The Business of Making Money with Horses
Introduction
Horses can make you a lot of money.
You can make a good living with horses, raise a family, get the kids advanced
and specialized education, and even provide a nice nest egg for retirement.
In fact, horses can make you rich,
financially, and in lifestyle.
That isn’t wishful thinking or a crazy claim made just to get your
attention. It’s a fact.
And if the opportunities for making money with horses were good last
year, they are even better this year. It
used to be the value of a horse was determined by the “work” he could
produce. Then in the late 1970s and
early 80s his value was determined by the “pyramid schemes designed to avoid
giving dollars to the tax man.” Both
methods met their demise in the late 1980s, and the price of horses plummeted.
By the early 1990s, the horse’s value was based on a new standard. Then and now, the value of the horse is based
on how much someone is willing to pay for the “potential” a particular horse
has to satisfy that someone’s desire. A
horse is worth what the potential buyer is willing to pay. There are no other criteria.
There is no limit on the price of a
horse. What the market will pay today is
the price of the horse today. Increase
the horse’s real or perceived potential and the price of the horse will be
higher tomorrow.
If you like horses, or a particular horse business, either can make
money for you. And if that is what you
want, then this course is for you.
This course is all about the business of horses and how they can make
money, profits, income.
This course isn’t a long or complicated one. Running a successful business isn’t all that
complicated and making money certainly isn’t complicated. Lengthy explanations aren’t necessary. What is necessary is a simple understanding
of the profit opportunities, a business idea, your commitment and a willingness
to make adjustments and changes as needed.
These are the same factors required to make money in any business.
There are a lot of statistics in this course. While the statistics are facts, they do get
outdated. Don’t view the statistics as
absolute; view them as guides to profit opportunities. Use the guide which applies to your situation
and then apply some of the business principles presented. Realize statistics change daily and principles
must be applied to new circumstances. If
you do some updating now and then, and review the present business climate
you’ll see new and better opportunities for making money.
It doesn’t really matter what breed of horse you fancy. You can make money with any breed. It doesn’t matter the age or the sex of the
horses. There is a way to make money
with stallions, mares, weanlings, yearlings and older horses.
Are there risks? Of course. There are risks to everything. The only certainty is uncertainty. But the risks become inconsequential if you
choose to accept the uncertainty and give up any desire for the impossible
notion of security. You are an entrepreneur,
a sole proprietor, a business owner. The
greatest failure is in never trying.
As with every other investment venture, making money with horses will
take some work, knowledge, skill, self-control and thought. Along the way there will be some heartache
and some disappointment, but there will be just as many joys and big
profits—30, 40, 50 or 100 per cent return on investments in weeks, months, or
less than a year. That’s common. A 300, 400 or 500 per cent return is not
uncommon!
It is simple. Horses can make you
money this year, and even more next year, because horse are an exciting,
fast-moving, personal involvement, open to anyone business.
But there are some business principles and horse business rules which
must be followed. Some are hard and some
are not so hard. If you let emotion
influence your decisions, or you think you can ignore or violate any of the
principles or rules, forget about making money.
The first rule is: choose what you like best and stick with it. As a business principle it is known as “doing
one thing and doing it very well.”
Sounds easy enough, but it is very hard.
The first big mistake most new business people make is trying to sell
everything and anything to everyone and anyone.
When you don’t concentrate on doing well the one thing you have decided
to do, you’ll know it. There will be a
lot of red ink on your ledger sheet.
(You’ll learn about ledger sheets in Lesson 10.)
If you love horses and you want to make them your life’s work, that’s a
richness you’ll have forever. If you
love horses and want to make them your business and you follow the rules and
principles of this course, horses can make you a lot of money.
The Business of Making Money with Horses
By
Don Blazer
Copyright
© 2002
Lesson
one
What is the business of making money
with horses?
Business is one’s work; occupation or
profession.
Making money is turning a profit, producing an income, creating a
positive return on investment.
To be very successful, financially and in lifestyle, one should be
passionate about his or her business—which is relatively easy if you are
already passionate about horses and horses are going to be your business.
This course is specifically about making money with horses. The business principles expressed apply
equally well to businesses associated with horses, as do many of the marketing
concepts. However, while this course
will certainly assist the student with the development of an associated
business, it is not intended to be a general business course. This course deals directly with horses and
horse businesses: ultimately the buying and selling of horses.
There are only three ways for a horse business to make money: provide a
service, win prize money and then sell the horse, or sell horses.
If you immediately recognized each requires “selling” of some sort, you
are well on your way to becoming a successful business person. (Even if you are standing a stallion, or
training horses, which are “services for sale,” you are involved in “selling”.)
The first step to establishing your horse business is to change the way
you think about horses. Since a business
is one’s work, occupation, profession, it is definitely not one’s hobby, and
horses can no longer be treated as such.
The Internal Revenue Service’s definition of business is a good guide
for you to follow: business is activity
directed by the intent to make a profit.
If you can demonstrate that your activity with horses is directed by the
intent to make a profit, you are in business.
No matter what you choose to do with horses, choose to do it with one
purpose in mind—making money. Now you
have a business. (You can still have a
personal horse; that’s one of the benefits of owning your own business; but all
other horses must be part of your business.
Therefore, every horse other than your personal horse is “for sale”.)
This course deals with the businesses of pinhooking (buying at one sale or
privately and selling at another sale or privately), selling yearlings and
two-year-olds, claiming and racing horses, breeding and broodmares, standing a stallion, and training horses for
others.
Make a commitment to go into business, and commit yourself to being
successful. Most new business ventures
fail within months, not because they were a bad idea, were poorly planned, or
were cash poor. They fail in those early
months because the owner lacked commitment.
You may choose to do one of the things covered in this course, or you
may choose any of many other “horse businesses.” In any case, the next few steps are almost
mandatory if your business is to be successful.
In choosing your business, the best advice I can offer is: choose to do
what you love doing most. The common
horse-business choices are “training and riding horses, raising baby horses,
teaching others how to ride.” Is one of
those things actually what you love most doing with horses, or is it your first
“recreational” choice? Self examination
is required here; to be in business your activity must be directed by the
intent to make a profit, and you must be committed to making it successful.
Maybe this step will help to clarify things for you.
Write a single sentence which defines exactly what it is your business
offers customers. For example, Success
Is Easy is a business which provides online horse courses, how-to horse
training and health care books, informational booklets on specific horse topics
and a business-help newsletter. That is
an overview of Success Is Easy. Now
write a single sentence which we’ll call the company’s “mission statement.” For example, Success is Easy provides
business and horse training information which results in money-making
successes.
Now it’s your turn. Write a
sentence which defines exactly what it is your business will offer your
customers. From that definition, write a
mission statement for your company.
Now make a list of all the things you would like to do in your business,
or are doing in your business. Then
start to eliminate some of the things which are not your most favorite things
to do, and start to prioritize the things you like doing best. When your prioritized list is complete,
eliminate all except your favorite horse business (not recreational) activity.
Write a single sentence which expresses the benefits your company will
provide potential customers? When you
have written that sentence, you will have a generalized marketing plan.
Write down your greatest personal asset which will make achievement of
your business purpose a reality.
Let’s use the following as an example
for a business.
What is the business going to offer customers? The business is going to offer the
opportunity to purchase yearlings which have the potential to be good show
horses.
From that answer we must develop a mission statement. Let’s try this: to provide yearlings with high potential for
showing success based on specific pedigrees.
Make a list of things you like to do which relate to your business and
refine the list until you arrive at your favorite thing to do. Let’s say your favorite thing to do is select
young horses from farms based on what you think their performance potential is.
With your favorite activity in mind, and your mission statement as a
guide, write the benefits your business will offer potential customers.
For example: The opportunity to
purchase pre-selected yearlings with the potential for success.
And what is your greatest personal asset which can help make your
benefit offer a reality? It could be
your ability to relate form to function; in other words, you are very good at
selecting the conformation which produces the kind of movement needed to win a
specific event.
With your expert selection of conformation and your study and selection
of pedigrees with potential, your potential customers are going to enjoy the
benefits of success.
You have now accomplished more than most who start a business. You have established an overview of your
business which you have refined into your business “mission statement.” In addition you have identified your greatest
personal asset—which is the strength of your business, and you have defined
your marketing program direction by stating the “potential you will offer to
satisfy customer desires.”
It’s now time to formalize your business.
There are basically four types of
businesses. There is the sole
proprietorship, the partnership, the limited liability company and the
corporation.
The sole proprietorship allows you the most freedom, but also places all
the burdens on your shoulders. You can,
of course, hire employees or contract for services which will reduce your work
load. But ultimately, in the sole
proprietorship, everything and anything becomes your responsibility.
Knowing that, I still recommend it as the best choice for starting a
small, home-based business.
Partnerships seem attractive since you are not alone in the business
world, and generally your partner or partners bring certain expertise into the
business. Sometimes your partner or
partners will also contribute start-up capital.
If you feel you cannot handle all the work required in your envisioned
business, then finding a partner may be the answer. For example, you may want to start a training
business, but you only ride western. You
recognize there is also a big demand for English training in your area. A partner with English training expertise may
be the needed ingredient for success.
Keep in mind, however, partners do not always think the same way, do not
always have the same work ethic, and do not always have the same attitude
toward finances. If you plan on a
partnership, be prepared for compromises.
As I mentioned earlier, most new businesses fail for one simple reason: lack
of commitment on the part of the owner.
Owning a business is a 24/7 proposition.
It is a 365-day per year obligation.
Its life, its vitality, its success depends on you, and you alone. Partners must be equally committed, or
problems develop.
Limited liability companies are allowed in a number of states. The idea behind them is to offer smaller
firms some of the tax and liability protection afforded corporations, but
without formal incorporation. If you are
interested in a limited liability company, check with your state corporation
department.
Corporations enjoy tax advantages—if they are producing enough
income—and most notably protect the principles from liability of debts or
lawsuits. It is called the corporate
shield, and in the case of most small businesses it is much more expensive than
its value.
Once you have decided on the type of business you want, have written
your mission statement and have a pretty specific idea as to how you will
market your product or services, you are ready to turn your attention to
physical considerations.
What are you going to call your business? It is a good idea to have a name for your
business even if you are a sole proprietorship.
Having a business name is a way to remind potential customers that your
services are available. And having a
name for your company makes it easier to separate business and personal
matters. If you decide on a business
name, then you will want to register it with your state government. Doing so is the establishment of a
“fictitious name” and must be accomplished if you want to have a business bank
account in that name.
It is a good idea to keep business money and personal money separate, so
you’ll need two checking accounts.
Business bank accounts usually have a monthly service fee. Be sure to pick a bank which offers plenty of
services for the monthly fees they charge.
You may or may not want to have an additional authorized signature on
the business account.
In addition to a fictitious name, you
will most likely need a resale license, or state tax number. You can secure the number usually from the
state department of revenue. Having a
resale number allows you to buy products (includes horses in most states)
without paying sales tax. At the time
you resell the merchandise, you will have to collect tax and you will have to
file reports and make sales tax deposits with the state.
Learn the history of the business you have chosen. This will help you decide on a location for
your business. You want to be in an area
where similar businesses have flourished.
If you want to deal with jumpers, be sure you locate in an area known
for jumping horses. Don’t go to an area
where all they do is ride western cow horses.
If you want to deal in racing Quarter Horses, don’t locate in an area
which has no Quarter Horse racing. When
possible, always choose to locate in an area where what you want to do is also
the most popular horse activity.
Before making any purchases of property or rental agreements be sure you
have checked and rechecked all zoning laws and ordinances which might limit
your business activities. Most cities
and counties have strict limits on the number of horses allowed on specific
land sizes. Be sure you can expand your
business and still remain in compliance with zoning regulations.
The next step is identifying specifically your potential customers. This may be easiest by refining you business
to the point of establishing a “niche” for yourself.
Let’s go back to our business example.
You want to offer pre-selected yearlings with a high potential for
success.
Establishing a niche requires that you get much more specific. You will want to select a breed. Select the breed you like most and will enjoy
studying the most. (You can learn a lot
about a lot of breeds, but to become an expert, you’ll need to direct all your
attention to a single breed.) For
example, you select Quarter Horses. Now
you want to be even more specific. You
want to offer pre-selected “reining” Quarter Horses. To be even more specific you want to offer
pre-selected “reining” Quarter Horses with pedigrees which suggest they will be
successful early. Now refine it even more. You want to offer pre-selected reining
Quarter Horses with pedigrees which suggest early (futurity) winners and at a
price less than $25,000.
Once you establish yourself as the person who offers that potential, you
will be “recognizable” rather than just visible, and people will seek you out
when they want your product. That
philosophy should be the foundation to your overall marketing plan for it
specifically identifies your potential clients.
Knowing who your clients are makes it easy to find them and tell them
about the “potential” your business has to satisfy their desires.
From the establishment of your business niche, you can write a business
plan.
Business plans are a guide—nothing more.
While it is nice to go through the process of writing a business plan,
their greatest value is usually in seeking financing.
In my opinion, the positives for a business plan are few since they are
totally conjecture. They are based on
what you would like to happen, or hope will happen, or project, based on
limited facts, you expect will happen.
Most of the time business plans create problems by being too restrictive
and discouraging change. In other words,
too much effort is made attempting to adhere to the plan.
Taking action is one of the most important steps to assuring a
successful business operation. When you
take action, you will discover areas of your business which need change, and
need change immediately. With the need
for change, the business plan is no longer relevant. When things are not working as planned, don’t
be afraid to change; changing to meet market needs is a necessary element for
success.
The business plan can be helpful if you use it to you assist in
identifying potential customers, selecting methods for communicating with those
customers and in evaluating customer satisfaction.
The business plan is a virtual requirement if you are going to seek
financial assistance from individuals or loans from banks or governmental
programs. Outside financial sources will
have little knowledge of your business, so they tend to rely on presentation
projections—the business plan.
A business plan is usually presented
in the following format:
BUSINESS—NAME, ADDRESS, PHONE, WEBSITE, E-MAIL
PRINCIPAL OR PARTNERS
TYPE OF BUSINESS
MISSION STATEMENT
General Goals (Plan for Profitability)
MARKETING STRATEGIES
FINANCIAL REPORTS AND PLANS
START-UP COSTS
PROJECTED ANNUAL INCOME/EXPENSES
CURRENT BALANCE SHEET
PERSONAL BALANCE SHEET
Most good business advisors will suggest you do not borrow money to
start a business. (Borrowing money to
expand an existing successful business is always good business. Borrowing money has tax advantages and can be
a very good way to expand and grow profitability. But there is always a price to be paid when
securing loans and you want to be quite confident you can earn a greater return
on the money than the cost of the money.)
Remember: lack of commitment is the number one reason for early business
failures. When you have plenty of
“backup money” or “start-up” money, there is no necessity for “making sales
now, earning profits now”, and that removes any urgency for success. Without the desire to succeed now, commitment
to the overall success of the company is reduced. Most home-based businesses fail because one
member of the family continues to bring in outside money to satisfy family
needs. With needs satisfied, the person
working on the new business simply doesn’t have a requirement to succeed. In a short period of time the commitment to succeed
is reduced and the new business simply slides by the wayside, or falls into the
“hobby” status.
If you think you need financial or business development assistance you
can contact:
The Small Business Administration (SBA) at www.sba.gov. The SBA provides loans, counseling and the
latest news on laws and regulations affecting small business.
Small Business Tax Education Program (STEP) is a partnership between the
Internal Revenue Service and local organizations to provide help with business
start-up, record keeping and taxes.
The Internal Revenue Service (IRS) provides tax guide publications for
small business owners and self-employed individuals. The IRS may be reached at 1-800-829-1040 or
at www.irs.gov.
A very simple bookkeeping system makes up the last lesson of this
course. Using the bookkeeping system
along with SBA and IRS forms and assistance will help move your business toward
profitability.
A final consideration for your business will be insurance.
Many states have equine-activity liability laws which can be helpful in
protecting you from losing a law-suit.
(No laws protect you from being sued.)
Regardless of the laws, if you deal in horses you will always have some
liability exposure.
Liability insurance will not keep you from being sued, but can help you
financially. If you are sued, your
insurance company will not want to pay the claim and therefore will provide legal
assistance. Not having to hire an
attorney gives you some immediate financial protection.
The amount of protection your policy affords is your second financial
safeguard. Evaluate your exposure—are
you taking your horse into large crowds of people who have no horse
experience? If so, your exposure is
high. If you are simply reselling your
horses at sales, your exposure is much lower.
Understanding your exposure will help you decide the safe guards you
need to put into place, and how much coverage in dollars you need.
If you are doing business in a state which has equine-activity liability
laws, then premiums may be lower than in other states. In any case, always get quotes from at least
three companies. Keep in mind an insurance
company is only as good at its service and payoffs. Insurance companies are rated, so go with one
which has earned an “A”.
If you are buying at sales or shipping horses long distances for any
reason, always purchase a “travel” or “mortality” policy. Horses get hurt and sick traveling. The policy can be very short-term—the length
of the travel time or a couple of weeks beyond the end of the trip. When moving horses, it is a good idea to be
prepared.
Long term mortality insurance is generally much too expensive in
relationship to the replacement cost of the horse. However, if you are syndicating mares or
stallions, or you are dealing in very high priced horses, consider mortality
insurance.