![](https://assets.isu.pub/document-structure/200814100617-6e0da0b44ed8fbac6aa8a6a768b7f663/v1/5c65807362a755c7a3e2353fd957f387.jpg?width=720&quality=85%2C50)
4 minute read
Do You Know The Two Things Profitable Horse Business Owners Have?
By Doug Emerson The Profitable Horseman
The following story about my experience as a loan officer in a previous career is a good example for keeping good financial records. Seated at the kitchen table with a couple who ran a small dairy farm, I was taking a loan application to build a storage building for farm equipment. The couple was tired of seeing their farm equipment rust and deteriorate when left outside exposed to the weather. I agreed protection of expensive farm equipment is a sound business practice.
I explained to the couple decisions on loan approvals are largely based on the repayment ability of the borrower. When asked about the farm’s record keeping system and profitability, the farmer pointed to his wife and said, “I milk the cows, she does the books.”
At that point she reached up to the top shelf of a kitchen cupboard and retrieved a shoe box crammed full of paper receipts and a hand written check register. A bit surprised, I asked how they knew what their profitability was.
“Simple, once a year we take the shoe box and check register to the tax guy in town and he tells us how much tax we owe…”
They didn’t get their loan request approved.
Business record keeping for most horse business owners is a tedious task. When left up to the business owner, it’s often listed as the last thing to do and then ignored. For most people, record keeping and watching paint dry share the same level of excitement.
If you’re busy in your business, hire a bookkeeper to do the entry work. You’ll make more money giving riding lessons than you will tapping a keyboard entering data. Use accounting software for your business. For the most basic record keeping, programs like: QuickBooks, FreshBooks and other general small business software will serve you well. For those who need more detailed business information, check out the specialized equine software available today.
However, while it’s advantageous to delegate bookkeeping tasks, no business owner should ignore the reports generated by their record keeping software. Up to date financial information allows you to check sales and profitability year-round. While living in the moment is sound advice for a healthy mental attitude, a healthy financial attitude includes living in the future.
Accurate projection of income and expenses with current financial information is a must when applying for a loan, making capital investment decisions and dealing with economic downturns like recession and Covid 19. Guessing may result in financial disaster.
Here is an example why having accurate and timely business information from your electronic record keeping system helps your financial decision making.
You are considering purchasing a lesson horse. Ben, a 12 year old horse, needs a rider with intermediate skills. Ben is offered for sale to you at $3500 and you expect him to be a lesson horse for 5 years.
Is Ben a good purchase for your lesson program?
Depreciation Ignoring the possibility Ben may have a resale value when he is retired from the lesson program; the straight line depreciation over 5 years for him is $700 per year. ($3,500 divided by 5 years)
Annual Maintenance This includes trim and shoes, normal veterinary expense, grooming, blankets and halters, special feed supplements, applicable insurance, etc., plus hay, grain, bedding and labor for normal care.
Opportunity Cost If Ben occupies a stall that could be occupied by a “paying” boarded horse, the profit that would have been generated after boarding expenses is also an expense of Ben the lesson horse.
The key to analyze the contribution to profit generated by each of your lesson horses is to track how many lessons each is used for each month and annually.
Your electronic records tell you: 1. “Ben” depreciates at $700 per year. 2. Annual maintenance totals $3,040 per year. 3. Lost profit from a boarder stall is $1,200 per year.
4. The total expense for Ben will be $4,940 per year or $412 per month, minimum.
Ben requires an intermediate rider and with your current student mix he will get an average of 6 lessons per week at $35 each for $210 income.
He costs $103 a week ($412 divided by 4). The difference between weekly lesson income generated and carrying costs is $107.
Your return to pay yourself for the week or an instructor is $107 divided by 6 which is $17.83 per lesson.
Unless you can average more lesson rides per week, purchasing Ben leaves a very small margin of profitability.
As you can see, good electronic records will allow you to calculate your combined carrying costs quickly and make informed decisions on purchases. The alternative of pulling out the shoebox and guessing is risky business.
For a profitable horse business, two things you need to have at your service are a bookkeeper and an electronic record system.
About the author: Doug Emerson, the Profitable Horseman, consults, writes and speaks about the horse business. He publishes a free electronic newsletter about making money with horses. Visit www.ProfitableHorseman.comto subscribe.
Revolutionary Coach to Rider Communication
![](https://assets.isu.pub/document-structure/200814100617-6e0da0b44ed8fbac6aa8a6a768b7f663/v1/1d48bd287f2ddc79046f8dfcb81bb75e.jpg?width=720&quality=85%2C50)
![](https://assets.isu.pub/document-structure/200814100617-6e0da0b44ed8fbac6aa8a6a768b7f663/v1/bb89604d222547790a78819e4e96a054.jpg?width=720&quality=85%2C50)
![](https://assets.isu.pub/document-structure/200814100617-6e0da0b44ed8fbac6aa8a6a768b7f663/v1/77f5fdc04ca6ae0971dedfa07e12abd0.jpg?width=720&quality=85%2C50)
![](https://assets.isu.pub/document-structure/200814100617-6e0da0b44ed8fbac6aa8a6a768b7f663/v1/a672eae639934bb68337dcccef47e775.jpg?width=720&quality=85%2C50)
www.eartec.com 800.399.5994
C o m p l e t e S e t O n l y $ 3 5 0
![](https://assets.isu.pub/document-structure/200814100617-6e0da0b44ed8fbac6aa8a6a768b7f663/v1/a55e94d208b28aace64e88aef5f3281d.jpg?width=720&quality=85%2C50)