Get the Know Your Numbers: Business Finance Planning MasterClass
Have you ever had a litter born, raised, and then they go home and it was perfect? They all had great homes, you got the price you asked, and when that litter money was in your bank account, you thought to yourself, “Wow, imagine if I had had two litters, this would be double!” I’ve been there. It’s exciting. What could you do with twice the money from your breeding program? My head goes to trips we could take with the kids, improved facilities for the dogs, or maybe paying off the vehicle or paying down the mortgage. All of these things are great feats to accomplish and would make the breeding program such a gift for the family.
We all want to make a good living, have the resources to take care of our puppies and families properly; there’s nothing wrong with that. You should be able to do that, it makes it all worth it.
When you’re breeding it seems natural that to make more money you need to produce more puppies, right?
I have to be honest with you, it’s not that simple. I wish it were; but then again, breeding isn’t really simple. The truth is, as your breeding program grows, it gets more complex. I like to call this the “Compounding Complexity of Scale.” Let’s play it out and see what happens.
THE MATH BEHIND SCALING
Let’s use simple numbers for math’s sake. Let’s say your dogs are easy breeders and whelpers, you don’t usually need AI or C-Sections. Ultimately, it’s pretty easy to produce a puppy: it only costs you about $300 with vaccinations and microchip, and a modest puppy pack. Let’s say your dogs are $2000. You have two breeding dogs that have two litters per year, averaging 6 puppies per litter. This means you are producing 4 litters at 6 puppies, for a total of 24 puppies per year. This means your gross revenue, the total amount of money you bring in from puppy sales is $48,000. Since you only have a stud and two females, your dog food expenses aren’t all that bad, along with your vet bills, since they’re pretty well in your house most of the time. That means that you only need about $300 from each puppy to cover the overhead of running your breeding program. All in all you charge $2000, and, after subtracting the $600 from expenses, you are at $1400 net profit on your puppies, which is a 70% profit margin on your puppies. This is a fantastic profit margin.
If we calculated this out over the year–that’s 24 puppies at $1400 profit per puppy–then your pre-tax take home for the breeding program is $33,600. Now, I get it, you probably don’t want to live on just $33,600 per year, BUT as a little side hustle that you could have with another job, it’s not bad, nearly an additional $3000 per month. That’s a sizable part-time job.
Let’s say you decide to double your breeding program and get 4 females, two studs, and, instead of 4 litters per year, you have 8, still averaging 6 puppies per litter. In this scenario you’re producing 48 puppies per year. Now if you’re doing it all yourself, you’d be doubling your work, but also doubling your profit, bringing home a little over $75,000 per year in profit.
But, let’s say that you decide that you want to hire someone to help you part time. They’re going to come out during the week for a few hours and clean your kennels. You decide to budget $400 per week, which is pretty modest, for 20 hours per week. If you were paying them as a W2 employee, covering taxes and worker’s compensation, as is required by law, you’d essentially be paying them about $15/hour as far as what you’d be hiring them at.
$400 per week for 48 weeks (let’s say they take a week off a few times per year), that means that you’ll have paid out $19,200. If we divide that out by the 48 puppies, we’ll have $400 per puppy in additional expenses. This means that our profit margin on each puppy goes down $400. So before we hired help we were making $1400 per puppy take home. Now we are only making $1000. Instead of making 70% on our puppies, we are making 50% margin.
At $2000 per puppy we were making a gross revenue of $96,000 per year, but with the hired help, we are now making 50% profit, so we end up with a pre-tax take home pay of $48,000. While this is better than our $33,600, it’s only better by $14,400, which is only $1200 per month.
We could argue it’s worth it because it’s more money–it could be your mortgage payment. BUT, let’s toss that around a second.
What breeders often fail to consider when increasing the size of their breeding program is that it doesn’t just increase expenses and the need for help managing dogs and cleaning—it increases stress, time away from your family, and the risk of burnout. Is the extra $1200 per month worth the trade-offs in your quality of life?
In addition to having to manage the employee and potentially losing money in expendables, you also have to sell twice as many dogs in order for this scenario to work. That means twice as much time working with buyers, answering questions, and it also means you’ll need to double your inquiries for puppies. This may mean doing more work with your website, SEO, your customer service systems, and probably more time invested in social media. If you’re already strapped on time—which is why you hired someone—you ultimately didn’t save yourself any time. Is the additional $1200/month going to compensate you for this additional time spent? And that’s without having to pay for any ads; we aren’t even calculating that expense…
Further, paying someone $15/hour is not particularly high-level pay, so don’t expect to get over-the-top performance. There’s a good chance you will be letting your standards slip a little when you hire someone; they’ll never be you. Employees won’t have the same stake in your business as you do. While many are hardworking and well-meaning, small inefficiencies—like wasted food or missed details—can add up. Without clear systems and training, these small losses can reduce your margins significantly. I remember one breeder reflecting to me that her employees didn’t care if dog food was wasted. For example, she once saw an employee spill a scoop of dog food on the way to feeding a dog and, instead of picking it up, they just got another scoop, wasting what was dropped. Because an employee is not paying for your expendables and supplies, there’s a good chance they’ll be a little more careless with them than you would be. All of this is “cost of doing business” when hiring an employee.
This is why, as an organization gets bigger and bigger, it needs more systems and simplification to continue to produce at the same or similar level. It means better facilities, tools, equipment, systems, and having all these articulated as a Standard Operating Procedure, also known as an SOP. These can all be built, but they also require time, testing, implementation, and tweaking. Which simply means more time and money invested from you.
Then you’re going to have to answer any questions they have; and chances are they won’t be messaging you at convenient times. Many breeders underestimate the time required to simply “manage” employees. It’s a bit more than I’d wish, but that’s just part of it. I’ve worked with a few breeders who have 4 or more employees, and in reflection it seems like they primarily manage employees rather than run a breeding program. In essence, they changed from doing the work themselves to managing the people doing the work, investing the same amount of their time, and taking home less money.
Let me toss something else at you. What if you struggled to sell puppies and ended up discounting some of them? What if you let them go for $1,500 instead of $2,000? If you did that for one litter, 6 puppies, you would lose $3,000 that year, making the overall benefit of doubling your program to a mere $11,400, not even $1,000 more per month in pre-tax income.
Let’s flip it another way. What if you went back to the simplicity of two breeding females, a stud, and 4 litters per year, 24 puppies. Yet, instead of selling them for $2000 you sold them for $2500. Over the course of 24 puppies, you’d make an additional $12,000 per year. Which is exactly what you were netting doubling the dogs, litters, puppies, and buyers, while hiring someone.
Get the Know Your Numbers: Business Finance Planning MasterClass
I wish it were only one, but I’ve been on quite a few coaching calls that started by saying something like, “If I don’t sell 20 dogs every month, my breeding program won’t survive.” As in … they must sell 20 puppies per month—one per business day—in order to merely cover their business expenses. It’s not always this bad, but there are many times I speak with breeders and their overhead is over $20,000 per month.
As you increase in size, you need help. You don’t just need help managing dogs and puppies, but you need help with customer service, managing buyers; you need help with advertising, either through hiring someone to help with social media, or paying for ads. Sometimes you’re hiring someone to run the ads in addition to paying for the actual advertisement. EVERYTHING gets more expensive. Things that were free are no longer free, they cost money.
In working with these breeders, the average cost per puppy for using Google Ads to sell their puppies is $400. If you sold your dogs for $4000 and you average $400 per puppy in advertising expenses, then your profit margin just went down 10%. That’s a huge shift in margin, and much worse if your dogs are less than $4000.
Some breeders opt for hiring someone to raise their puppies, either a whelper or puppy raiser, or both. The going rate for these services is around $500 per puppy, which is good money for someone who only has to take care of puppies and not take on the costs or liabilities associated, and who doesn’t have the work of selling them. There are some instances where this is useful, but figure that it will probably eat 10-25% of your margin. So you’ll need to incorporate that into your overall financial plan for your breeding program.
Dog breeding is a business where your money is made in the margin, more so than in volume, although they both come into play.
Think of it this way: if you are making $500 profit on a puppy, and you could find a way to make that $1000, then you would need to produce half the number of puppies to make your numbers work. Isn’t that incredible? If you could double your margin, you could cut your breeding program in half.
I work with many breeders who believe they need to increase the number of puppies to get into profit. But I find often the reverse is true: they need to reduce the number of puppies and increase their margin.
If your margin is $500 on a $2500 dog, then if you could get your expenses under control, spending $1000 total out of each puppy to cover overhead and puppy costs, then you could cut your breeding program to a third and make the same amount of money—that doesn’t include the reduction in stress.
With a smaller, more efficient program, you not only reduce stress, but also create more time to focus on customer relationships, your family, and ensuring every puppy has the perfect placement.
Another thing to think about. Imagine that you need to produce 120 puppies per year to make your numbers work, as they currently are with your heftier overhead. Now, what happens if the market takes another swing like the post-covid crash? Many breeders saw a decline in inquiries around 50%. But imagine it weren’t that bad; what if it were only a 20% decrease in inquiries? If you are producing 24 puppies per year, that means you’ll need to work hard to sell about 5 pups. That’s not terrible. BUT, if you are producing 120 pups and you see a 20% decline in inquiries, then you’ll have to work hard to sell about 24 pups. That’s a lot of extra work trying to manage an additional 2 older pups per month while waiting to sell your current pups.
It can create a lot of headache and financial strain when you have leftover puppies, need them to sell because you need to pay employees, and yet the market simply isn’t what it was. Smaller programs are simply more resilient to the ebb and flow of the market.
In my opinion, I don’t want to be doing this if I’m not making $1000 or more per puppy. It is way too much work to not make any income. You’ll have to see what that number is for you.
In my most recent MasterClass on Knowing Your Numbers, I’ve created a large spreadsheet for you to plug in numbers and play around. You can see what your allowable expenses are to make the margin you are seeking, and you’ll be able to see where you’re falling short.
SHOULD DOG BREEDING BE SCALED?
After listening to this, you might be thinking, “Sheesh! How am I ever supposed to grow my program?” It’s a fantastic question! I believe there is a bell curve. The peak of the curve represents the sweet spot—where your program is large enough to generate significant income but small enough to remain efficient and manageable. Beyond this point, each additional litter starts diminishing your returns.
Once you are comfortable whelping and raising puppies, you have a decent handle on buyers and your ideal puppy buyer, then you can consider an increase to your program size. The biggest difference in those who increase successfully compared with those who don’t is the intentionality behind it.
When you are increasing your numbers, you need to do so with a plan. If you are struggling to make ends meet with just a few litters, don’t expect these inefficiencies to get better with more dogs. More dogs generally magnifies inefficiencies. Consider the added facilities to make employee labor reach further. If you don’t have a system to teach an employee, don’t expect hiring an employee to save you money. They need to learn that system from you.
In the bell curve of breeding size, the top of the curve represents the most income from your breeding program. As you increase the cost to produce a puppy, reducing your margins, expect your program to have diminishing returns with each additional litter produced.
If you are in this large scale operation and you are drowning financially, unsure of what to do, thinking you need to sell more puppies or produce more, I encourage you to look at your margins and see where you’re bleeding money. Reducing your overhead will lower your cost to raise a puppy. Obviously we can’t jeopardize the health and wellness of puppies, but challenge yourself to find a more cost-effective way to make it all possible. It exists, I promise. If you’re really stuck and can’t see a way out, schedule a business strategy session with me so I can help you see the path out.
With the right margins, systems, and intentional growth, you can build a breeding program that’s not only profitable, but also fulfilling, sustainable, and a true gift to your family and the families you serve.
