The Business of Horses,
Are You a Business?

by M. R. Bain

I remember how I got into the horse business. I liked working with horses, I would rather do that than eat, sleep or look at girls. My parents were sure that their oldest son was going to work in the corporate structure and let someone else sign the checks. They held the view that the day of the horse had come and gone, that horses were now a hobby afforded by those with disposable income. This view is still held today by many including the IRS.

How do you convince the skeptics that you are in business to make money, acquire assets, that you have inventory that has value and that you are not listed on the Forbes 500?

I was naive enough to believe that I could make a living at doing what I love. I know now that it can be done and over the years I have learned to treat it as a business. When a person does that, his employment takes on meaning and is enjoyable. You learn that in order to make the payments on the mortgage, the truck, buy food for the children that you must sell your inventory or services. You must always be aware of changes in the marketplace and strive to incorporate them or to make your products and services more needed.

You treat it like a business. Often, we fail do to that because we fall in love with a certain breed, certain color, certain horse, etc. Don’t! We should conduct our activities as if our livelihood depends on it. It does! If we want to be in business and show that our intent is to provide ourselves with an income that we can depend on over a period of time, we must be ready to part with our inventory at a fair price in a reasonable length of time.

We should, at some time, be able to depend on our business to provide us with a suitable income that would compare to income earned in other employment (IRS auditors look for this.) Many times horse business owners have income from other employment that provides them with substantial resources that can be used in starting up and maintaining a horse business. The problem is that the owner does not keep a record of amounts put into the business or has proof (signed financial documents) that the investment is to be repaid at some period, either during the life of the business or at the close of the business

We devote large amounts of time to our horses. If we are in business, we must devote large amounts of time to it. Did I repeat myself? No! The business owner has to devote time to selling his product, adjusting his inventory, researching market conditions, looking for new customers for his product, teaching new and old employees and a myriad of other duties.

All businesses in the start-up phase have cash flow problems. Namely, no cash flow. That is normal. Most small business have little venture capital to start with. The entrepreneurial owner learns early on to read each little change and to act quickly on it. What is hot now is history tomorrow. That is true in the horse industry especially where today’s hot bloodlines change at the next world show or GR1 race. You have to be willing to change, to add new blood to your breeding programs, to offer lessons in disciplines that are developing increasing interest in your area, to train a different type of horse in order to increase your cash flow and improve your profitability.

We should have goals—attainable goals. We should learn from others who are successful but we should also be innovative in our approach to setting up a business in our particular area. The goals should be attainable in a reasonable length of time. If your losses are reduced over time and your income increases in the same period, you know that you are doing something right and your business can become successful. If your losses continue to increase and you are putting large amounts of capital into the business, you need to either revise your business plan or decide if you are a hobbyist. Do not wait for the bank or IRS to make that decision, you won’t like the outcome.

All too often, we either develop tunnel vision or we use a shotgun approach. We think that if someone we admire does it a certain way then it will work for us. Or we want to leave nothing uncovered so we have a little bit of everything without a definite plan of action or research into the opportunities that may be present. Every business can carve out it’s own niche in the business world by being innovative and aware of the customer’s needs and serving those needs. A business should always be looking for new ways to serve its clientele and for securing new customers.

M. R. Bain, B.S. A. A. has been a horseman all his life. He has been a professional trainer since 1955. He is also an owner and breeder and has worked as a breeding and stable manager. His intent in writing these articles is to educate fellow horse people on the business aspects of the horse industry. You may contact him at MRBAIN@msn.com with your questions and comments.