up legal paperwork to reflect that, as at the date of takeover, any issues or liabilities that arise as a result of the previous person’s ownership are taken care of by them and not you. This is absolutely essential. You don’t want any of their debtors (people they owe money to) coming to you for payment and you certainly don’t want to expose yourself to any other legal proceedings of any sort.

When you carry on trading as the same limited company as the previous owner, you will save yourself from a lot of hassle and paperwork. However, you’ll still need to inform Companies House, current customers of the business, suppliers to the business and utility providers that you’re the new owner.

With this option, one of the first things to do (after appointing a solicitor) is to get yourself registered as a director of the company – especially if you are looking to take over the bank account of the trading company. This will enable you to talk to and work with the bank and begin trading as the new owner.

There were delays with this process with Tim which delayed him taking over the business by several extra weeks, so I’d suggest getting the wheels in motion for this sooner rather than later.

Option 2 – should you set up a new limited company?

When starting up a new limited company you will then need to contact all suppliers, customers, utility providers and so on and set up accounts with them ... pretty much the same as moving in to a new house.

However, often when buying a dog business or pet business you are buying the ‘good will’ (ie the name, reputation and customer base) that the previous owner has built up. It’s best to preserve this, so setting up a new limited company but ‘trading as (Current Business Name)’ is a good way to go.

Simply changing the name and starting to trade as a new business can have quite an adverse and damaging effect if it isn’t done right. Managing a transition from one brand and owner to another should be carefully planned. Professional marketing advice should be employed, or at the very least, speak to people that have been through the same process themselves.

In both cases

In both instances ensure that you have documented exactly what it is that you are buying from the current owner of the dog grooming business for sale (and any other pet business for that matter) and exactly what is included and what isn’t.

What equipment and fixtures and fittings do you get? What is the position with rent and the property (discussed in more detail shortly)? Does the owner have the right to include the things they are saying, or does the landlord of the property need to be consulted? Is the equipment they are including theirs to include in the first place? Is there any finance or lease hire on anything? If so, how is that dealt with and who inherits any liability, payments or costs?

Whichever scenario, making sure you are legally watertight is a must.

What are the current owner’s intentions?

One thing to certainly be wary of and have documented as part of your transaction are the intentions of the current owner in the coming years. The last thing you want is for them to open up shop again just down the road from you as a competitor!

Find out if they are retiring, moving away from the area or switching businesses completely. If they are staying in the pet business, are they setting up a new business in the same marketplace? If someone has a dog grooming business for sale that’s based in a salon for example, are they intending to set up a mobile dog grooming business?

If they are, then they will still be a future competitor and most likely take a lot of their customers with them, thus reducing the amount of business they hand over to you. Having a solicitor look after this is a must as they can write conditions in to the sale of the business that will prevent them from setting up in competition to you.

Like I say, I am not a legal or financial specialist by any stretch of the imagination but I’d seriously recommend getting professional guidance in either of these scenarios.

Buying a dog business or pet business - Inland Revenue and VAT

If any business’s turnover exceeds £85,000 (correct at time of writing – Jan 2019) they must by law register for VAT. Does the company you are looking to buy turnover this much? If so, are they VAT registered? Most likely they are, so you’ll need to ensure that details are changed with the Inland Revenue.

Again, as part of your investigations, ensure that any outstanding VAT liabilities are taken care of before you take over. A hefty VAT bill is the last thing you need when starting up a new business.

On the subject of VAT, it’s great to be able to claim back VAT on items you buy, but you will also need to charge it too, and then pay it to the Inland Revenue (aka ‘the revenue’ also aka ‘the dreaded tax man!’).

Does VAT apply to grooming prices?

So, in the dog grooming world (maths time) if you are charging say £30 for a groom, you will need to charge £30 plus VAT (currently 20%) so that’s an additional £6 which suddenly makes your groom cost £36.

If your nearest competitor isn’t VAT registered, then they will just charge £30. Therefore, to remain competitive, you really need to charge £30 all in as well (so including VAT), but then out of the £30 you need to pay your VAT. To see what you make out of this (after ‘the revenue’ have had their piece) the calculation is:

£30 divided by 120 which is (0.25) and then multiply this by 100 which leave £25. So, in reality you are £5 down by becoming VAT registered.

Again, the best practice here is to speak to a reputable accountant. Yes, its extra costs, but it could save you a fortune and protect you from a world of potentially expensive (and legal) problems later on down the line.

Buying a dog business or pet business – what about property leases?

The chances are that with buying an already established dog grooming business for sale or a pet grooming business, there will be a property of some sort involved. Having separate premises for your business has advantages, especially when employing several members of staff and when looking to keep work separate from home.

However, there are inherent obligations with many leases and therein potential problems and I would strongly urge you to investigate this as much as possible as you don’t want pet business ideas to come crashing to the ground. You will be entering into a legally binding lease agreement with the landlord, so be thorough.

From bitter experience (formerly owning and running a nightclub from a venue where we had a ‘full repairing lease’ – Google the phrase if you have time) I can tell you that this can be very costly, burdensome and stressful!

Commercial property leases are like residential lettings in principal but they are generally weighted more in favour of the landlord than the business owner as the tenant. A landlord's solicitor drafts the lease and then the tenant’s solicitor reviews the lease and suggests amendments.

Then the back and forth begins between solicitors until an agreement is reached that both parties are happy with. Sounds simple, but when we did it with the nightclub it took over two months to sort and we built up a solicitor’s bill totalling over £3,000 … plus VAT. Not budgeted for and very annoying!

What should I look out for in a lease?

Here are the things to look out for when looking at a lease for a premise (this is by no means fully comprehensive and a solicitor will be able to guide you further):

  • carefully consider the length of the lease. Three to five years is often common, but go for what works for you. Some landlords will force a 5-year lease. Negotiate hard.
  • establish break clauses – ie a time at which you can break from the agreement and lease if you wish to do so. In a 5-year lease for example, insist on a one and three-year break clause. This means that you can effectively walk away after one or three years.
  • establish when rent reviews are. Avoid leaving it so the landlord is able to up your rent at any point in time.
  • This may not really be relevant in the dog grooming world, but if the premises are quite large or you have additional space make sure you can sublet space to another business if you want to. Having a complimentary service running from your premises can often help with covering overheads. In a hairdressers for example, nail bars, aromatherapy, massage, beauticians and the like are often available and in most instances their space is rented to them by the hairdresser who is the main tenant on the lease.
  • establish if the lease is 'full repairing' (ie, you as a tenant are responsible for all repairs to the building) - I'd urge you to avoid this at all costs. Leaky roof - you pay. Subsidence, you pay. Think along the lines of renting a house from a landlord and those things you would expect them to cover as part of your rental agreement you end up footing the bill for. There are things that you would expect to pay for such as decoration and minor wear and tear, but more expensive repairs to the house itself or something like a broken boiler you would expect the landlord to cover. Ensure you have similar with a commercial lease.
  • understand what you are responsible for (usually cosmetics, general upkeep and décor etc) and what the landlord is responsible for
  • find out what the landlord is entitled to charge you for if they complete repairs (this is often hidden in the form of an additional 'service charge')
  • investigate any previous maintenance and forthcoming maintenance schedules. If in the last few years there have been small roof repairs, is the landlord likely to need to replace the roof in the next few years and therefore pass on a large ‘service charge’ to you?

There are many more points to consider. What’s the best thing to do here? You’ve guessed it. Speak to a reputable legal professional.

Buying a dog business or pet business – will I get goodwill transfer?

Here’s a scenario. You have been going to the same hairdresser for many years. You get on really well with them. They know exactly how to cut your hair and what you do and don’t like. You’ve built a great relationship and don’t hesitate in recommending them to family and friends.

Image if the next time you go and get your hair cut, it’s a completely different person cutting your hair. How would you feel? The business owner has sold up and you have a complete stranger standing there with their scissors ready to hack at your hair. What would you think (or even do!)?

Now imagine the same scenario but this time, your trusted hairdresser told you several months ago that they were looking to sell the business. However, they are bringing the new owner on board for six months, so they can meet all of the regulars.

They will not only get to know the business, but most importantly all of, its customers. The last hair cut you had the new owner was there and got to see and hear what you like and how to cut your hair. The next appointment will be the new owner cutting your hair.

Which scenario would you prefer?

Sadly, this takeover process is not always the case, and often people lose customers when a new business owner takes over (same with restaurants and chefs, pubs and landlords, garages and mechanics) ... a pet grooming business is no different.

If you are buying in to an already established dog business or pet business ensure that there is a handover process and period. Not easy to do, and it can be costly, especially as you could effectively be working for next to nothing during the process.

Buying a dog business or pet business – how about advertising, Marketing and Reputation?

Do your homework here. Check and see what the reputation of the dog grooming business for sale is like and see how well their advertising and marketing works. Can you find them online? If so, how easily?

If you search for 'dog groomer X' online (where X is the town they operate in) do they appear on the first page in the search engine? Do they have a Facebook presence (let’s face it, who doesn’t use Facebook nowadays?!). Do they advertise in shops? Have you seen their van around? And so on...

Chances are that you will be looking for a pet grooming business for sale that is close to you anyway, so what is their reputation like? Are they well known and known for doing a good job?

We've all seen the scenario of a pub with a bad reputation. No matter how good the new incoming landlord is, shaking the reputation of a dodgy pub is always a monumental battle.

In conclusion then…

As you can see there is an awful lot of paperwork to consider, a lot of extra costs and added pressures and stress with buying an already established business. This may or may not be a route for you as you explore pet business ideas.

To see the opportunities that exist and the associated costs of buying the business do a bit of research. Remember that the money you pay for buying the business doesn’t include any of the legal and professional fees associated with the transaction (similar to buying a house). This could quite easily add up to anywhere in the region of £5,000 or more.

In addition, do you want your own separate premises? How will this feature in your priorities and work life balance? What about the costs too? Somewhere like http://uk.businessesforsale.com/ has lots of businesses listed. Do a search for ‘dog grooming’ on this site and check out the costs.

Very interesting.

Legal bit

Please do not rely on these comments and figures solely for making any decisions in buying a dog grooming or pet care business. It is also my recommendation that you consult solicitors and/or accountants that specialise in dealing with buying businesses to get certified professional advice.

So what are your dog grooming options?

Quite simply the three main options are: buy a franchise; buy an already established business; set up your own business.

There’s a fourth option too but take a look at these three first as they are the main tried and tested ‘norms’. Not that you need to stick to any of these norms, but knowing the conventional ways will help you decide if any of them are for you - or not.

The options:

  • 1. buy a franchise – this is a big topic to cover (especially with the costs and commitments involved) so we cover it in articles ONE and TWO below. 
    • 2. buy an existing business - article THREE below
    • 3. set up your own business – again, a large topic, so a couple of articles which are FOUR and FIVE below
    • 4. the mystery option - an alternative to a franchise is looked at in article SIX

    Article 1 - franchise opportunities

    Find out more about franchises themselves, their darker secrets and franchise opportunities

    Article 2 - a mobile dog grooming franchise

    Want to know what you can really earn from a mobile dog grooming franchise? Click and see …

    Article 3 - buying an existing dog/pet businesses

    Thinking about buying an existing dog business or pet business? Then this is a must read article.

    Article 4 - how to start your own pet care business

    Looking at how to start a dog grooming business? Then this article will help you out.

    Article 5 - setting up your business from home

    If you’re setting up a dog grooming business from home (UK or overseas) then read Lisa’s story.

    Article 6 - an alternative to a classic franchise

    Is there another way? Something fairer on you, your time, your loved ones and your pocket? Find out.