The Business of Making Money with Horses
By
Don Blazer
Copyright
© 2002
Lesson
Four
Yearlings
(race or show) For
Yearlings provide two sure-fire ways to make money, and a third possible
way to make a lot of money, quick.
First, if you buy yearlings for immediate resale,
privately or at sales, you will almost always increase your bank account. I say almost always because there are those
rare occasions when one gets sick or injured and the profits dwindle. Luckily, it is uncommon to lose money on a
resale yearling, even if everything goes wrong.
Generally, the profit just gets thin—but there is a profit.
Second, yearlings which are to be shown, then resold,
are a greater risk; therefore they can produce a greater return on your
investment. The problem, of course, is
the greater the profit potential, the greater the chance there will be little
or no profit.
A yearling to be shown, then resold, ties up
your money for a long period of time, and may never prove the performer
necessary to demand the big bucks. On
the other hand, if the yearling turns out to be good—wow!
Third, there is the yearling to race. Here, the potential for return on investment
is even better. So is the chance you’ll
lose money. But then it’s only money and
no guts, no glory. (Fortunately, it is
not really as hard to make a profit as some may caution you. The tough part is following the guides—as it
always is. I am confident,
most of those who fail to make a profit violated one or more of the rules early
in the game.)
Potential makes you money!
If you want to make money buying and reselling yearlings, then you must
buy potential.
Potential can be anything, but you must decide in advance of any purchase
what it will be and who will want to buy it from you.
That is rule number one.
If you are associated with people who want to purchase stock horses,
then you must have a horse with a catalog page which proves his potential as a
stock horse. If you plan to resell the
horse as a jumper, the horse must be bred for jumping, have proven jumpers in
his background, and have the potential to be at least 16 hands in size. (Don’t ask me to explain the minimum 16-hand
requirement. It is one of those notions
which has no factual basis, but is part of the jumper industry. Silly, nonsense requirements are found in
every segment of the horse world, as I’m about to tell you.)
By making a study of the market to which you will sell, you’ll be able
to identify a number of your own peculiar rules.
Since you are the one who will determine the potential in the yearling
to resell, you are the one required to work hard to find a buyer seeking that
potential.
In my case, I’ve made it easy on myself, again.
The potential I purchase is “flash”.
And the best “flash” I know of for a quick and very profitable resale is
the color GRAY. (BLACK, however is
quickly becoming a major color of choice.)
If the horse is gray, short, well-muscled, and not too clumsy, I’ll sell
him as a potential western horse. If the
horse is gray, tall, Thoroughbred looking, I’ll sell him as a potential English
horse.
Silly?
You bet. Make money? You bet.
No matter what else the horse is, if he
isn’t gray, I won’t buy him or her for a resale yearling.
Now you are saying, “It can’t be that simple.”
Let me assure you, with the resale yearling, it is.
There just isn’t any accounting for what a horse buyer will do. A future customer will tell you every detail
about the horse he or she wants. But in
the end, he or she will buy my gray horse—even if he is everything the customer
didn’t want. Don’t waste your time and
money trying to find the “exact” horse described by a customer. You’ll lose money every time. Buy potential desired by the market you have
chosen. The buyers are there.
All I ever sell in the resale-yearling is the potential flash of a gray
horse. I never tell the customer the
horse has the potential to do this or do that.
I say, “This is a really nice gray horse.” And then the customer tells me what potential
he or she sees in the horse. I just
agree. The buyer may never ask for gray,
and the buyer may never actually realize that the color is what sold the horse,
but that is all I have to sell, and that is what I sell. (Of course, I make a catalog page and show
the page to possible customers. It is
the customer who reads into the catalog page the potential he or she wants.)
I don’t look for a sophisticated buyer.
I don’t attempt to sell the person on the idea the horse is a potential
halter horse, or jumper, or dressage horse.
I sell yearlings and two-year-olds to people who fall in love with the
horse’s color.
If rule number one is deciding the potential you will sell, then rule
number two is: never deviate from that potential.
Suppose you decide you want to sell the potential of a halter
horse. If you’ve put forth any effort at
all, then you know something about the type of horse it takes to be a halter
horse within the breed you’ve chosen, and in your part of the country. You know what your market wants to buy. If you haven’t expended any effort to learn
your market, then you’ll need some luck and strict adherence to the other
rules.
So you purchase a horse with the potential to be a halter horse. You’ve followed all the rules to this point;
therefore, this horse has a catalog page to prove his potential as a halter
horse. And of course, you have written
out, or typed, the catalog page so you can show it to a customer, and so you
won’t forget to mention any of the horse’s potential when you are presenting
the horse for sale.
Have the catalog page with you at all times during the
presentation. Do not violate rule number
two by attempting to add anything to the horse’s potential. Say only, “This horse has the potential of
being a special halter horse.” Point out
the proof of potential on the catalog page, and then be quiet.
From that moment on, all you have to do is agree with the customer’s own
observations. If your customer wants to
add to the potential of the horse by suggesting the horse has a wonderful
disposition, or he might also pull a buggy, or that he sure looks as if he
could barrel race, you just smile, nod your head and keep your mouth tightly
closed. Don’t you dare attempt to add
anything more to the horse’s potential; if you do, you’ll probably lose the
sale and the opportunity for a big, big profit.
You really don’t know what the customer is looking for or likes other
than he wants a halter horse. You have a
potential halter horse for sale. You are
asking a lot of money for the horse because he has such “great potential” as a
halter horse. Anything else you may
suggest will most likely be the wrong thing.
I know, I’ve violated the rule.
Let the customer tell you what is good and what is bad about the horse.
If you don’t violate rule two, you won’t say the wrong thing, and then
much sooner, rather than later, someone will purchase the potential you are
offering, leaving you with a very nice return.
There are also some other guides, rather than rules, which can
facilitate the resale of a yearling or short two-year-old.
Price the horse no less than three times more than you paid for it. If you purchased it for $1,000, ask no less
than $3,000. A horse with the potential
you are suggesting must be valuable, not cheap.
You can always accept an offer.
Do not attempt to train the yearling which you plan to sell
immediately. You do not want the horse
to reach his potential. You want to sell
the potential. You do not want to know
how athletic the horse is, or what a pretty mover he is. What you don’t know won’t hurt you, and what
no one knows is the horse’s potential—the thing you are selling. In presenting the horse to the customer, do
everything possible to make the horse as attractive as you can. Groom the resale yearling until he shines
like a diamond. (You should never
present a diamond in the rough. A
customer may say he or she can see through the long hair and dirt, but neither
can.)
Bathe the resale yearling with shampoos and cost conditioners. Make sure he sparkles. Blanket the resale yearling according to weather
conditions so it is obvious to the customer that you recognize the potential of
the horse.
And be sure the resale yearling is gentle. Any customer coming to view the horse’s
potential should be able to touch the horse, walk around the horse and rub his
nose.
If you adhere to the rules and use the guides, resale yearlings and
young horses should bring you profits as quickly and as large as the examples
given in this chapter.
I purchased a gray yearling filly on the first evening of a five-day
sale. On the second day of the sale, a
gentleman approached me as I was longeing the filly in front of the shed
row. He know
what I had paid for the filly ($3,000) and he asked if I’d be interested in a
small profit.
Everything is for sale, I told him, and I asked what he would consider
giving for my filly.
He replied, “Thirty-five hundred.”
I handed him the lead shank and stuffed the cash in my pocket.
Now I didn’t price the horse at three times what I paid for her, but
then he know what I had paid. I didn’t suggest the filly was anything other
than what he saw—gray. I accepted a 16.6
per cent return on my investment.
If you could deposit $3,000 in the bank, and get 16.6 per cent interest
on your money at the end of one year you would consider it phenomenal. What do you consider a 16.6 per cent profit
in one day?
By the way, I asked my buyer why he was so interested in my filly.
“My wife wanted a gray horse, and I want to get back to
Don’t think that this sale was one of those lucky once-in-a-lifetime
things. I’ve done it many, many times
since.
A friend recently followed the “know your market” rules and purchased
“potential” in a sorrel filly. He paid
$750 for the filly, and priced her at $3,000, more than three times what he had
paid.
Aggressively talking to people in the market for the potential he had to
sell, he resold the filly in less than 30 days at the price he wanted.
His expenses were $108.
His return on investment was 282 per cent. (Income, less cost and
expenses, divided by the original investment.)
George makes his living by making two or three such deals a month, with
an occasional gray thrown in for bonus bucks.
Resale yearlings can make you a lot of money if you purchase potential
(which identifies your market), then resell that potential.
To do it, you must know and understand your market, go where the buyers
are, or bring the buyers to your horse.
The second way to profit, the yearling
or short two-year-old to be shown, then resold,
requires you do enough training to demonstrate the potential you are offering.
If you can’t do the training, or you don’t want
to do the training, then don’t select this avenue as the road to your
fortune. You will not turn a profit
paying someone else to train a show horse.
Trainers are making the profit if they are following the rules in a
later lesson.
Potential for the young show horse must be identified, polished, and
presented. Once named, you cannot change
it. (It’s a bad idea to change horses in
midstream, and I know, I’ve made the mistake.)
I’ve selected the following example for two reasons. First, because I had a lot of problems moving
this filly since she had a ringbone which discouraged many buyers. And second because this sale demonstrates
what can be done if you add a little creative thinking to a rather simple plan.
I purchased a two-year-old filly at a sale. Her cost was $1,200. For my money, I got a flashy, extremely
attractive, high-potential western pleasure horse with a high ringbone on the
right pastern. Without the ringbone, she
would have cost four times as much, which I never would have paid. (If I had been buying only potential I would
have paid the price—she had the potential—buy I buy facts too, and the fact was
she had the ringbone. Therefore I wasn’t
willing to invest too much in a high risk situation.) I was willing to gamble on the ringbone
because the filly had a great catalog page as a potential western pleasure
horse.
I don’t advocate that you buy horses with problems—they aren’t the type
of potential you want. But in this
filly’s case, she was not sore or lame, and I was confident I could keep her
sound during training.
With the performance horse, as with all others, you are selling
potential, never actualizing it. You
must have a plan and a goal for the horse, which includes selling the horse
long before you have to prove the horse’s potential.
Take your time with the show horse’s training, but don’t waste any time
in attempting to sell the horse. Start
selling the minute you own the horse.
Start training several days after you establish a specific plan and
goal.
With this filly, her training progressed nicely, but her sale seemed
almost impossible once buyers and veterinarians took a close look at the
ringbone, even though she was never unsound.
It surprised me a little. I
always believe “management” of problems was part of the game. Apparently is it not for a lot of people, so
a word to those who want to make money fast—don’t buy ‘obvious problems.’
If you have a problem, however, smile, manage it, and never get discouraged. There is always someone out there willing to
pay for the potential you are offering.
In this case, it took a year to find someone willing to accept the risk,
but not the entire risk.
I leased the filly. The lessee
was to pay $250 per month in a lease payment, plus pay the filly’s board and
training each month. I was to be the
trainer. I was to assume the cost of
shoeing the filly and the cost of her health care.
The lease holder was happy because she was protected, could stop
anytime, and would not be stuck with a lame horse. I was happy because the filly was now
producing an income in two ways—being trained and being leased. I was sure I could keep her relatively sound
as long as I was in control of her shoeing and her health care. In addition, I had some other
advantages—someone else was doing my work, (showing the potential of this great
western pleasure horse to possible buyers), and I still had the opportunity to
sell the horse at anytime.
The lease was in effect for about a year before I sold the filly to a
woman who had been trying to beat her at local schooling shows for more than
six months. Since the woman couldn’t
defeat the filly with the horse she had, she decided to purchase a winner, and
the potential for bigger and better things to come. (I never allowed the filly to be shown at a
big show where she might be beaten.)
The venture produced the following financial result: I paid $1,200 for the filly and had expenses
during the first year of $2,160 in board, $315 in shoeing and $200 in health
care. The total investment at the time
of the lease was $3,875.
I leased the filly for $250 per month, but still had $515 in expenses
for the year during the lease.
The filly produced an income of $3,000
from the lease, and sold for $2,500 for a total income of $5,500. The total expense, including her original
purchase price, was $4,390. The net
profit was $1,110. (To show the worst,
rather than best, the amount paid to me for one year to train the filly during
the lease was not included as income attributable to the sale of the horse.)
The return on the investment (income less cost and expenses, divided by
purchase price) was 92 per cent in two years, or 46 per cent per year.
If, as I do, you consider that a bad deal, then bad ain’t
too bad, and good is somewhere just ahead of fabulous.
The guide for making money with the young show horse is never, never, test the horse’s potential. (I never allowed the filly to be shown except
at schooling shows. The horse must
always appear to any prospective buyer to have even greater potential than what
they are seeing.)
Establish a performance goal, but sell before you reach it.
The young horse must be sold while he’s improving, in training, still a
potential champion.
The third money making method, yearlings purchased to race, then sell,
requires more training, more time, and more expense. The racing of a young horse is the riskiest
of all methods by which horses can make money.
It is also the single method by which you can become very wealthy
overnight. I’m talking about a lot of
money. And it has some tax ramifications
which will be discussed later.
Everything is relative. Since you can get very rich running young
horses, you must also be willing to carry some higher costs than normal, and
resign yourself to having less involvement than normal.
You will also have to follow more rules.
I can cite numerous examples of people making thousands of dollars
racing young horses. I can also point
out examples of people who have made hundreds of thousands of dollars racing
young horses.
Of course, for every positive example I offer, some guy will jump up and
scream about all the people who have lost their shirts trying to race young
horses. There’s no doubt about it. Thousands of people have lost money with race
horses. But the statistics aren’t nearly
as bad as some would have you believe.
And you can bet the big losers didn’t follow the rules.
The following figures are standard for the racing industry.
Only 2.58 per cent of foals ever win a stakes race. That’s almost 50 to 1 odds against the foal
succeeding and making you a millionaire.
(What are the odds of something else (Lotto) making you a millionaire?)
Fifteen per cent of racing foals never perform. Twenty per cent race, but never win.
Twenty-five per cent win, but not enough to pay for themselves. Another 15 per cent win and pay for
themselves, but do not warrant placement at stud or in the broodmare band.
Now here is the good news. Nearly
75 per cent of the young race horses don’t make money, but 25 per
cent do make money. And
the money they make is big money.
So you have one chance in four of hitting the big bucks. How full is the glass, not how empty?
And if you follow the rules, the chances are very good you won’t lose
much if you don’t pick a money maker the first time.
First guide: hire a trainer who has a good earning
percentage. (A high earning percentage
means the trainer earns money—first through fifth—almost every time he races a
horse. A good earning rate would be 50
per cent or above.) Total number of wins
during a racing meet is not necessarily a good earning percentage. That means that often the leading trainer in
total number of wins is not the trainer who has the best earning
percentage. You want a trainer who sends
horses out which earn money in nearly every race. And you want a trainer you
can work with and trust. Do some
investigative work, and talk with several of the best earning trainers before
you make a final decision.
A cheap trainer is not a good trainer.
If the trainer is cutting his or her prices, then some of the
necessities for the horse are being cut.
It can’t work any other way.
Guide number two: don’t change trainers if the horse isn’t
winning. Change horses.
There is no good financial reason for a good trainer to keep a horse
which can’t earn money. Only bad
trainers keep horses which are losers.
They want the owner to keep paying “day money.”
A good trainer will tell you to get rid of the horse if the horse can’t
earn a profit. A bad trainer will tell
you anything you want to hear, and keep presenting you with a bill. You’ll soon be very far in debt.
Listen to the trainer and get rid of the losers. Cut your losses and let your profits run.
Guide number three: if your horse doesn’t earn money within his
first two races, find a new horse.
Guide number four: purchase a horse with potential, but not at a
high price.
Remember the catalog page? You
are the buyer now, not the seller. You
are buying potential, buy you don’t want to pay for it.
Black type means the cost of the horse will sell high. That’s not what you want. A lot of winners (but without black type) in
the horse’s background means the horse has the potential to run, but currently
doesn’t have the high-priced sizzle.
That’s what you want.
A few years ago, six of the top 20 money-earning two-year-old Quarter
Horses were either traded or sold at auction.
These horses all had the catalog of potential, but didn’t command the
high prices mistakenly associated with big money winners.
Tolltac was traded for approximately
$5,700. He went on to win more than
$1,000,000 and was later valued at $4 million by having a half-interest
purchased at a price of $2 million.
Indigo Illusion was purchased as a yearling for $7,000. As a two-year-old, she earned $476,889. Face In The Crowd
was purchased for $4,800 and earned $428,761 as a two-year-old. Drop of Moon sold for $8,200 as a yearling
and earned $246,140 as a two-year-old.
Double Dutch Bus sold for $14,000 and earned $219,654, while Rise N High
was purchased for $6,500 and earned $210,000.
The other 14 top money earners were raced by their breeders, or sold at
private treaty, but that’s another lesson.
Guide number five: purchase young horses which are nominated to
major futurities and derbies. Original
nominations don’t cost much, but offer potential and can’t be replaced. Anyone can nominate almost any horse to a
futurity or derby. If not nominated by a
certain date, then there are penalties to pay for late entry, if late entry is
even possible. Futurity and derby
winning horses are not necessarily the fastest horses around, but they were
nominated and are eligible to run.
If a horse is not nominated or supplemented to the race, it doesn’t
matter how fast he is; the horse can’t win big money futurities or derbies if
he isn’t in them. The same, of course,
applies to show horse futurities.
Guide number six: purchase horses bred in the state in which you
race. State-bred races normally carry
extra purse money. That means you earn
more for doing the same amount of work.
Guide number seven: race your horse at the level at which he can
win. It is not profitable to race a
horse against competition he can’t beat.
No horse can make money for you if you refuse to let him earn. If someone claims your
horse while he is winning, so much the better. You now have another chance to go for the
million dollar winner.
The absolute rule of making money in racing: win races
and sell horses. Having a
horse claimed is the same as selling the horse.
Still skeptical about making money racing young
horses?
Let me put it bluntly. It’s
risky. But one in four will earn
money. That one could be yours.
In the meantime, so you won’t be hurt financially, do the following
things:
1. Sell any and every time there is a
profit. You’ll never lose money taking a
profit.
2. Let your profit making horses run where
they can continue to win and produce
income.
3. Don’t keep a horse that is losing
money. Evaluate every three months. Lose money
three months
in a row, the horse has to go.
Now look around at those who are whining about having lost money on race
horses. It’s a certainty that they
violated one or more of the rules and guides to profits.
Yearlings and early two-year-olds offer three sure ways to turn profits,
but each method involves the eventual selling of the horse.
Some of the horses you own will turn out to be great show horses, some
will be terrific race horses, and some will just be nice horses to be
around. But, you can’t keep them no
matter how wonderful they are. If you
want horses to make money for you, you must sell them when their potential is
high.