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The Urban Reptile founder Craig Stewart holds an albino Burmese python snake.

In a rented warehouse bakery in Nanaimo, B.C., Cheryl Foley and a staff of three are busily creating gourmet pet treats made from ingredients such as rye flour, pea flour, ground flax, Angus beef, venison, fruits and vegetables.

Containing no salt, sugar, fat or preservatives, Foley Dog Treat Co.'s products have been embraced by pet owners seeking healthy, additive-free foods for their beloved canines.

Foley is one of many small businesses cashing in on Canadians'  love of  their pets. According to the Pet Industry Joint Advisory Council of Canada, about half of Canadian households own some kind of pet, and Canadians dropped $6.5-billion on them in 2012, a figure that's been rising steadily annually.

That has spelled opportunity for many small businesses finding a variety of niches, from pet health and wellness products and services, such as the gourmet natural food trend the Foleys have tapped into, to designer clothing, animal daycare and many other items.

When Ms. Foley lost her government job a decade ago, she became partners with a woman who owned a home-based dog-treat business; they did modest business selling to pet stores in the lower British Columbia mainland.

Three years ago, Ms. Foley and her husband, Noel, now co-chief executive officers, bought the company. Since then, they have expanded it to three brands, gained distributorship across Canada, and added a line of horse treats.

"We are trying to cater to the educated pet owner," says Ms. Foley. "A lot of treat companies come and go, but you have to know what consumers are looking for."

Ms. Foley is working to take the company from a small specialty wholesaler to a mass manufacturer and to add to her staff. Two years ago, sales were $70,000; they tripled last year and are projected to hit $400,000 this year. As well as pet stores, Foley's products are sold in health food stores, and retailers such as Winners and HomeSense, and will soon be in Giant Tiger and Big Lots Inc.

Marianne Bertrand was early to the game. She started her dog boots company, Muttluks Inc., in 1994, after she received a pair of dog boots as a gift for one of her three Bassett hounds. When she couldn't find anywhere to buy more, she made her own boots to protect her pets' feet from snow and ice, and then started to get requests from other dog owners.

Ms. Bertrand started the business from her Toronto home with $700, initially selling the boots in plastic baggies at four pet stores close to her home. Today, Muttluks operates out of an 11,000-square-foot facility in Toronto, employs up to 35 people during peak production periods and sells through pet retailers throughout North America as well as online. The product range has expanded to include dog coats, pet beds and paw balms.

"We're riding the crest of a wave," says Ms. Bertrand, Muttluks' president. "The market is so much more sophisticated, with consumers and stores expecting sophisticated packaging, delivery and service."

Though the industry is highly competitive, small entrepreneurs can succeed if they find a specialty market and provide customers with a product and focus they don't get at large pet retailers, says Dave Stauble, founder and president of Toronto-based natural food company Carna4 Inc., which he launched in 2010, with his wife, Maria Ringo.

Mr. Stauble spent 22 years creating pet foods for large pet retailer Pet Valu, including holistic dog and cat food lines. Ms. Ringo is a homeopathic medicine practitioner who started one of the first raw-diet dog and cat foods in the 1980s.

When Pet Valu was purchased and restructured by a U.S. private equity firm in 2009, leaving Mr. Stauble without a job, he decided that starting his own company was the best way to create long-term security, as well as allow him and Ms. Ringo to tailor a business to their lifestyle and goals.

While his background made it easier to source manufacturing, packaging, marketing and ingredients, it was still tough. "The key was creating food that was meaningfully differentiated. We were able to create the first complete pet food that exceeded all nutritional requirements without adding any synthetics, and that has really resonated with customers," says Mr. Stauble, whose products have been picked up by about 300 stores in North America; he expects sales to near $1-million this year.

"Our type of clientele shop at the little independent pet stores that make up 10 per cent of the market," he says. "I want to be the biggest player in the small specialty market."

The Urban Reptile has tapped into a highly specialized market, selling geckos and snakes worldwide. Craig Stewart, founder and president of the Woodbridge, Ont.-based business, has raised and sold reptiles since he was a boy and gained a reputation with buyers for the rarity and quality of his animals.

Six years ago, he quit his job of 16 years at an investment firm to focus on it full-time; his wife , Lori, joined him 18 months ago. They have seven employees and a breeding facility operating out of two industrial units.

Their business has two tiers: lower-end, high-volume reptiles to serve retail pet stores, and high-end reptiles sold to investors and collectors. Their reptiles sell from $10 to $25,000. Last year, they sold 8,000 and this year's target is 10,000 to 12,000, he says.

All of these entrepreneurs say that the Internet and social media are crucial to their businesses. While Muttluks and Carna4 sell through retailers, they also sell online. The Urban Reptile sells exclusively through the Internet and has built business by advertising on online forums and bulletin boards catering to the reptile community.

"We're only Web-based, don't have bricks and mortar stores, so that's enabled us to keep our costs down," Mr. Stewart says.

Being a small entrepreneur can have its advantages. Sprouted seeds, a key ingredient in Carna4's foods, are costly and tricky to process, Mr. Stauble says, which he believes makes it more unlikely that large pet food companies will try to replicate his formula.

"We're a small family business with not a lot of overhead, so we can work on smaller margins to produce a food that's economically viable for the pet owner," he says. The company has one full-time staffer beyond its husband and wife owners; work such as production, research and development, social media and testing are contracted out.

For entrepreneurs looking to get into the industry, franchising is also an option. Amy Nichols, founder of U.S. dog daycare and spa facility, Dogtopia, has teamed up with Peter H. Thomas, chairman and CEO of Thomas Franchise Solutions Ltd., to tap into the dog daycare trend and bring franchises north of the border. (Mr. Thomas is the founder and past chairman of Century 21 Real Estate Canada Ltd.).

Ms. Nichols started the first Dogtopia in 2002 in Virginia; there are now 22 franchises and four company-owned stores down south. Her centres are set up similarly to children's daycares, with play rooms segregated by dog size and temperament; they also offer grooming and overnight boarding. Canadian franchises cost $42,000; total outlay will be about $300,000 to $350,000 by the time a centre is turnkey, Ms. Nichols says.

"You want them convenient and easy to get to. Dog daycare is a want, not a need and you need to make it as easy as possible," Ms. Nichols says.

Among the challenges pet entrepreneurs face is financing. Mr. Stewart has found that banks are reluctant to fund something "so out of the box" as reptiles, so he had to rely on his own savings to fund his business; Ms. Foley used personal credit cards.

Competition can be fierce. While Ms. Bertrand had no rivals when she started Muttluks, the market is now saturated with knock-off products, she says.

Key to survival has been continuing to keep dog boots as the core focus, continually improving, and focusing on eco-friendly materials, she says. Muttluks has diversified to offer "good, better and best" boot lines to compete with lower- priced competitors.

While many people get into the pet industry because of their love of animals, it's important to make sound business decisions, Mr. Stewart cautions. Although he's bred about 200 species of reptiles, he has narrowed his focus to cater to the broadest demographic, with three species of geckos and two types of snakes.

"A lot of people in the pet industry are in it because it's a passion, but you still have to maintain a strong business sense," he says.

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