'She currently has about 15 sitters, all independent contractors'
"I'm thinking about starting my own pet-sitting business and am trying to understand how businesses like this are valued." (Photo subject is a model.)
Dear Quentin,
I have an acquaintance who started her own pet-sitting business four years ago.
She has a client list of around 300 people. She says she grossed $300,000 last year and netted $90,000. She told me she paid herself $50,000 and, with deductions, was able to get her taxable income down to around $30,000.
She still does a lot of the pet sitting herself, but she's trying to pull back and hire more sitters. She currently has about 15 sitters, all independent contractors, and says she keeps 20%-30% of each client fee.
She believes she could sell the business in a few years for $300,000. That sounds very high to me. My understanding is that small businesses like this are often valued at roughly 2-3 times net income, although I realize there are other factors involved.
I'm thinking about starting my own pet-sitting business and am trying to understand how businesses like this are valued. I'm asking for input specifically on the business valuation and financial aspects. Thank you in advance.
Dog Lover
Related: My golf buddy worked as a financial adviser. Here's how I knew his friendship was fake.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.
Your friend brings a lot of value to the business as the managing director, the founder - and the person who oversees the client list and the network of dog-sitters.
Dear Dog Lover,
Do what a dog does when it approaches dark, unfamiliar territory: Tread carefully.
For small pet-service/dog-sitting businesses, buyers often value the business based on the seller's discretionary earnings (SDE) rather than just the bottom line. At first glance, pet-sitting services have valuations of around 3X average earnings, while broader pet-grooming services have a valuation of 2X earnings to 2.6X earnings.
A $90,000 net income would suggest a valuation of roughly $300,000, more or less in line with the gross sales. But your friend's $50,000 salary could move that valuation higher if it's not already included in the $90,000 net profit. That could have the valuation closer to $400,000, which sounds aggressive.
Your friend brings a lot of value to the business, as the managing director and founder - and the person who oversees the client list and the network of dog-sitters. There are risks that she would have to include in any prospectus, including the economic backdrop and the likelihood that some dog-sitters do what she does, and take a slice of third parties' pet-sitting fees.
A $90,000 net income would suggest a valuation of roughly $300,000.
The obvious advantage of buying a business such as this is the client list and the fact that it's a going concern, but I'd also want to know how long it took her to get where she is today. That could cut both ways: If it took her 10 years, you're paying for that time; if it took her two years, who's to say that you couldn't create the same business model in your area?
Finding reliable dog sitters who treat the animals with care, dignity and respect may not be as easy as it sounds. You also have less control over what happens to these dogs when they are out of your immediate care. There's a lot of trust involved by both the business owner and the clients who are handing over their beloved pets for hours, days and/or weeks.
Median sale prices of dog-boarding businesses have been volatile over the past five years, says BizBuySell.com. "Prices fell in 2022 as interest rates made acquisitions more expensive, rebounding strongly in 2023 to $500,000, then dropped again in 2024. The market surged in 2025, with median sale price reaching $850,000, a 125% increase over the five-year period."
Related: 'They knocked her down and started biting': My mother, 84, was viciously attacked by her neighbor's two dogs. Do we sue?
Evaluating a big risk
A $850,000 valuation does not sound like a one-woman operation with a list of third-party sitters who may or may not be available on any given day. It's far more likely a business with several employees keeping the dog show going. Valuations, sales and income differ dramatically, depending on how the small- or medium-sized business is structured.
Inflation, interest rates and the job market will all influence the fortunes of these kinds of businesses. During the pandemic, millions of people were working from home and did not need to rely on pet-sitting services. Dogs need walks, sure, but they arguably take up less time than a young child when you're trying to work from home.
Before buying a small business, you would require a client list, at least three years of tax returns, monthly revenues and expenses for at least two years so you can see any of that aforementioned volatility and a profit-and-loss statement signed off on by a reputable banking firm. Get a list of assets (computer systems, property, vehicles etc.).
Check bank and credit-card statements to cross-check reported revenue.
Also ask for bank and credit-card statements to cross-check reported revenue against actual deposits. Are they coming from clients? Does the business have any outstanding debt or liens? Any lawsuits against it for mistreating pets? What are the annual insurance costs and what do they cover exactly? Are insurance contracts transferable?
The client list should show tenure, frequency and average spend per client showing how concentrated the revenue is; Is it coming from a handful of clients or a broader base? That will make a difference to the risk you would be taking on. What are the churn and retention rates for clients? Do they stay a few weeks, months or years?
Do your own due diligence by checking out the business's reviews on sites like Yelp, Trustpilot, Google (GOOG) (GOOGL), social media, and dog-sitting sites. On labor and operations, read the employee or contractor list, paying close attention to pay rates, tenure, noncompete clauses, and whether they are classified as W-2 or 1099. Would the staff stay on after a sale?
Being your own boss means having clients whose bark may be as bad as their bite.
Don't miss: Why does almost nobody want to befriend older people like me - except scammers?
By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
More columns from Quentin Fottrell:
We were friendly with our neighbors for decades, until recently. One day, they introduced us to their financial adviser...
I found a $100 bill in the communal washer at my Airbnb. What should I do?
'It's the ultimate regifting': My mom gave me a house. Should I transfer it back to her to reduce capital gains?
Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
-Quentin Fottrell
Comments