Just FYI, here's a place in my area that I can't
wait to take Nikko to (she's on vacation until April). IMO, the prices are at least, if not beyond, fair. We don't really ever leave town or need a pet sitter, but I really want Nikko to be well-socialized, and I'm sure there will be occasion sometimes to leave him overnight.
Her rules are small (under 20lbs only I think?) dogs only, and she said they get special awesome care in her own home - somewhat like you're planning. Her home, but some specially created doggie-only areas. If you can get enough customers, I think it would be an awesome idea, and a true service to small dog owners in your area.
Perhaps you could call her and see if she has any advice for you? I don't want to volunteer her or anything, but she was so nice when I spoke to her, she might be willing to share her experiences with you if you were super polite and asked nicely. I know I was thrilled to find her place, and I personally can't wait to use her service. Just make sure to create a website - I for one would never have found this woman's place if they weren't online, because we're new to the area and not terribly social creatures anyways.
Royal Canine Villa Main Page
Lauren & Nikko