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My Zimbio

Believe It or Not—It is Possible to Make Money in the Horse Industry
Equine Accounting
Wednesday 16th of December 2009 11:39 AM

One of the running jokes in the horse world is this:

Question:  What is the only way to end up with money after working in the horse industry?

Answer:  Start out with a lot of money.

This isn’t necessarily true.  I have several clients who run profitable horse businesses, live in nice houses, and take nice vacations.

What is their secret?  They understand that 80 percent of horse businesses fail for four major reasons and they take the necessary steps to avoid these pitfalls.

1.       They don’t have a business plan.

2.       They don’t know how to market their services effectively.  (If you don’t have a Web site and email address, GET THEM!)

3.       They don’t legally understand their potential exposures so they don’t protect themselves.

4.       They don’t understand the business/financial side of the business (in other words, they don’t know how to manage their money.)

 

Each of these topics requires an in-depth discussion, but since my expertise is in finance, I will focus on the last (but definitely not last in importance) reason for failure: the inability to understand the financial aspects of the business.

 

The Internal Revenue Service LOVES horse businesses.  In fact, 27 percent of all small businesses audited in 2007 by the IRS were ranchers or farmers. On average, in each of these cases, equine business owners had to pay the IRS in excess of $40,000.  

 

Why?  Due to poor record keeping.

 

The easiest mistake to make is to mix personal and business expenses.  Make sure you have separate accounts for your business and personal expenses and “pay yourself” by moving money from your business to your personal account to pay for personal expenses.  Don’t pay personal expenses from your business account or vice versa.  Intermingling funds is the first thing an IRS auditor will search for.

 

The first key of understanding the financial side of a horse business is to keep accurate financial records and documentation that supports them.

 

The second key is to understand profitability.

 

When I ask a horse business owner if their business is profitable, the most common answers I get are:

·         “I think so.”

·         “We do OK.”

·         “We can pay our bills.”

·         “Things are a little tight.”

What a business owner should be able to say is: “We made XXX dollars in profit this month/year.” 

Unfortunately, most equine business owners don’t know this basic information.

To make money in the horse industry, you must understand your expenses.  You should be able to identify the absolute cost of keeping each horse in your stable.  The absolute cost includes all costs associated with providing for the horse including:

·         Land and building

·         Building and property upkeep

·         Utilities

·         Grain and hay

·         Farrier

·         Shavings and arena flooring material

·         Veterinary care

·         Insurance

·         Tack

·         Manure disposal

·         Employees and contractor laborers

·         Barn supplies

As the stable owner, you should be able to say each horse in our stable costs $XXX per month.  And most importantly, you should never take on additional horses if those costs aren’t covered and increased to add profit to your business.

Another important aspect of understanding the financial aspects of the business is to know which of your services is profitable (or not).  For example, you may provide lessons, clinics, summer camp and a show program.  Do you know which of these is the most profitable for your business?

One of our clients came to me at the end of the year and told me she wanted to stop offering summer camps because it was a lot of work and she didn’t really enjoy it.  I pulled the data we had compiled and pointed out that three weeks of summer camp made her eight times (800 percent) what her lesson program made all year long.

Of course, she decided to keep summer camp and actually doubled the number of camps she offered.  Because she didn’t really enjoy facilitating them, she hired a teacher to run the camps.  By understanding where her profit was coming from, she was able to focus her sales and marketing efforts on a specific service which improved her financial position. 

The third key to financial success is to create a monthly budget and to measure your budget against your performance.  Did you have the revenue you expected? Were your costs in line with the budget?  Did you forget to plan for the load of shavings that you received?  Remember it is OK to deviate from the budget if you know and understand the consequences. 

For example, a great opportunity for advertising may arise in March you didn’t know about when you created the budget.  So you spend additional funds on advertising that month. Now, you can either adjust your budget or reduce advertising you had previously budgeted for later in the year. 

A budget isn’t concrete. It can be changed. It can be adjusted.

The last key to success I want to discuss is the idea that it is OK to fire your clients. 

“Acme is my largest customer, there’s no way I can afford to lose them.”  This is what I recently heard from one of my clients.  Then it became my responsibility to educate him on why he needed to end the relationship with that particular customer. 

There are various things to consider when handling a customer relationship. A few of these are:

·         Is the relationship profitable?

·         Is there a strategic reason to do business with this customer?

·         Does this client represent the morals and ethics of your company?

·         Do you, and your staff, enjoy working with this customer?

Recently, one of our horse trainer clients turned away a new customer because he didn’t have space in his barn or time in his schedule to train another three-year old.  It bothered him a little, but it bothered me a lot. 

Why?  Because he has a couple of clients who aren’t as profitable as they need to be.  After all expenses, his time, and the time of his staff, the gross profit on this client who has six horses in training (at a discounted rate) is only $600 per month.  He could replace this $600 with only three horses in training at full rates.  If he were to add three more horses, he would double his profit.

So, the bottom line is that it is possible to operate a profitable horse business!

About:  Jennifer Foster, CMA, CFM is President of EQ Bookkeeping LLC, a firm offering specialized bookkeeping/accounting services for the equine industry.  She is a family owner of Arabian horses and her husband and children ride competitively. She's been riding horses since the third grade. Her recreational time is spent at shows, including the Youth Nationals in Albuquerque, New Mexico, and the U.S. Nationals in Tulsa, Oklahoma. Her company, EQ Bookkeeping provides specialized bookkeeping and accounting services for the equine industry.  In addition to full service virtual accounting and tax preparation, they provide consulting services focused on improving profitability for their horse business clients. For more information, visit www.eqbookkeeping.com.


Continued QuickBooks Online fraudulent phishing emails
uncategorized
Monday 7th of December 2009 07:30 AM

QuickBooks Online Users beware: a recent notice from Intuit suggests that the phishing continues.

Dear Customers,

We continue to receive reports of different versions of the phishing email we alerted you about on 11/12/ 09. We continue to investigate the fraudulent emails that were sent to some QuickBooks Online and Intuit Online Payroll users. The email requests users to download a plug-in or windows update to secure your data.

Intuit did not send this email and we at QuickBooks Online and Intuit Online Payroll will never use emails to request personal information or update security of our service. A copy of the e-mail is attached below should you want to refer to it.

What should you do?

To protect yourself from fraudulent emails and websites, here’s what you can do:

  • Do not click any links in a suspicious email.
  • Do not download any plug-ins or tools from an email
  • Be suspicious of any email that asks for personal information, requires you to download anything or requests your authentication information to access your online account.
  • Delete any suspicious email from your inbox and your trash bin immediately.
  • You can report any incidents, see examples of phishing emails, get more security information and recommendations on securing your computer at http://security.intuit.com/.

If you think you’ve provided personal information such as your login name and password through a fraudulent website, or if you have recently downloaded the plug-in or windows update suggested in the mail below, here’s what you should do:

  • If you have downloaded the tool, please delete it. You should scan your system using an anti-virus program from a respected Security vendor, for example Trend Micro, McAfee, Symantec or Microsoft, to remove any viruses that may now be on your computer. Several of these vendors also offer free online security tools.
  • Change your password to prevent unauthorized users from logging into your account.

If you have any questions, please don’t hesitate to contact us. We are taking immediate action to stop this from happening and to provide you with the best possible experience.

Sincerely,

Intuit Corporate Information Security
http://security.intuit.com/

 

Posted by Jennifer Foster, President of EQ Bookkeeping, your expert in equine accounting, bookkeeing and tax.


My Horses Wear Prada
Equine Accounting
Friday 4th of December 2009 01:24 AM

I was speaking with some friends recently about the state of the economy.  They asked me how business was doing and my response was "it could be better."  When they probed, I told them we need to buy two new horses this fall.  A western horse for my son who will be moving up to the JTR classes and a country english horse for my youngest daughter who will begin competing in saddleseat walk/trot. 

Because they don't have horses and understand the costs associated, I tried to explain the costs of owning and competing with horses.  I told them the horse is just the beginning and there are monthly costs for board, training, veterinarian fees and the farrier.  They asked me "what is a farrier?"  After explaining that the farrier puts shoes on the horses, they said "that doesn't seem like a very large expense."  The only way I could think of to give them a visual was to say "it's like getting a new pair of Prada every six to eight weeks."

Now they get it!

Jennifer Foster, President of EQ Bookkeeping

www.eqbookkeeping.com

EQ Bookkeeping, your source for equine accounting and equine bookkeeping related information


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