The last thing on the mind of most people in a horse business, or considering starting one, is business management and the business management discipline required to be successful. Hopefully, I can convince you why business management should be at the top of your list. The business management discipline component is your responsibility. Business management discipline is mostly acquired and the majority of us need to work at it every day!
The failure of most horse businesses can be attributed to the absence of good business management and not using a business management system to help them anticipate, track and measure their business. Recordkeeping and accounting systems are not management. They record history. They record what you have already done and what you have already spent! However, purchasing a good business management system will not help unless you have the discipline to maintain it and use it!
Now I have your attention let’s break a horse business down into three simple principles
Marketing and Sales: No customers, no business.
Income and Expenses: It’s not what you make, it’s what you keep.
Business Management: If you can’t measure it, you can’t manage it.
Most horse businesses start from a love affair with horses. That isn’t a bad thing as long as you don’t let your heart dominate your business decisions. Don’t get me wrong – if you are in a horse business or plan to start one, your love of horses had better be on the same level as your aptitude for the type of horse business you are in or planning. Most horse businesses require putting in long hard days, and business management is not always at the top of your ‘things to do’ list at the end of a long hard day. Too often the only reward in a horse business is the nicker when you walk by a stall or the peaceful munching of hay when you turn out the barn lights. Unfortunately, in today’s business environment too many horse businesses are sustained by that love affair even when their financials tell them they should ‘fold the tent’. When the money is gone it is a ‘lose – lose’, you lose and the horses lose. Don’t let it get there.
If you are in any business there are an incredible number of things to think about and a horse business is no different. In fact, there are way too many things to list in a short article – so I will try to make it as simple as possible and still add value. The majority of horse businesses are service businesses – boarding stables, equestrian centers, training facilities, lesson facilities, or a combination.
I haven’t forgotten horse breeders – I am one. Horse breeders are essential to all horse businesses – no horses, no horse businesses. But, they are not a service business. They are a manufacturing business. I wouldn’t say a horse breeding business is any more or less difficult to operate, but it does have its own market and operating challenges. A simple example is cash flow. Cash flow in a boarding, training or lesson business is much more predictable than it is in a breeding business. Cash planning and the use of cash are important in both businesses, but critical in a breeding business because of unpredictable sales. Cash is king in all horse businesses! Don’t run out of cash!
The majority of horse businesses today are recreational businesses. If you are in a horse business you are not just competing against other horse businesses in your market segment, you are competing against completely different businesses that are in totally different recreational markets. You are competing for the recreational dollar – do I go skiing in Aspen for a week, or do I buy a new ski boat, or do I buy a horse, or do I put my horse in training and show it.
When people decide to purchase a horse they often have no idea as to the responsibility they have accepted. And, heaven forbid we should tell them and lose a sale. But I suggest, if you love horses you will tell them by educating them, and in the long run you will get more sales as a result. Word-of-mouth is a powerful part of sales in any business. Likeness begets likeness and people associate with people of like interests. So, make sure that what people are saying about your business is all ‘Good’. THE PLACE to stable or purchase a horse!
It all starts with being a responsive business owner, and by being responsive you can start to differentiate your business from other similar businesses and capture more of that elusive recreational dollar. There is no doubt that that the economy is still weak and recovering slower than we would like. It will probably never be the same for many industries and their markets due to increasing global influences. The recreational dollar has not only shrunk, it is more informed and spent more wisely. But, in these challenging economic times the business owners who are willing to change the way they do business can create their own economic stimulus by being smarter; more organized, more efficient and business disciplined. The use of business tools like a business management system will free up more time and let you know where you stand financially (cash) so you can spend that time and invest in gaining and sustaining a competitive edge. In fact, the current economic environment provides an excellent opportunity to get your business right sided and emerge a much better business with the potential to continue to gain market share going forward.
Remember, I said the last thing on a business owner’s mind is business management. Unfortunately, this is the norm in the world of horses – and you know I am right. I have taught equine business at Colorado State University and I have seen it all and heard all the excuses. I say, business management should be at the top, and maybe the first thing. Why? Because business isn’t about having fun, it is about having fun making money.Business success isn’t about the easy decisions; it is about the difficult decisions. If you want to attract more customers, or improve your facility, or get another lesson horse it takes money. If you don’t have a good business management system and don’t have the required business discipline you probably don’t have a clue as to the demands on your cash or even if you have any cash.
As I have said many times before, accounting systems only record financial transactions. They track how you ‘spent’ your money. They don’t manage your money and therefore, they don’t assist you in making good business decisions without a lot of external analysis – more work, more time, and more chances for mistakes. I have never seen an accounting system that tells you how much it cost to keep a horse without using several additional spreadsheets.
Do you have the time and enjoy making spreadsheets and duplicating entries? Fact – the average person makes an error every 300 keystrokes!
A good business management system will do your accounting and tell you how much it cost to keep a horse without you having to leave the system or spend any additional time and resources.
I wince when I hear horse business owners tell me they just give their information to their accountant. Then I wince again when they tell me they only need to keep track of vaccinations, deworming, the farrier, and invoice their customers. The blank stare is disappointing when I ask them if the invoice is profitable and generating positive cash flow. At the risk of generalizing, their accountant is probably afraid of horses, never mucked a stall and doesn’t have a clue about running a horse business. But, they can make financial transactions add up and balance. I am still not sure what value that adds to a business.
If you apply for a loan, your banker is only interested in your balance sheet and your cash flow – do you have enough liquid assets to secure the loan and do you have enough cash flow each month to make the payment. Your banker has probably never mucked a stall either! They judge you as a business manager! Be a good one!
I call running your horse business with an accounting system ‘Checkbook Management’ – I’ve got checks, I must have money. A good business management system will do your accounting, but will also provide you with financial analysis and projections to assist you in making good business decisions! You should know your business better than anyone else and therefore, you should know how to run it better than anyone else. You just need a business management system that frees up your time and is your assistant business manager so you can do what you do best!
There is some truth to the aphorism that it cost ten times more to get a new customer than it does to keep the one you have. That cost ratio is probably less today considering the computer technology, software applications, email and social networks available, but it is still a higher cost to get a new customer.
A big part of getting new customers is developing trust and establishing an aura of expertise. People new to owning a horse or having a horse trained, etc., need to be assured that you as the horse or service provider know what you are talking about. Potential customers generally don’t make decisions quickly – and they shouldn’t. Therefore, you need to be able to send a potential customer away with literature or something that reinforces what your business offers, the benefits of horse ownership, and your horse and business expertise. You can easily do this yourself at a very reasonable cost using your business computer and some reasonably priced software. If you can’t do it, or don’t have the time, get a young university student to do it for you – just make sure they are a horse lover. By-the-way, equine science students are excellent help at a very reasonable cost. They love horses and they want to be around them. Their enthusiasm will elevate the excitement around your business and that certainly doesn’t hurt potential sales!
A business management system plays a role in your sales process by scheduling appointments and managing your follow up (contact management). Potential customers associate your attention to detail and interest in them with how you are going to take care of their horse. Don’t drop the ball!
Your facility doesn’t have to be an equestrian estate. But, it does need to be safe and clean with the look of good management. This doesn’t only apply to potential customers; it applies to keeping your current customers. A good management system will give you the reports you should neatly post for everyone to view. After all, a good management system has all the information stored in its database. Save time and money and use it to your advantage. The reports might include a horse’s information posted on its stall, its pedigree, its nutrition plan and feeding schedule, its preventative care schedule and how much bedding it gets. There should be general barn reports neatly posted that show training, lesson, farrier and veterinarian schedules to name a few. Simple things like this will give you a competitive advantage at no additional expense. It is all free if you have the ‘right’ business management system.
Nutrition and Feeding Schedule
I have often heard that if we were bigger we could compete with the ‘big guys’. This is an unsubstantiated myth and often an excuse. Bigger has its own set of business challenges. Stop and think about the overhead, variable cost and inefficiencies the ‘big guys’ have to deal with every day. To compete with the ‘big guy’ you only have to be better, and being smaller makes it easier to be better. Granted, you have to have enough cash positive revenue to cover your overhead.
There are many successful ‘boutique’ horse businesses. Small gives you the opportunity to be unique and attract the cliental that are willing to pay for unique and special treatment. If you are small you can utilize your assets more efficiently, control your overhead better and pay more attention to your customers. A business management system will let you know how your overhead is affected and any change in your breakeven if you add another horse or lose a customer. Think about this – what if you add a horse and have to add additional barn help, but you only need 25% more barn help. Unfortunately, people don’t come in 25% slices. A business management system will help you make the right decision. Do you have your barn help work a little overtime at a higher wage and reduce your operating margin or do you add the additional barn help and add some additional services to generate more revenue to cover the added expense at your current operating margin? Bigger isn’t better, best is better!
The following is an example how a good management system can save you time while assisting you in managing your horse business. In this example we will purchase a vaccine. This purchase will take the person entering the information less than a minute while providing all the forecast, tracking, measurement and report information you need to be a good manager!
When you purchase the vaccine all the item, supplier, and expense ledgers are updated automatically. The vaccine’s expiration date and lot number are tracked and reported. The vaccine is added to inventory and the vaccine’s stocking level is automatically adjusted and the repurchase reminder is reset. The breeding department is charged the expense and the cost for each horse that is vaccinated is tracked and reported. The financial accounts are identified. The credit card balance is displayed and increased while its available balance is decreased automatically. The receipt can be stored for recall if necessary. All this is accomplished with a few dropdown selections, button ‘clicks’ and minimal text entries.
Vaccine Purchase and Vaccination Process
I could provide several more examples, but I think this gives you something to think about. I don’t mean to imply that running a horse business is easy and a good business management system will solve all your problems, but it will sure help. Believe me I know running a horse business isn’t easy. I live it every day. There is nothing like an ‘MBA in horse business management by baptism of fire’. A well respected business associate once told me, ‘there is nothing like hanging to sharpen the mind’.
Uunderlying the success of any horse business and the management system you chose is your commitment to keep your system current and use the information it provides to assist you in making good business decisions. Believe me; you need a horse business management system! But, purchasing one if you do not have the ‘business discipline’ to keep it current and use it is a bad business decision, and probably not the management system’s fault!
To be successful in a horse business does not require a finance education, but it does require business discipline and an understanding of what your financials are telling you. This understanding will enable you to make better business decisions. A good Horse Business Management System will do the calculations for you and analyze and report the results with comments or suggestions. A good Horse Business Management System will save you valuable time you can then use to improve your business. I encourage you to investigate how equineGenie not only helps you manage and care for your horses and manage your business operations and support your customers, but helps you be financially successful.
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Happy Trails, Good Management and Business Discipline Always!
Bob Valentine, Ph.D. President GenieCo, Inc. Box 271924 Ft. Collins, CO 80527 970.682.2645 or 970.231.1455 firstname.lastname@example.org
Dr. Valentine taught Equine Business Management to graduating seniors in the Equine Science Department at Colorado State University. He has been involved in the horse business for too long. If you have any questions, you can reach Bob at email@example.com, or call him at 970.682.2645 or 970.231.1455 (mobile).