What Buyers Look For in a Pet Supply Store

Where the earnings come from

Buyers split a pet store into categories and ask for each one by itself. Food is usually the largest and the lowest in margin. Treats, chews and supplements earn more per dollar. Toys, accessories and seasonal goods earn more still but sell unevenly. Live animals, if you carry them, are a separate business with their own risk and their own questions, and a buyer will price them apart from the rest. Fish, reptiles and small animals need tanks, filtration, supplies and staff who know the work.

What buyers want to see is the mix over time. A store whose food sales grow a little each year, with steady treat and supply sales behind them, is a store with a loyal base. A store whose sales spike around the holidays and sag the rest of the year takes more explaining. Owners often find that the numbers look different when sorted by category than they do in total, so we recommend running that report before a buyer does.

Autoship and delivery matter here. If customers have a standing order that you fill every few weeks, either through the store's own system or through a local delivery route, a buyer sees repeat revenue they can count. Our post on recurring revenue and contracts explains why that kind of income is worth more. A loyalty program that tracks purchases, such as a free bag after a set number of purchases, gives a buyer data they can use to judge how many customers come back.

What the food and brand relationships are worth

Premium and natural food brands often decide where an independent store stands. Some manufacturers sell only to specialty retailers and keep their products away from the big chains and from online discounters. If you carry brands like that, a buyer wants to know whether the accounts transfer, whether the manufacturer approves the new owner, and whether any exclusive territory exists. A brand that leaves after a sale can hurt a store badly, because the customers who came for that food come for nothing else.

Ask your reps for the terms in writing before you list. Look for minimum orders, rebate programs, return policies and any agreement tied to your name. Vendor credit matters too. A store that has built good credit with its distributors can run with less cash on hand, and the buyer needs to know whether that credit transfers or has to be earned again.

Local sourcing counts as well. A store that stocks a local treat baker, a regional raw food maker or a nearby rescue's fundraising line has a position the chains cannot copy easily. Buyers like those relationships as long as they are documented and do not depend on one friendship with the owner.

Inventory and how a buyer counts it

Inventory is usually the largest asset in the sale, and the way it is handled decides some of the price. Most deals for a retail store set the inventory apart from the goodwill and settle it by a physical count near closing. The buyer pays for saleable stock at cost. Food that is close to its date, discontinued items, torn bags and dusty aquarium equipment generally get excluded or marked down.

Owners can help themselves by keeping the stock clean for a year or more before a sale. Mark down slow items and sell them. Keep expiration dates visible. Keep the point of sale system accurate enough that on-hand counts match the shelf. A buyer who counts the store and finds the system far off will start to doubt the rest of the numbers. Our post on getting your financials ready covers the other books a buyer reviews.

Shrink gets a look as well. Pet stores lose product to spoilage, damage and theft, and a live animal that dies is a loss that should be on the books. A store with those losses recorded honestly looks better than one that claims none.

The records a buyer will ask for

Expect requests for the business tax returns, monthly profit and loss statements and sales reports by category, and by store if you have more than one. A buyer will want the point of sale reports for transaction count and average basket, since a store that grows by raising the average sale behaves differently from one that grows by adding customers. They will ask for your payroll and the staff list, with any specialty knowledge such as aquarium care, and the hours each person works.

They will ask for the lease, the vendor agreements, the list of equipment and fixtures, and your insurance. If the store sells live animals, expect questions about suppliers, health guarantees and any permits that apply. Rules vary by state and your attorney confirms what applies to your store. If you offer grooming, boarding or training inside the store, those lines have their own value and their own risks, and we cover grooming and boarding in separate guides.

What has to transfer

The lease comes first. Retail depends on location, and a pet store has a particular need for parking and for a layout that handles heavy bags and carts. A buyer's lender will want enough term left to cover the loan, so talk to your landlord about renewal options early. Our post on the lease as part of the deal explains the process.

Next come the vendor accounts, the loyalty program and its customer data, the point of sale software license, the domain name and social media accounts, and any permits for live animals. Customer lists have value only if you are allowed to transfer them, so check your privacy language. Employees are the last piece. A knowledgeable team that can match a dog to a food, or a reef tank to its lighting, is hard to replace, and a buyer wants to know which of them will stay.

What tends to sink a sale

Several problems come up again and again. The owner is the face of the store and customers ask for them by name. A single food brand accounts for a large share of sales and cannot be moved to the buyer. The lease has a short term left. The inventory count falls short of what the books claim. Online and big-box competition has already pulled sales down, and the owner has no plan to answer it.

The last one deserves some thought. Buyers do ask how the store holds up against national chains and online delivery, and the answer cannot be lower prices. The strong answers are local, such as knowledgeable staff, special-order food, community events, a delivery route and a loyalty program with a customer base to show for it. We would want you to be able to describe your edge in plain terms with numbers behind it.

How to prepare

Give yourself a year if you can. Set up the category reports and run them monthly. Clear aged stock. Start an autoship program or a delivery route if you do not have one. Collect your brand agreements in one folder. Teach a manager to run the store in your absence, as we describe in our post on owner dependency. Keep the shelves full and the store clean, since buyers visit more than once.

At Business Advisors of America we begin with a valuation built from your own numbers, prepare the materials a buyer and lender will want, and screen buyers before any of them learns the store's name. If you want a first look at selling a pet retail store, the sub-industry page is a place to start.

This article shares our opinion and general information. It is not legal or tax advice. Always speak with a licensed attorney for legal advice, and a qualified tax professional for tax questions, before you act.