Ok so we have all heard it before, "I wish I owned a dog kennel, you get to just play with puppies all day." From an outsider looking in it is all rainbows, puppies, and sunshine.
Anyone who has actually put in the work, knows that there is a crazy amount more that goes into running a dog daycare or dog kennel than just "playing with puppies." Industry professionals full on cringe every time we hear this. This perception dismisses the insane amount of stress of owning a dog kennel. Not only do us owners have the immense stress of owning a small business, but at the end of the day when we lay our heads down, we also have to worry that a pet in our care will get injured or worse. These increases in stress do not always translate to an increase in profit margin. The amount of competition in our industry is getting bigger and bigger and customers continually want more for less. As business owners it is vital that you make sure that you have a healthy profit margin to ensure the health and longevity of your business.
Raising prices is one of the most intimidating things that us small business owners can do. We work insanely hard for the business but are scared to ask to get paid for what we do. In this blog, we will look at how to determine how much to raise your prices and how to best get your message to your customers with minimal blow-back.
When I decided it was time to raise my prices, I went to the IBPSA conference. Before the conference every year, IBPSA holds a "Pricing For Profit" workshop. I can't say enough how helpful this workshop is. From this workshop, I was able to create separate Profit and Loss statements for each section of my business. It is really important to be able to separate your profit and loss statements by business segment so you can know where you are making and losing money. For example, if you are losing money in dog daycare but making money in boarding, and you work on expanding daycare, you are now expanding your overall loss and are working harder to make less money. To determine how much you should charge for a service you need to understand your true break even for each department, then determine your ideal profit percentage, and your average days charged (occupancy percent). You then take your break even added to your target profit percentage. Take that number and divide by your days charged and you will get your new target rate.
To get your break even per department the "Pricing for Profit" workshop teaches you that you need to track all of your employees personnel cost per department. This can be really hard to track since many employees will work part of a shift at the kennel and part in dog daycare, and then maybe some time in reception. I had a really hard time tracking this since time clocks can't easily track this.
I decided to build this feature with Paw Partner Software and Mobile App. Your employees can easily toggle between their job types and you as the owner can track where your money is going and will help you find the true cost of running each segment of your business.
By far the most important part of relaying a price increase to your customers is showing your value. Just to highlight that point I'm going to say it again, "VALUE VALUE VALUE". As business owners, many people believe price is one of the main factors customers use when determining where to spend money. In any industry the price is not the leading determining factor for customers decisions. In our industry, price is even less of a factor customers use when determining where to spend money. When customers come to you for boarding or dog daycare, there is an immense amount of trust and emotional connection they have with you. Many of my customers view their pets as more of their children than their actual kids. When they are looking for a business to bring their most cherished family member to they aren't typically looking for a "bargain center" to bring them to.
Last year I raised our prices for our "Deluxe Kennels" by over 50%. While this is much higher of a jump than I would typically advocate, it was the right amount for my business as we have done a lot of improvements around our property and I had more business than I could handle and wanted to use price to scale back my bookings a bit (this did not end up scaling back my bookings FYI). The 50% bump did make me nervous to relay to my customers and thought that I would get some significant blow back.
I wrote a open letter to my customers and sent it to them via an email, posted it on my website and on Facebook. I also gave my customers 45 days notice before the price increase was implemented. I let my customers buy their daycare packages in that 45 day period before the price increase and they could use those package credits after the price change came into effect. This created some nice cash flow as I instantly got about 10,000 dollars of packages bought in that 45 day period.
In my letter to my customers can you guess what I highlighted? Yep VALUE. When customers are complaining to you about your prices they are not actually complaining about your prices. They are telling you that the value they perceive they are getting is not equal to the price that they are paying. They feel this way for one of two reasons: you either are not actually giving them much value, meaning you are cutting corners, property a mess, breakdown in systems, etc. The second and far more likely reason is that you have not done a great job at relaying all of the value that your customers are getting for the services you provide. If you are like me, you don't like to brag or tell people all the great stuff you have done. You really need to get over that fear when developing your message of value.
Developing your value message is the perfect time for you to display to your customers all of the hard work you have done. You work your tail off and you deserve to be recognized and paid for it. When discussing value I focus on two areas primarily: facility improvements and staff improvements. Like I mentioned before your customers want the best experience not the most bargain experience. Your customers don't typically go beyond your front office so it is really important to paint a picture of all the improvements you have made to your facility that their pets enjoy but they may not know about. Next, you really need to showcase the value that your staff bring to the table. We have amazing people in our industry and we all are incredibly dedicated to peoples pets above ourselves. Now is the time to showcase all of the hard work that you and your staff have put in. Make sure you highlight any value proposition that makes your staff unique. If you have vet assistants on staff, trainers on staff, long term industry professionals on staff, talk about it. Your customers won't understand the value you give them if you don't show them.
Your customers will be upset if they think you are raising prices just to buy a new Ferrari or vacation home. It is your job to highlight the reason for the increase and what value they are getting. When I raised my prices on our "Deluxe Kennels" by 50% I thought for sure I would have people coming from everywhere to complain. When I clicked "upload" to my Facebook price increase announcement my stomach dropped and I physically cringed. In total, I had 3 customers discuss the price increase with us and after having follow up conversations, they all said, "wow I didn't realize how much work it takes to run this place." You have to remember that in your customer's eyes you live a privileged life of puppies and rainbows. It is your job to show the value behind the curtain.
In these Covid recovery times you will need to be careful as price increases can be seen as tasteless in times like these no matter the value you are proposing. That said, it is your duty as a business owner to take a hard look at your operation and make sure it is profitable.
Here is an example of my price increase from last year.