At some point, all professional horsemen realize that they can't keep every good horse that walks into the barn. Buying and selling horses is part of the business.
Becoming fond of your horses is a terrific benefit of being in the horse business. It is also a financial tie down that can ruin your business. The profitable horseman understands the horses in his or her barn are assets; they aren't pets.
A horse is either appreciating in value or depreciating in value.
As an asset, a horse is generating income as:
a lesson horsea leased horse
brood mare
stallion
inventory for sale
rental for hire for ride or drive
If not, the horse becomes a financial dependent on your business's welfare roll.
Not only is it an operating expense, it is also an opportunity cost. Think about it, if a horse occupies a stall and generates no income or has little or no potential for future income, it is a thief horse.
Unlike a horse thief, a thief horse steals your potential to earn profit from the space and resources it occupies. That stall could be used for:
- A speculation horse "bought right"
- An empty stall for attracting the next opportunity
In economic terms, there is an opportunity cost for every decision you make in your equine business. An opportunity cost is defined as the cost of something in terms of an opportunity foregone.
Every fork in the road you come upon requires a choice. The road you choose is the path you follow.
The road not taken is your opportunity cost since you cannot travel two paths at the same time. Choosing the more profitable path that fits your business vision is the choice to make every time.
This week's tip is to consider whether or not you have any "thief horses" in your barn and if you do, how to find a new home for them.
The horse business is just like any other business in that assets have to directly or indirectly contribute to producing revenue. If your assets are non- producing, then it's up to you to make changes.
Written by: Doug Emerson www.profitablehorseman.com
Jennifer Foster, EQ Bookkeeping - Helping horse businesses make more profit! www.eqbookkeeping.com
