666: Busy but Broke? The Metrics That Reveal Your Business’s Real Health
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In this episode, we break down the difference between being busy and being stable, profitable, and resilient. We walk through five measurable health indicators that reveal whether your business can actually support you long-term. From market fit and client retention to utilization, unit economics, and cash flow, we explain what to measure and why it matters. Whether you’re solo or have a team, these indicators apply across the board. Our goal is to help you diagnose problems clearly and build a business that supports your life instead of consuming it.
Main topics:
Market fit and demand
Revenue durability and retention
Utilization and capacity efficiency
Unit economics and profit
Cash flow resilience
Main takeaway: “If you’re not profitable at one visit, adding more visits will never fix it.”
This is one of the hardest truths in pet care—and one of the most important. Being busy can hide serious problems in pricing, labor costs, and efficiency. When margins are broken at the unit level, scaling only multiplies stress and burnout. Real growth starts by understanding what it costs to deliver one walk, one visit, one day of care—and pricing accordingly. Profit isn’t greed; it’s what allows you to build a business that lasts.
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Episode 215: https://www.petsitterconfessional.com/episodes/215
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A VERY ROUGH TRANSCRIPT OF THE EPISODE
Provided by otter.ai
SUMMARY KEYWORDS
Pet care business, health indicators, market fit, demand capture, revenue durability, client retention, utilization efficiency, unit economics, profitability, cash flow, operational resilience, client acquisition cost, lead volume, client lifespan, business insurance
SPEAKERS
Meghan, Collin Funkhouser
Meghan 00:02
As we kick off the new year, we wanted to talk about something that doesn't always get addressed openly in our industry, the actual health of our businesses, not just how busy we are or how stressed we are, not just how many times we've had to rearrange a schedule because a client added a second cat at the last minute. We're talking about the structural, measurable indicators that show whether a business is stable, viable and worth running. Hi, I'm Megan. I'm Collin. We are the host of pet sitter confessional, an open and honest discussion about life as a pet sitter. We appreciate you joining us today. We would also like to thank our sponsors, pet sitters, associates and dog co launch, and also our amazing Patreon people who support us at the dachshund or Great Dane level, we are so thankful for your support. If you have been listening for any length of time and have found this podcast valuable and helpful to your business, we would love it. If you would support us, you can go to pet center, confessional.com/support, to see all of the ways you can help out.
Speaker 1 00:58
We don't talk a lot about the patreon supporters and what they get. But one thing I wanted to mention is they get an extended and expanded version of our weekly writing that goes into our weekly email newsletter. In our newsletter, we open with an expanded thought or thing that we're working through or that was discussed on an episode, and we take that and then expand it even more into an expanded writing that goes out only to our Patreon supporters. So if you are interested in those writings, you like those kind of things, consider supporting the show and becoming a Patreon member.
Meghan 01:29
This episode is eligible for one CEU from naps and psi to earn that listen to the episode, take the quiz found in the show notes and get the email whether you are solo or have a team, whether you hire employees or use contractors, these health indicators apply to everyone in our businesses. Some of them will be familiar to us, but some may be new together, they form a framework for understanding whether our business can support us, not just the other way around. So for 2026 we are focusing on five big health indicators. They are market fit and demand capture, revenue, durability and retention, utilization and capacity efficiency, unit economics and profitability and cash flow and operational resilience. So fun. Oh yes, I'm sure many people have already turned off this episode, but we are going to walk through each one of these and why it matters, what to measure and the common failure modes that pet care businesses run into. Okay, so the first one market fit and demand capture. Market Fit is a fancy way of saying, does the market actually want what you're selling, and are you capturing that demand? This is a pretty big punch to the gut, because if you really, really want to offer adventure hikes, but your market is saying, No, we're not going to buy them from you. That can be a real big blow to you. A lot of people assume that they have fit. Market Fit because people occasionally hire them, but fit isn't some people hired me one time a year and a half ago. So the market must be saying, Yes, I want you. No. Fit is consistent inbound interest and predictable conversion. Think of these dog walks Monday through Friday or several times a week consistently.
Speaker 1 03:10
It can also be just those requests. How many times a week do you get a new client reaching out to ask you for insert name of service here, if you find that you are offering those adventure hikes and you're getting a request once every quarter or once every so often, you have to ask yourself, Okay, is this a market fit problem, or is this something else? And this is especially important for us as local service based businesses. All of this consistent in three major buckets, and the first one is the awareness. This is where we as business owners typically spend most of our time. Is awareness, branding, marketing, messaging. Do people in your community know that you exist, and do they know that you exist at the exact moment that they need you? Do they find you when they have that problem, for example, on Tuesday at 11:30pm when they're frantically Googling, dog walker near me? Are you showing up to fill that demand?
Meghan 04:15
But it's not just Google. If they woke up one day and thought, oh, I need a dog walker, or I need a pet sitter now, and they go to the coffee shop and they see your flyer there, and, oh, it's an exact right fit at this exact right time. It's like we're trying to make Kismet happen, basically, of intersecting, intersecting between the client, demand and need and the immediacy with our service and what we can provide well, and provide
Speaker 1 04:40
Well, and that's why it's so important to have your client avatar nailed down, so that you don't feel like you're having to be everywhere at all times for all people, when you have it narrowed down to the exact kind of person with the exact kind of problem that you solve, it's much easier to make contact with them. But it is also, again, this is. This awareness part is where we put an outsized amount of effort, because this is the top of the funnel into our business. This is how broad of a reach and appeal do I have to the people in my market. And then that second bucket is consideration when that person does find you, do you look like a trustworthy business? Do you look like a business that is reputable? Do you have that website that Google business profile? Do you have reviews, photos, that social proof? This is where they decide if you're credible or just some random person. We often
Meghan 05:35
talk about your digital presence, right? Your reviews, your Google, your website, everything that you just said your Facebook, is it up to date? Does it have catchy photos and captions and all that stuff? But we also have to think about, well, okay, this mom is at her yoga class complaining to her neighbor, who also goes to the same yoga class that her dog walker failed again. And so the neighbor says, Oh, I use Jan's pet sitting. They are awesome. Then that mom and yoga goes home and Google's Jan's pet sitting. So yes, your digital presence is very important, but it's also trying to cast that broad net of getting as many people to talk about you as possible,
Speaker 1 06:13
and that your messaging, your brand, all of that is in alignment so that you are an easy fit into their life. Just being aware of you is one thing. Considering and looking into you is a completely different step. And then that last step in this process of that bucket three of conversion, once they reach out, how quickly and clearly do you convert that interest into a paying client? How are you able to take that person from Hey, I'm just checking in. I'm trying, I'm looking for some questions. I'm trying to find some answers about this. I'm just looking at this. Wait. This is where things like slow response time kills conversion, especially for new clients, either in a panic mode or when they have that direct interest, they reached out. They're interested. They have questions. There is some inertia here. So am I able to take that capture, it, connect with them at that avatar level, and then move them on into my services seamlessly?
Meghan 07:07
And as much as nobody likes to answer the phone these days, it is important that we answer the phone
Speaker 1 07:12
even more so in the world of AI and the world of is this real. I mean, if you watched a lot of the news after Christmas, many, many people were disappointed by the gifts that they got because AI made them, marketed them, and people bought them and they didn't match reality. People wanted this physical product, but it wasn't what it was appear to be, because the images, the marketing was all AI. And so people returned these in droves across the country and world, really. And so people want to have that connection that, hey, are you real? What is this like? That is more important than ever. And so when we think about this market fit, again, this consistent interest, consistent conversion, here's what we need to be measuring to understand this. First, you have to understand your lead volume by source. Leads are just people coming in. Where are people finding you? Facebook, Google, Instagram, flyers, events, word of mouth, referrals from pet professionals that you track those. And then you're able to figure out where are people coming into your business. The second one is a conversion rate from inquiry to active client. How many people reach out to you, and then of those people, how many convert to active and using your service? And active here is a little slippery, depending on what kind of services you offer and how you want to be used. Track it that way, if you are a weekly dog walking company, well, then active means weekly dog walks for your clients. If you're a pet sitting company, it may be, well, they used me once a year, because that's when they take their family vacation. So that's an active client. That's you have to decide a little bit of these metrics for you.
Meghan 08:56
It's also important here to not just say, okay, when they became active, but what step are they in your pipeline, in your process of, well, do they just fill out some information, or all the information? Have they done a meet and greet? Or is that pending? Or what stage are they in? Because that's also going to tell you where people are potentially falling off
Speaker 1 09:13
and how long it takes them to move you through that move through the process. Once they reach out to you, can you calculate? Can you track on what day then they become an active client? And know? Okay, well, from to reach, from reach out to active is average of 60 days or 40 days or 30 days, and there's no right or wrong number here. Obviously we would love it for to be, you know, quicker, but maybe you aren't able to accommodate quick turnarounds and your schedule's already always full. So there's some other levers that we have to pull in our business. It's just measuring and knowing where am i right now, and are there things that I can do to change this? Because that's the next question. Once I know the average time it takes to from inquiry to conversion, Can I do anything to influence that? Can I change. Change any of that?
Meghan 10:01
Or do I want to even, because if I'm so busy, I'm busting at the seams, I may not want to change that. I well, I may want to make it longer even I need to stop the inflow in my business, because I've got so much going on.
Speaker 1 10:14
Yeah, you may find that people are coming in immediately converting to clients and then falling off, or then not using you. And so the question then is, were they ever a good fit? So maybe I need to lengthen that conversion time so that I can educate them and they it actually works out well, and not just the time it takes to convert, but the cost, right? The client acquisition cost, or CAC is okay, I have a client. How much did it cost me to get that person knocking on my door? And for many of us who use word of mouth, this number we is deceptively low. This is where we go. Oh, my client acquisition costs are zero, except for all of the hours and hours and hours that you personally put in to drive that engine, to make those connections to network, to send those emails, to build and continue those relationships. That is, that is time and money that you must account for in this, because if you stopped doing that, if you stopped pushing on that engine, it would all fall apart. And so how do we account for that? So being able to calculate how much your time is worth per hour is a really important part of this, and applying that towards the clients that are coming into your business.
Meghan 11:23
The last key metric here to think about is your lead source survivability. So how many does your lead keep producing over time? Is it just from the Google ad, and that's why you're getting so many Google inquiries, okay? Well, if you don't want to keep paying for that, then that's probably going to go down. So it's not going to survive as long as maybe some other organic sources like Facebook.
Speaker 1 11:43
Yeah, I know we did mailers and flyers for a big push several, two or three years ago at this point. And man, those were just on our lead inquiry source for long, long, long time. And then once we stopped pushing that out, of course, all those died down. Of course, those went away because we weren't pushing anymore. And so looking at going, how much can I effort can I put in, versus what do I get out of this? And being able to track that going okay if I put flyers out there. Man, that lasted for six seven. I got eight months of of inquiries from those flyers I put out before they started to
Meghan 12:15
dry up. Market Fit and demand capture really matters in 2026 because customer acquisition has changed. You know, organic search is still dominant, but paid search has become more expensive. Google ads, Facebook ads, going to events or sponsoring things, and AI is growing as well. It's not good enough anymore. Just to be found on Google as a pet sitter near me or dog walker near me. We have to go to the next level now and say, Okay, what is AI telling people? Social has become less reliable. Marketplaces like rover have matured, and word of mouth really requires that retention in order to work. Are you continuing to get clients and raving fans in the door so that they can talk about you? This can all fall apart, though, and go into a sort of failure mode. Those struggling with their pet care business believe, oftentimes that they have a booking problem when what they really have is a visibility problem or a clarity problem. People either don't know they exist or can't figure out how to buy that's why, if you do have a website, that homepage is so important.
Speaker 1 13:19
And the big takeaway here is, as we're trying to understand, do I have market fit? When you start measuring your lead volume, lead volume by source, lead, how long do they stay where they're coming from? The conversion rate, that will really start to tell you of the people that I'm reaching, do they want my services? And really sit with that and ask, and you can pull that one level of good. Let me market more. And if you find yourself marketing, marketing, marketing, and nothing changes on the inquiry side, you really then need to sit back and ask yourself, is what I'm offering a good fit for this market, or is it not, am I just pouring good money after bad and wasting my time on this when I really need to try and figure out a different service offering
Meghan 14:02
it could also be. And we've talked about this several times, of the keyword searches, or the things that people think they want, and then you've labeled it something else. So if you are saying, I offer pet taxi services, and people in your community don't understand what that means, or if people are saying they want a house sitter so somebody can stay overnight with their pets, but your term of house sitter means I come over and there are actually no pets there, and I either water your plants or I just do a home check. There could be this mismatch of terms. So the market fit here may not necessarily be that nobody wants your services. It may just be they're not educated enough, and that's where you really have to discern
Collin Funkhouser 14:38
and test, test, test, trial and error, trial and error, trial and error. You really it's all that process of honing and honing in on what this is. And then once you've worked through all of that, then you can make that good
Meghan 14:49
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Speaker 1 16:44
a true durable revenue would mean that if you put in no more marketing and messaging effort, all of the same clients would show up again and again and again. Either every Christmas they'd all show up. Or every Thanksgiving they show up. Or every Monday, Tuesday, Wednesday, Thursday, Friday, they'd show up without you needing to do anything.
Meghan 17:07
Now, obviously this is an idealistic world, right? Because clients die, they move away. They don't need you anymore because their daughter moved in with them, and so they have their own built in pets that are like this is such an ideal world that we would love to live in, but realistically this, we can't get this to 100% No, but
Speaker 1 17:26
we can look at three areas. There are three areas that we can look at, measure and track, and the first one is your retention rate. How many new clients stay for? 612, 24, months a one time. Booking is not retention. That is a transaction. And I hear it a lot and see it a lot on Facebook groups, and we experience it ourselves. Man, look at all these new clients that came in. Well, they needed me for one dog walk, one drop in, or one weekend, because their family member was traveling with them. And you can measure retention across however long you want to again, depending on your business. If you're a pet saving business, probably every year. What's your client retention rate? If you're monthly and you're doing lots of these reoccurring dog walks and these visits probably shorten that time. Just to see what this is, because this is going to tell you how many new clients am I going to need in order to continue to grow or maintain without dipping below? Because if you have a low retention rate, that means you bring in 100 people, only four stay well, that means you've got a market, market, market, market, market to get back to 100 people, and then they're going to drop down to four, and that you're constantly having to churn. That's where that client churn feels like where you are just burning through clients, because they come in, they get service, and then they leave and never come back. And that also speaks to the client lifespan. How long does the average client stay with you? For dog walking again? This could be 356, 10 years for travel, sitting. It might only be seasonal, but every year after that, both are very valuable. But knowing that lifespan changes your strategy, because if you get somebody, you're serving them well they like you. You know, on average, that person is going to be with me for six years, or however long. You know, whatever that is, you know that that goes into how much effort you put into client, acquiring them how much you can spend on a client, because from the client lifespan, you can start calculating, on average, once I get a client, how much do they spend with me, telling you how much you can spend on ads, on goodies, on birthdays, on Extras, all of those things go into this.
Meghan 19:39
Collin, you mentioned churn earlier, and this might be the most damaging, this silent churn, when clients vanish without telling you. And this is why, in a client survey is so important, because you know this silent churn, it feels like nothing happened, but revenue simply evaporates, and we don't necessarily sometimes want to know why they left. Maybe they had a bad experience. Or they came home to something that was amiss and they didn't enjoy it. Or, as I mentioned, sometimes they just vanish because they've moved and they just didn't tell you about it. But this is important to know when you are trying to get this revenue that shows up consistently. So some things you need to watch this retention rate over time don't necessarily measure month to month noise, because it can be just that. It may not mean anything. It could just be a one time fluctuation, and really indicative of nothing. You also want to look at rebooking frequency. Does it take four days for them to book again, or four months, four years? How often do clients actually book you and again? It's going to be different based off of your business, your service offerings, and really your business structure as well. You also want to look at your average client lifespan. In an ideal world, this can be measured in years, but it's probably going to be more measured in months.
Speaker 1 20:52
And a great way to calculate this one is just date of first service and date of most recent service. Subtract the difference in days or years, whatever that is, and calculate an average based off of that, and you'll really start to see that there's the separating of clients, which will give you some insight into that churn rate that we've already talked about. And Megan, I'm glad that you mentioned those two things. Of, there is this voluntary churn. Of, they moved away, they died, they lost their job, they you know, whatever that is, that's kind of a voluntary of, okay, we not this isn't good. Or maybe you stepped in and said, this isn't a good fit for us anymore, for whatever reason. And then there's that silent turn of they, maybe they were using you really, really frequently, and then they just kind of stopped. And now, you ever had that moment? I have this moment all the time where I'll come into Megan, I'll be like, Hey, Megan, whatever happened to that Baxter dog? Remember what we were doing? You know XYZ and, oh yeah, we haven't seen him in several months. Let's check in and see what's going on. Those are, those are things that you can catch and kind of can systematize to make sure they don't fall through the cracks,
Meghan 21:52
especially if you have a CRM or an automated way of checking back in and saying, hey, it's been a while. How you doing? How's it going? Do you want to come back. But when we talk about this durability and client retention, you know, most businesses diagnose this as a marketing problem when they really have a retention problem. If your business retention is low, you may consistently be replacing clients just to stay at the same revenue level, or maybe a little bit above.
Speaker 1 22:18
And you'll see this when you look at year over year revenue. You'll see, oh, man, look, I did $140,000 in revenue in 2024 I also did $140,000 in 2025 that's weird, because I had 180 new clients reach out and start service this year. What on earth happened? Well, that's where that thing is silently killing your business when you have a high level of churn and a low level of durability, you then rob yourself of a foundation that you can build on, you cut yourself off at the knees, and all of a sudden you're not able to build because you can't physically do any more level of marketing outreach and communication to people to make them more aware, because if they come in, it's, it's, you're like a sieve instead of a bucket. They come in, they stay there for a little bit while, and then they are just gone from your business. And this prevents your business from being able to grow and increases your burnout as the owner.
Meghan 23:15
This is especially important if you are trying to completely flip your business, if you're going from one primary service, let's say pet sitting, and you're going moving into dog walking. You really need to be tracking things on a precise level and making sure that when you finally cleave off that pet sitting that you are able to do so and still maintain a healthy profit. So you may need to split these out by entire services and look at them individually siloed. Because if your core is pet sitting, but you're going to dog walking, but your dog walking is has a really high churn rate, and your average client lifespan is in the weeks versus months or years. Then you may not be able to cleave off that pet sitting as soon as you would like to,
Collin Funkhouser 23:53
or it's going to take you a lot more effort on the front end to grow that business than you originally expected, because the stability of let's just the pet sitting isn't masking the lack of reliability, so to speak, for the other service. And so breaking these out by service will give you that intense clarity in your business so you can make those good decisions.
Meghan 24:15
The third sign of a healthy business is utilization and capacity efficiency. This is the indicator that can be really hard to measure, but it's one of the most destructive, the utilization part of this asks, How well are you using the time, the routes and the labor that you already have? And when we talk about the labor, we're not just saying this employee, Marge does Baxter at two, and then she goes to Sandy at four. Like we're not just saying that. We also need to consider our employees from an individual level. What can Marge bring to my business that would make it more efficient? Maybe you are looking at your business thinking, I really need somebody to go out and do boots on the ground marketing to get my business name out there. More I know that I can do this, and I do this on a consistent weekly or month. Basis, but in order for me to do more CEO level tasks that I need to be doing and really steering the ship, I need to have somebody under me for marketing. And I know that Marge is really good at talking about our business and what we do. So when we talk about labor efficiency, we're not just saying, Go out and do visits quicker or in a more efficient route or manner. We're also saying, How can I utilize the skills that my employees have to further my business?
Speaker 1 25:28
It's all about capacity. And yes, I think oftentimes, Megan, like you said, we limit this to the dog walks, the pet sits, the whatever that is, but there's so much more that our business does and needs to operate in order to be successful as a whole. We run service business right the we have a hard ceiling. It's time. We cannot add infinite bookings to our schedule. I wish we could. There are just only so many visit windows. There's so many hours in the day, and there are so many miles before everything just collapses in on itself, and all of a sudden we are too full and everything is falling apart. So here are things that we need to be looking at. And this is a little bit about what you're speaking to. Megan, tracking the billable versus non billable hours. The billable hours, you know, the ones that are doing the work, generating revenue. Then there's the other work, the non billable where there's no revenue that comes directly from that, but it's more operations, admin, back end, marketing, that kind of stuff. Also looking at your route density, how close on average are your visits? Does it take an average of 10 minutes to get to them? Five minutes, 30 minutes.
Meghan 26:37
Or are they all in the same building, where it takes 30 seconds to go up and down an elevator?
Collin 26:41
Right, absolutely right. And then giving you this, this density of services, which increases your capacity, because you are making more and better use of your what time. If I can pack more services into a shorter period of time, I'm more utilizing this. And yes, looking at your your staff capacity, I'll just add that here. Of Okay, I have four people in the team. On average, each person could do six visits in the time that they have allotted. So on average, in this time block, I have the capacity to do 24 visits. But also, on average, I'm only doing 10. I'm way under utilizing my team and I need to figure out how I can make that bigger and actually use them more
Meghan 27:24
for those services. And so that can look like going out and generating more marketing and advertising to fill their schedule of visits. It can also look like having them go do some of this work or filling their schedule with other things until you get busier in your business.
Speaker 1 27:39
Yeah, we're all about optimizing time here, and that's our one limiting factor. So what is your visit window execution? That's that's really fancy for Did you show up on time and did you stay late? How many times did they start a visit on time and how many times did they stay late? Because that is an inefficient use of a time window.
Meghan 27:57
This really becomes crucial when you are a solo, and you want to hire your first one or two employees, and you as a solo, have said, Okay, well, it I only have maybe four or five clients in a day, and I can kind of visit them generally whenever around the noon time. And it's okay if I say 45 minutes, you know, if the client booked a 30 minute visit. And it's okay if I stay 45 minutes or an hour and a half because my next visit isn't until two and a half hours later. But now you're wanting to hire somebody, and not only do you have to pay them, but they don't really have the ability anymore to stay as long and so you really have to make that judgment call of of talking with clients through this process. But now you as the boss, are hyper aware of these visit times of we say 30 minutes, okay, it needs to be 30 minutes. It can't be an hour and a half anymore, like I was doing by myself.
Speaker 1 28:47
And there's a big discussion here of, do I pay per piece, or do I pay per hour? The fundamentals come down to this, your employees want to know what success looks like. They want to know what it means to be excellent and execute well in your business. So if you do hourly, we do hourly. We track these kind of numbers through our software that gives us those insights that we sit down and we have one on ones with the team members to tell them how they're doing and what that looks like. Because when we have employees, this efficiency that we're talking about, this equals wage, this equals coverage, this is talking about margin, because now you're paying for that time you are extending. You're either expanding or shrinking the amount of coverage you have for visits with the more inefficiencies. If that 30 minute visit is consistently taking 45 minutes to do, you have less time to do another client's visit in that same time window, and you also have less margin in your business, less profit that you could use to reinvest in marketing, reinvest in training or give yourself a pay raise. And yes, even if you're so low, efficiency equals how many hours you can work before you collapse. And that's something that we have to pay hyper attention to, because otherwise it gets away from us. We find ourselves just working, working, working, working, working, working, working, working, because the only way I know to grow my revenue is I just have to work more. And we forget about the efficiency aspect of what it means to run a business that is heavy, heavy in operations, an operations heavy business, must seek out efficiencies to the nth degree otherwise, just like we talked about earlier, with client retention, you are cutting yourself off at the knees. You can grow all you want, but if you are inefficient in your operations, it will kill your business.
Meghan 30:31
And that's why we say all the time, that time is your most valuable asset, because you are worth more than what your clients are paying you. Businesses often try to scale revenue before they scale utilization, they add marketing, they add clients, they add bookings. But because capacity isn't structured, stress rises, margins fall. US owners, we burn out. So improving that utilization, improving that efficiency, is often the cheapest way to grow profit without raising prices or adding clients. And now a word for Michelle at dog co launch.
Speaker 2 31:03
What does it take to scale your pet care business? My name is Michelle Klein. I'm the founder of dog co launch, where pet care companies come to grow and scale. And I want to send you a case study of how one of my clients took his monthly revenue in just one year from $17,000 to over $73,000 and yes, that is monthly revenue, not annual. To get this case study and to learn more about dog CO and what we do and how we help companies go to dog CO, launch.com forward slash case study,
Meghan 31:38
the fourth indicator of a healthy business is a unit economics and profitability. Or, if that doesn't make sense, the question, does the business actually make money per unit of service? So this is where us, as the owners, discover the painful difference between revenue and profit. Womp, womp, they are not the same thing at all. So for pet care, a unit is usually a visit, a hike, a walk, a day of service, if a business loses money at the unit level, a dog walk, scaling simply increases losses.
Collin Funkhouser 32:12
If I'm not profitable at one walk, I will not be profitable at two or three or four, or just add more walks. If I'm not profitable at the first visit for pet sitting, I will not be profitable for any of the other visits.
Meghan 32:25
And this is why it is so incredibly scary. And please don't do this. This is why it's so incredibly scary to charge by the day, no matter how many visits you have, because if you if a lot of times, if you do that, you are shrinking your cost per service, and you should have just charged per visit anyway. A lot of times the day, cost will be significantly cheaper, four or $5 cheaper than if you had just booked a la carte
Speaker 1 32:50
walks, yeah. So we see this happen all the time. Somebody says, I just got a booking request. They want three visits a day for four weeks. I think I need to give them a discount, because this is too much money. This is too expensive.
Meghan 33:03
This is too costly. It's $1,000 or $2,000
Collin Funkhouser 33:05
well, the question then is, well, do your costs to render the service? Do they go down at each visit? Do they stay the same? Do they go up? Because I guarantee you they don't go down.
Meghan 33:19
Well, this is not true for doggy daycares and boarding facilities. Right as you scale with dogs, you can get more profit. But when we are driving two clients homes, the wear and tear on your car, the gas to get there, your time, maybe if you have a lot of visits back to back over the dinner hour, you need to stop and get some fast food somewhere like these, costs do add up, and just because you do one visit or five visits, it's the same.
Speaker 1 33:44
This is something that I know, Megan, we you and I have really focused this. Has been hyper fixated on this of if we do not have healthy profit margins on one visit, we really need to look at how we're structuring that and what that means for us and our business, and whether we are fair to our employees or not, and that then drives, okay? I know that for sure, for sure, I can do one visit and still be profitable. Great. Now let's work on adding more visits here, right? So what? How much things to track with this? What's your average order value? What? How many on average when somebody books your services, what's that number? What's that number? And again, with this, you calculate this per service of when they do dog walks. This is the order value whenever they do pet saying, this is the order value when they do hikes. This is the order value. Then really importantly here, you have to calculate your labor cost, percent to do one walk to do and this is where it is. This, it's hard to understand, because you may say, Well, I'm paying per hour, but the service is only 30 minutes. What's my labor? Well, you can choose how you do that, whether you pay only for 30 minutes plus drive time plus mileage, or do you pay for an hour minus drive time and mileage. You figure out how your business works in here, but know and nail this. Down. How much does it cost to render one unit of service? Then, once you have that, what's my margin? What's my gross margin per visit? How much money am I is the business making? How much money do I bring in when somebody is doing the walks? And yes, even if you are doing the walks, calculate this, because, like Megan said, you do have costs associated with this, and then calculate an effective hourly rate either as yourself, how much are you making per hour when you're in the field, and how much does your team make you per hour when you're in the field? This gives you this idea of, well, for every hour of operations, I bring in X amount of revenue to the business. Therefore, whenever I have eight hours in a day, or whenever I'm operating so many hours and I have an hour, can also be a unit time of if I have three people in the field and they're working three hours, well, that's nine man hours in the field that now you can calculate, on average, how much is your business bringing in. It really gives you so much depth and insight to your business and understands where you make money and how much it costs. You, like, make money, how much it costs, but it gets complicated, the kind of services that we offer, so making it generalized out to an hour helps us put this in context and understand exactly how our businesses operate.
Meghan 36:19
If you just listen to what he said and you aren't tracking this, you need us to need to start tracking this, because none of that would have made sense if you aren't tracking it. Start today.
Speaker 1 36:28
2026 Let's go. I mean, I think this is really on my brain, because recently I got to hear a talk given by someone who is really, really high up with one of the largest grocers in the United States, and I won't forget this for the rest of my life, when he talked about the margins in that business are between one and 3% right? That is their profit, their profit on any item, is between one and 3% sold in a store. And it really got me thinking, if we only made one or 3% profit in our business, what would that what would that do? How would that limit our business? Because effectively, what that means is that every dollar that comes in, effectively here, 100% goes back out to labor, to the cost of the services, to your overhead, to your insurance, to fuel, software, taxes, 100% goes back out the door. How would we approach our business? What would that change about our business? If that was the case, and this is really where we need to figure out going, okay, am I watching my margins shrink in my business over time? What do I do about that? Right? This is where we would want to look at, can I increase my revenue per client? Can I increase the number of dollars that any one client gives me? Because that's a massive bump to my business. Of instead of having to go out and acquire a new client, the existing ones can give me more money, whether that's different fees, minimum visit policies you charge for add ons that you're currently doing, right? This is, this is a major break that several businesses that we see are trying of Well, it used to be all included, but now what they're doing is they're breaking out certain things that maybe were above and beyond and maybe were a little bit more extra than necessary, and not everybody needs. So we don't need to include that. And if you want, well, there's, there's an extra charge for that. But really what we're talking about through this process is we need to look at our efficiencies again. We need to look at our labor per unit service. What can I streamline? What? Routes can I make or marketing? Can I do to get more density in my service area? What can I do about can I replace or reduce the amount of redundancies, the amount of overlap in my administrative or in the softwares that I use, so cutting out the overhead, right? Okay, maybe, maybe I do look at my softwares or my insurance or my admin hours, or I look at these kind of things in my business, because if you had 1% profit, you can't reinvest in uniforms or in supplies or in marketing or in any sort of extra insurance in your business, all that stuff would have to be stripped away. And so when we look at what our profit allows us to do in our business, it actually means that we can run a business that we want to run, that is that is fun to do, and allows us to serve people well without having to be at multi, multi million dollar scales. I mean, at at the small profit areas, you can't afford to hire strategically. You've got to strip out all of those policies and procedures and really go bare bones. You you can't, you just can't afford to spend the time. Game on that you also can't afford to take money for yourself. You can't weather different changes. You can't when something slows down, you don't have that backstop for you and your business. One bad week would completely wipe you out. And that's the danger that we sit and that's the danger where many of us feel like we just have to be there. It's just, it's okay. I'll just try and exist here. And that's not the case with the right kind of pricing and structure and density and control. You can run that kind of business that you want, because again, where we want to operate, we want to be high touch, we want to be high experience, but when our profits shrink, we force, we are forced, as a business to move into low touch, low price, low experience, and a commoditization of our service, because there is just no money to do anything else in the business with. And like Megan said, we've got to start by just measuring and tracking all of these numbers.
Meghan 41:10
This is a great time to start in 2026 because costs have been rising, fuel, labor insurance, software, payroll taxes, the list goes on and on. Many businesses haven't raised prices in three or four years. We feel bad. We don't want to, we don't want to burden our clients. We don't want to lose clients over this. But it is something we have to do in order to have that margin, because when we don't that margin erosion is invisible until it hits cash flow, and when we aren't able to do that sponsorship opportunity or that new marketing thing that we've heard about that everybody else is trying, so we want to try it too. When we don't have the margin to do that and don't have the cash to actually put into that, our business is going to suffer, and we may not be happy because we're feeling like we're falling behind.
Speaker 1 41:52
Many, many business owners, not just pet business owners, but business owners in general, make the mistake of equating being busy for being profitable. I see posts a lot of, hey, I need to make more profit. So I need to get busy. Or the only way I make going to make more profit is if I'm going to, you know, increase the number of visits that I do per day. Well, the problem there is, again, if you're not profitable at the first visit, adding 300 visits a day will never make you profitable. Sure, are there some efficiencies that can come with just increased, you know, drive, you know, decreased drive times and increased capacity per hour? Only if you're intentional, though, only if you're intentional. And so we can look at going, man, look at all of the visits that I'm doing today. I'm so busy. My team is so busy. I've never been this is gonna be the best year ever. Hey, why didn't I make any money? Was it because, accumulatively, with all my team members and myself, we were driving 500 miles a day, and I needed to reimburse them for mileage. Well, that could be why. And suddenly my labor costs were 78% in my business, plus then I had to pay out all the expenses for running and operating and the insurance and the licensing and the equipment and all that stuff, and now, oh, I'm only making I'm only taking home 5% or less. But if you've finished 2025, exhausted but broke, you don't have a marketing problem. You have a unit economics problem. You need to focus on how much it costs to deliver one unit of service, and then price accordingly, so that you can be profitable in 2026 now sometimes that takes a while raising $1 every quarter or adding after hours fees or convenience fees or late booking fees or things like that. The fees will help with this, but it adds a reality to what you're already spending your time doing and the difficulty that it is to render the services that you offer. I've said it before, and I'll say it again. We offer a premium, premium experience for our clients. We should be charging and acting like it. It's not a race to the bottom. It's hard to do what we do, especially for doing these one on one models. This is extremely costly. It should cost. It should the price should be commensurate with that. And we have to wrestle with that as the business owners, but it's imperative that we do that, because if, again, can't say enough, if you're not profitable with one, it does not matter how many you'll do, you'll never be profitable, and you'll be burned out, and your business will suffer.
Meghan 44:22
The final indicator of a healthy business is resilience, the ability to survive volatility. We have talked a lot about this on the podcast, but when we have cash flow, it asks, Can this business withstand slow months, unexpected costs and timing gaps? If you're a pet sitting business, you know that slower months are coming. Do you have enough cash to still pay your employees even in those months, whatever your insurance deductible is? Do you have that in the bank in case something happens in pet care? Seasonality is real. Typically, January and February are more of a slump. Not many people traveling, unless you're in the warmer climates, and then you have got. Snowbirds, but summer, lots of people traveling holidays, same thing, but unexpected cancelations can swing 1000s in a week. We all saw that with covid, everybody canceled their trips, shut everything down, and we panicked, because we're like, oh, now I've got a large bucket of money here that I have to give back to my clients. And some of us didn't have that cash to do that,
Speaker 1 45:20
and this really shows up when you just look at your personal budget, because if you're a solo sitter, are you going to be able to pay your personal expenses in January, after the holiday crush? Are you going to be able to pay them in February, when January was slow and February is also slow. Being able to have that cash flow from month to month to month means that you are doing something on the back end to keep it predictable, and this means saving during the good months so that you can pull from savings during the bad months. This comes up in discussions when somebody says, hey, it's a slow month. What do I do to pay my bills? And the question is, what money did you set aside during the busy months to account for that?
Meghan 45:58
But it's not just saving money. It's also not overspending the money. Of course, we want to win when we're busy, we want to go out and do all the things and buy all the things and do the marketing pushes, and that is important. But we also need to, yes, save as well. Yeah.
Speaker 1 46:13
So it's things that you need to be tracking and understanding. The first one is your cash runway. And this is basically how many months can you operate if you didn't bring in another dime or nickel, how many months could you pay your business expenses? Because you do have business expenses. You do have your cell phone bill, you've got your internet you have if you have an office, if you've got insurance, if you've got all of them, those are expenses that need to be paid if you didn't do perform another service. Because the one really good thing about operating a service based business is that we only have payroll when we have services to do. If I have no services, my payroll does go down. Now this changes if you have like full time admin, if you have full time managers, if you've got those kind of positions that are locked in. This then increases your runway that you need in cash that you have on hand to just pay for expenses. In the case of an emergency, three to six months would be fantastic to have as a business, because then you're also tracking your operating ratio. This is your operating How much does it cost to operate versus my percent revenue? And you can split this out two or three different ways. What most people do is they will include labor in their operating expense, and then make that a ratio of the revenue. And here you're looking at 60 to 70% of all in everything that you spend in your business, plus the labor 60 to 70% however, you can get more granular in this and take out the labor of your operating expense just to see, what else am I spending my money on? What else goes on in my business. And there you're looking at 10 to 20% on top of the labor and keeping those in control, so that you know, how much do I need to pay out, how much do I need to be saving? Also, speaking to this, I mentioned it the owner pay versus this reinvestment allocation, how much am I able to pay myself versus putting back into the business. And what is so powerful here is to use Profit First. Profit First allows you to make sure that you get paid, and then everything else goes too often. We put ourselves at the end of the bucket, end of the line, and say, Okay, well, whatever's left over, I'm going to get and said, flip that and say, What do I need in order to survive and pay my bills? And then I will work backwards from that and adjust the percentage that I take and am able to take over time so that I can be comfortable in this.
Meghan 48:34
If you don't know what Profit First is, or are interested in learning more, you can go to Episode 215 and that's where we broke down. All about profit first, and how to do that in your business. Another thing to track is receivables aging. So look at when clients pay. Is it before service, all of it with a deposit, or is it after service? Obviously, we don't want to be chasing clients down for payment. Here. We want, ideally, we want all the services paid before we start them, so that we are guaranteeing, if we have employees, we're guaranteeing that we're able to pay them, but also that we're able to guarantee and pay ourselves. Because I want food on my table next month. I don't know
Speaker 1 49:09
about you, and so what happens is, you conduct, if you, if you take payment after service, I want you to seriously consider in some way, trying to secure a deposit or moving more and more people to paying you beforehand. Because here is the trap that we find ourselves in. All of a sudden, I have all these bookings over Christmas, and I do all of the services. But if payroll is due before the invoices get paid, where's that money coming from? How do I pay my employees? If the invoices are paid after 30 or 45 days or net 60, you have no money to do that, and then I have to. So that means that the services prior to Christmas I got paid, I have to save some of that money to set aside to pay for the increase in services. But how is that possible? Because services dip below Christmas, and cash flow all of a sudden becomes incredibly difficult. To manage in the ups and downs of this business,
Meghan 50:02
and then you have to guarantee yourself that you have those three to six months of backing and savings in order to pay payroll Exactly.
Speaker 1 50:10
That's what gives you that leverage, that cushion in your business. And also this is about seasonality mapping. When are you busy? When are those hot spots, and do you have the revenue to pay for the labor that's associated with that. But also getting back to that one we discussed earlier, the capacity. Do you have the capacity to meet the demand for Christmas and Thanksgiving, or do you need to ramp up, ramp down? Like that informs some of your decisions as well when your business is busy and how you're operating. All throughout this discussion right now of operational resilience, we've focused really on the ability for your business to survive when things go wonky, and what allows it to survive? What allows your business to keep going when things are volatile, having cash in the bank, having money to continue to pay your obligations, to continue to market, to continue to get your message out there, and to serve your clients. The fact is, is that as a business, it doesn't run on wishes and hopes and dreams and maybes. It takes money to do things as a business. Now, we are prudent. We are careful with how we spend our money. First and foremost, we should have that in line and only spend money when it's necessary and do it well, in alignment with our business and our goals. But money does it take? And that's what this is all about. In order to be resilient as a business, we have to make sure that that cash flow matches how we operate and matches with what our expectations are, so that things don't get out of alignment. Because when those gaps in, when the cash comes in versus when the payments need to go out, when those start increasing in time, that's when the trouble starts. And so if you are invoicing after the fact, have tight deadlines, have tight turnarounds be after those people in a kind, nice, cheerful way, obviously, but don't let those slip through the cracks when we are so operationally heavy, that money coming in must pay for the operations of our business to continue to go out and generate more revenue and more cash flow in the business. When that engine gets off, it all falls apart.
Meghan 52:34
Resilience here isn't sexy, but it is the difference between a business that needs constant emotional energy to keep alive and a business that can plan instead of react. We don't want to get stuck in a rut here. The problem is, most of our businesses don't die from a lack of customers. They die from a lack of cash flow timing. Make sure you understand your business. Nobody is going to know it better than you. So if somebody is telling you to do one thing, you need to look at your business. Don't just copy what they say. Look at your business and say, Does this make sense for me? Does this make sense for my clients? And what they need from me? Expenses hit before revenue does so. If payroll is due on the 15th, but the client pays on the 25th that gap is going to kill the business. So we have talked about the five health indicators of a pet care business, market fit and demand capture, revenue, durability and client retention, utilization and capacity efficiency, unit economics and profitability and cash flow and operational resilience. If we zoom out here, these five indicators form a path you go from fit to stickiness to efficiency, then profit and finally, resilience, even if one link is missing here, the business becomes fragile. If all five are present, though, the business is durable. It can last for 10, 2050, years. Durable. Businesses can grow, they can hire, they can pay the owner. We like that, and they can create that opportunity that we are all looking for, that freedom, or whatever it is, the goal that you have in your mission for your business,
Speaker 1 54:06
it also creates opportunity in your community. Creates opportunity for the people who you're hiring so that you can serve people well. I mean, just just think about that flow, making sure that that funnel is wide, that your market actually needs your services. Once they get into your business, do they stay or do they go out? Then, once I have them in my business, am I using my time, my routes, my money efficiently to serve them so that I have profit? Because when I have profit, I have money to put aside. And profit is not what you make, it's what goes above and beyond what you need to survive and pay your bills. So I've got money left over now that can go back into the business. Can save, can reinvest. This engine keeps turning. And this the businesses that nail this are the businesses that last and like it takes time, though, you look at these five areas and this transfer and go, where is the problem in my business? Where is the issue for why I'm feeling the way I am? Is it in one of these then die? In and fix it, and then move on to the next one and the next one and the next one, so you actually have a business that works for you and isn't killing you.
Meghan 55:07
Going into this year, the opportunity is not just to work more. The opportunity is to work smarter, to measure again, those metrics super critical, to diagnose the issues, learn the lessons, move on and then intentionally build a business that supports your life instead of consuming it. This business will run you 24/7, if you allow it, but when you put structures around it, when you operate how best your market is, how the clients are, how you want at the end of the day, how you want to operate your business. That is when you don't just survive the business, but you thrive in it. You flourish in it. We hope you enjoyed this episode, and if you did, we would love it if you would share it with a friend or leave us a review on Apple or Spotify. Don't forget, this episode is eligible for one CEU from naps and psi. So now that you've listened to the episode, go into the show notes to click on the quiz to take it and get the email. Thank you for taking your time. We would also like to thank pet sitters, associates and dog Collin for sponsoring this episode. We'll talk with you next time bye. You.
