How do I set the rates for my dog walking or daycare services?

This is one of the most pressing questions for dog walking services or dog daycare businesses that are just starting out. But for established businesses too, this remains a highly relevant question. Alongside quality, price remains a very decisive factor for clients who are looking for a dog walking service. It is also only to be expected that a client will quickly go to the ‘rates’ page on your website.

You can have any number of happy clients, but if that does not cover your monthly costs and leave you an acceptable profit margin, you have to ask yourself whether your business is sustainable. That is why it is so important to use a sound pricing model. In this blog you will find a guide on how to set your rates and which components matter in doing so.

Before you can arrive at a good price, you should ask yourself the following:

1. What is our strategy and which range of services fits it well?
2. In which location are you operating and what does your competition look like?
3. What are your costs and how much do you want to be left with, so you can keep running your business comfortably and have room to invest?

We will now go through the points above one by one.

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1. What is our strategy and which range of services fits it well?

Determining your services is a very important part of setting your prices. Your range of services, however, depends on your strategy. So that is where you need to start. The key question is ‘what type of business do we want to be’? After that you can make your range of services fit that strategy.

Broadly speaking, we see three strategies that work well:

I. Low complexity, high volume strategy.

A large number of services per month at a competitive price. This works if you have your own field, for example. You make sure that a lot of dogs can be walked or cared for in daycare in a responsible way, but you do not charge top dollar for it. This is one of the best performing strategies, because your cost side stays relatively the same as you scale up your services, while your revenue side goes up. It is important, though, to keep the variety of services limited and to deliver as little custom work as possible. That is at odds with scaling up your business.

II. Premium client relationship strategy.

A smaller number of services, at a premium level, at a higher price. This could be a small-scale but luxury dog walking service, for example. Here we also often see ‘upsell’ services such as grooming, which let you make a higher profit margin per client. Client relationships are vital in this strategy, so that clients do not switch to a cheaper or non-professional service around the corner. So you will have to invest in that client relationship and preferably visibly perform above the client’s expectations.

III. Niche market strategy.

A variant on the premium client relationship strategy. A smaller number of services, focused on a niche market, at a higher price. We see this in the big cities, for example a dog walking service or dog daycare for expats or a closed community. The working language is then English, for instance, and marketing and sales focus specifically on this niche.

It is important to decide in advance which strategy you are using. And therefore what kind of business you can and want to be. Mixing strategies creates higher risks for the continuity of your business, your profit margin comes under pressure and in the end that is not sustainable in the long run either.

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2. In which location & what does the competition look like?

Location is a very decisive part of your pricing. It determines how much competition you face, and some cost components are location-dependent as well.

With regard to the competition, it is important to determine how your business sets itself apart from the competition. So do thorough research into that competition and determine your own place within it. What services does the competition deliver and can you estimate which strategy (see above) they are using? What prices are being charged? Be aware that in this day and age you also face competition from non-professional services, where walking buddies are matched with dog owners over the internet. It is just as important to realise, though, that you deliver a professional dog walking or daycare service, possibly with training, accreditation and van(s), and that you therefore should not lower your prices to that level, but should compete on quality, professionalism, availability and client relationship.

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3. What are your costs and how much do you want to be left with, so you can keep running your business comfortably and have room to invest?

When it comes to calculating profit, the well-known formula is:

Revenue -/- Costs = Profit.

Our advice: try reasoning the other way around for once. Because you can estimate both Profit and Costs well in advance. The revenue that is needed for that follows from it.

Profit + Costs = Revenue.

Profit

What do you need as Profit, to provide for your living and to be able to invest in your business? You can probably work that out for yourself. You want to be able to pay your fixed charges such as your mortgage or rent, living expenses, holidays and things you buy. Put that in a list and you will find out what you want to take out of your business as profit.

Costs

What is on your cost side:

• Employees
• Location costs
• Transport (depreciation, fuel, insurance, road tax, maintenance)
• Marketing and sales
• Business operations (software, bookkeeping, insurance, etc.)

Revenue

What you end up with is the revenue you need. Divide that revenue by the number of services you want to deliver per month (your target), and you arrive at your rate. If you want to deliver different services, make a table like the one below. First fill in the revenue you need and work back to the rate.

Suppose your required profit is 3,500 per month, to provide for your living and to be able to keep innovating. On the cost side of your business you have calculated 1,500 euros. The revenue you need is then 5,000 euros. We fill this in at the bottom right of the table and then work back to rate * quantity (P*Q). Since you can usually estimate the number of services to be delivered (Q) reasonably well, this lets you work back to the rate you need (P).

With the method above you can get a good sense of what your rate should be in order to have a healthy business. That is more important than being the cheapest, or doing what others do.

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Discounts

We often see discount schemes being used. That is fine in itself, because it lets you stay attractive to the client who joins frequently. Make sure, though, that you do not give away too much discount. Because your cost side simply carries on. Discounts we consider sensible are a second-dog discount at the same address, and tiered discounts up to a maximum of 10%.

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Finally: it is ok to say ‘No’.

However fairly your rates are set up, there will always be clients who want to negotiate on price. And there are also clients outside your service area, or who want just that bit of custom service. Those are the moments when you have to decide whether that does justice to your business strategy and costs in the long run. More variation generally means more complexity in your business operations at higher costs.

So in those situations we say: then simply don’t do it. That is fair to the client too. Your professional service is worth it.

Questions and/or comments about this blog post? We are always open to feedback and discussion, just as we are about our software. Feel free to send us a message and get in touch.