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
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
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
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
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
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
£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
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
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
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
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.
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.