Entrepreneur, CPA, Founder & CEO of BIDAWIZ
December 28, 2010
A doggy daycare business sounds like a fun and fast growing venture. I performed preliminary market research online to get a sense of the opportunity and will share my findings with you below. Please note that when performing market research it is critical to use multiple sources to improve the reliability of the data in your financial model.
I first wanted to get a sense of the total available market (TAM) by finding out how many households own dogs in the US. According to the American Veterinary Medical Association (AVMA), in 2007, 37.2 percent or 43 million households own dogs in the United States. In addition, on average each household owns 1.7 dogs, so the total number of dogs in 2007 was 72 million.
Then, I visited the American Pet Products Association (APPA) to review a recent 2009/2010 survey. The data from the survey indicates that there are 45.6 million households owning dogs in the U.S. and 77.5 million total dogs. By using these two sources (AVMA and APPA), it is safe for us to conclude that 35 to 40 percent of households own dogs in the United States and the total number of dogs to households is 65 to 70 percent.
Now, let's move to doggy daycare annual spending. The same APPA survey indicates that $273 is spent annually ($20 to $25 monthly) for kennel boarding which is the largest component of doggy daycare services. It is also important to note that spending has grown about 5 to 7 percent each year for the past 10 years. This statistic is important when projecting growth in your financial model.
This market data above is very important as we can use it as the basis for our assumptions when we build the financial model. So, let's get to it. We don't know the total number of
dogs in your area but we can figure out the population size and number of households in your area.
Let's assume that the population size of your city is 100,000. Let's then divide the total population by the number of people per household or 2.5 (source: U.S. census) which is 40,000 households. Then, let's take our "35 to 40 percent of households own dogs in the U.S." statistic and multiply that by the 40,000 households in your city.
We now estimate that 14,000 to 16,000 households own dogs. If we wanted to estimate the total number of dogs in your city, we could just multiply the 14,000 to 16,000 by the "1.7 dogs per household" market statistic which equals 24,000 to 27,000 estimated total dogs in your city.
Now to the fun part: total available annual sales. Since there are 24,000 to 27,000 dogs in your city, and the average annual expenses per dog for daycare are about $273 or $20 to $25 per month, we can estimate that the total available annual sales would be $6,500,000 to $7,300,000 or $540,000 to $610,000 per month.
Before you get too excited, let's point out a few factors that are very important to consider. First, the total available annual sales are for the entire market which means it includes your competitors. If there are four other doggy daycare centers in the city, then they will be taking a share of the pie. Secondly, our assumptions above are based on national statistics and may not be reflective of the market conditions in your specific city.
The fact of the matter is that you won't know how successful the business will be until you actually launch the company. Market research is important and an indicator of the business opportunity but it is by no means a guarantee of success.
I hope this was helpful. Good luck with the doggy daycare center.
Category: Personal Finance