The Business of Making Money with Horses
By
Don Blazer, taught by Eleanor Blazer
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.
There
is no assignment.