What to charge is the most important financial decision you need to make if you are in the horse boarding business. If you get it wrong, you won’t be boarding horses very long. If your price is too high, you won’t have enough customers to make money. If your price is too low, you will lose money and burn through all your cash.
There are many types of horse boarding; stall only, stall with full care, stall with a run, paddock, pasture, etc. There are many expenses, direct and indirect, variable and unpredictable, associated with each type of board. Setting the right charge will vary with each type of board. The direct cost associated with boarding a horse is reasonably easy to figure out. It is done for you if you use equineGenie. The indirect expense is a little more challenging, but also easier if you use equineGenie. Variable expenses can be decision based, but unpredictable expense is what it says, unpredictable.
The direct cost is a horse's feed and care supplies, which are easy to determine and manage. We will use stall board with full care as an example. Stall board with full care is one of the most expensive board types to provide. If you use equineGenie and have set up the horses’ nutrition programs and bedding, and purchase your feed and bedding using equineGenie, equineGenie automatically calculates the unit cost of each purchase and expenses to each horse their feed and bedding used daily. equineGenie removes the feed and bedding used daily from inventory and reminds you when it is time to purchase more. You always have what you need, when you need it, but never more than you need, thus conserving your cash.
The indirect cost is labor and depreciation expense for assets used in your boarding business.
Labor can vary from horse to horse, so an average per horse is acceptable. A pay rate can be entered when you set up your employees or contractors in equineGenie. In equineGenie you can assign and manage an employee’s or contractor’s work assignments, thus enabling you to track and manage your labor cost. The labor cost for stall board with full care could include stall cleaning, feeding, turnout, blanketing, etc. In this example we will limit the labor cost to stall cleaning and feeding.
Depreciation expense is a non-operating cost on your income statement because there is no operating cash involved. The money was paid when the asset was purchased. But, it still contributes to the cost of doing business because you invested in the assets to have a boarding business.
equineGenie tracks, manages and reports your assets and their depreciation. You can proportion an asset’s use in your boarding business and assign a proportioned amount to your boarding cost. Assets are easily set up in equineGenie, and equineGenie automatically calculates an asset’s depreciation.
In this example a barn ATV is used to pull a manure trailer for cleaning stalls in a metal barn. The depreciation schedule for each asset can be gotten by asking the ‘Genie’. asktheGenie is a free service included with every equineGenie system software purchase. Depreciation schedules are one of many services asktheGenie provides, saving you money by not having to pay an accountant for depreciation information.
equineGenie automatically calculates and reports an assets depreciation. In this example the metal barn, the barn ATV and the barn manure trailer are all an indirect cost. If your stall board with full care included daily turnout, or if we had chosen pasture board as an example, fencing’s depreciation expense would be another indirect cost.
There are the variable and unpredictable expenses that need to be considered such as, insurance, facility repairs, equipment maintenance, marketing and advertising, social media management, etc. The management and control of variable and unpredictable expenses is difficult to impossible, so they need to be covered with a sufficient profit margin.
Considering the business risk, hard work and unpredictably of a boarding business a profit margin of 50% is not unreasonable. Unpredictable expenses can lower your profit margin significantly in any month, or for several months, or even make you lose money. Horses are beavers, and their kick is a cannon.
In this example the monthly stall board with full service has a monthly cost of $286.83 per horse, (($9.43 x 365) / 12). Therefore, it is not unreasonable to charge $575 per month. $575 per month is a 50.1% profit margin, (($575 – $286.83) / $575)). Your horse boarding business may have additional expenses that are not mentioned in this blog, or expenses that is unique to your business. It is also reasonable to bill periodic services such as deworming and other services as a separate line item in addition to board. If you would like help with your boarding business pricing, my contact information is below. There is no charge, take advantage of it.
Remember, boarding horses as a business, is a business, not a friendship. If it happens to also be a friendship, that is a bonus, but it shouldn’t lower the board charge. It is also good business practice to bill your board one month in advance. You are incurring the majority of your cost to board a horse in advance.
Next time we will discuss how to compete in an equally priced boarding market. Remember, equineGenie tracks, manages, analyzes, teaches and raises your horse business I.Q.
Here’s to a successful boarding business!
Bob Valentine, Ph.D. President - GenieCo, Inc Ft. Collins, CO 80527
Dr. Valentine taught Equine Business to graduating seniors in the Equine Science Department at Colorado State University. He has been involved in the horse business for many years. If you have any questions, you can reach Bob at firstname.lastname@example.org, or call him at 970.682.2645 (office) or 970.231.1455 (mobile).