Can Leasing Improve Your Bottom Line?

Avatar:
Author:
Publish date:
Social count:
0

Leasing horses is a client service that can improve profits, stabilize cash flow and increase customer loyalty. Lesson barns often begin leasing programs to give students an opportunity for practice outside of a lesson setting. Farms typically lease lesson horses that get lighter use or underused farm-owned horses such as retired show animals. Other equine entrepreneurs have discovered that leasing can be much more than just a lesson program sideline. When approached as an alternative to taking lessons or buying a horse for those who want to ride, leasing can be a lucrative business unto itself.

While leasing may provide a farm with additional income compared to boarding or lessons (see sidebar), its potential to stabilize monthly cash flow is the primary financial benefit cited by those who offer the service. Leasing guarantees that the horse’s basic monthly expenses are covered and that the farm will get paid whether the rider shows up or not. Leasing also allows farms to keep some horses they may not otherwise be able to afford to carry. Compared to other horses in a lesson program, leased animals get more consistent attention, more consistent riding, and greater variety in their work.

Among the most important benefits of leasing is customer satisfaction and loyalty. The typical lessee is someone who would like to own a horse but does not have the time or money for full ownership. Leasing allows them to form an emotional bond with an individual horse they can call “their own” and keeps them coming back to the farm, month after month.

Different Approaches to Leasing

Like many lesson barns, Chrislar Farm in Rowley, Massachusetts, only leases lesson horses to current students. Students gain the advantage of unsupervised riding time to enjoy their chosen horses and also gain new riding privileges. Lessees are allowed to ride their horses out of the ring on the farm’s half-mile track or on trails in an adjacent state forest. Barn manager and trainer Lynne Pomerleau notes that the horses thoroughly enjoy the extra grooming, bathing and grazing that the children give them.

Like Chrislar Farm, Macabee Farm in Woodbridge, Connecticut, also leases horses to lesson students. Instructor Cheri Cancelli notes that while many lessees are content to stay at that level of involvement, others go on to buy their leased horse from the farm or purchase another horse which they bring back to the farm.

In many states, liability issues have all but eliminated hack horses for hire by the hour. Leasing offers a way to provide horses for serious riders who may not want to commit to a long-term lesson program in order to ride. Joe Rich, owner of Trailside Stables at Waywind Farm in Waban, Massachusetts, began offering leasing as a way for his clients to ride outside of a lesson setting while ensuring the horses have competent rider caregivers.

Casa Dulce Riding and Guest Ranch in Agua Dulce, California, is within 20 to 40 minutes of several population centers, so owner Joyce Guenther decided to try leasing and see how it worked for her. “Leasing gives them the opportunity to ride on a regular basis and become attached to one horse.”

Guenther feels leasing is also ideal for people just starting out in horses who may not know what kind of horses or riding they prefer.

Battlefield Equestrian Center, Inc., at The Sanders Ranch in Centreville, Virginia, opened its doors as a boarding, lesson and training facility in 1983. Owner David Sanders says that they had a leasing program in full swing within a year because he was getting almost 50 calls a week for hack horses. Leasing offered a perfect way to meet that demand while ensuring good horse care. He sees leasing as a variant of “renting” a horse that requires the client to care for their horse better than a typical hack rental situation allows. His contract requires that lessees do certain things such as picking out feet each time they ride, grooming, and walking the horse after rides to cool him out.

Sanders has found that leasing also fills a need for many of his boarders who wanted a way for their spouses to ride with them occasionally without incurring the full expense of a second horse. The Sanders Ranch raises three to six babies each year. As these horses grow up, they join the leasing program.

Leasing can have its downside, too. Cancelli notes that some lessees do not understand that when they lease a horse, they are paying to reserve riding time. As a result, the horse becomes unavailable for lessons or other uses during “their time” and they owe the monthly leasing fee whether they ride or not. Susan Braen, of Greendale Farm in Orchard Park, New York, has had lessees who wanted to bargain for more time because it rained or they were on vacation the day they were scheduled to use the horse.

When horses are used for lessons as well as being leased, the situation works best when instructors adhere to a regular lesson schedule that is prominently posted so that lessees can work their riding time around it. When more than one person leases the same horse, the riders work out a mutually agreeable schedule for sharing the horse during the week, on weekends and on holidays. Sanders says that in 20 years of leasing, he has only had to arbitrate two or three times.

Julie Rhodes, of Rhodes Riverside Ranch in Labadie, Missouri, is also frustrated by lessees who pay but then never show up to groom or ride. Then, she says, the horse gets less attention and exercise than it would if it were fully used in her lesson program. People who lease horses have even less ownership in them than people who lease cars, Braen comments. If something goes wrong, they feel no responsibility toward the animal. She recalls one lessee who simply abandoned a lame horse in the barn and was never seen again.

Coming to Terms

Farms with leasing programs retain ownership of the horses. The horses remain at the farm, which continues to provide feed and housing, take care of stall maintenance, and schedule regular farrier care and veterinary care. Responsibility for any extraordinary veterinary care during the term of the lease should be spelled out in the leasing contract (see sidebar). Contracts should also specify when the horse can be used (particularly important if the animal remains in a lesson program), where it can be ridden, any riding restrictions, and the horse care responsibilities of the lessee. Most farms provide the horse’s saddle and bridle as part of the lease package and all expect lessees to be able to catch, groom and tack a horse up on their own. “They have to be old enough and experienced enough to do it right,” says Rhodes.

Farms typically offer half leases or full leases which include a specified number of rides per week. Leases may run from month to month or for a longer term such as three months, six months, or a year. Farm managers who insist on year leases say this guarantees that the rider intends to make a real commitment to the horse. After that first year, they often go on a month-to-month basis.

Others are less rigid about lease terms. They reason that if a rider improves and wants to begin riding another horse, that option should be open. They understand that family demands, vacations, illnesses or other unforeseen life circumstances may make it difficult for a client to ride for several weeks or months. They understand the basic business imperative that meeting the client’s needs makes and keeps a satisfied customer. So these managers feel it is unfair to ask people to pay for riding privileges they cannot use.

On the other hand, at least one of them has found that “horse time” means different things to different people. Rich recalls when one of his lessees injured her leg at work and he presumed that she would want out of her month’s lease while she recuperated. Instead, he found her sitting on a chair in the stall. She’d paid for time with “her” horse and she was going to enjoy it even if she couldn’t ride.

Setting Prices

Pricing horse leases is a rather inexact science. Key to profitable leasing, however, is a clear understanding of all associated costs and of the income potential of alternative uses of the horse. Then run the numbers to create a monthly cash flow statement to test the effect of various price points on the farm’s bottom line (see sidebar). Among the variables different barn managers consider when they set lease rates are:

  • Price of board
  • Price of lessons
  • Some combination of board and lessons
  • Cost to carry the horse from month to month
  • Whether it is a half or full lease
  • The length of the lease
  • Number of weekly rides included in the lease
  • Riding privileges included with the lease
  • Use of tack and barn supplies.

Lease prices are also affected by the regional economy, the barn’s sport discipline, and its proximity to population centers.

Rhodes bases the price of a lease on her cost to carry the horse for a month plus depreciation on tack included in the lease, the cost of grooming supplies, and the amount of time the person will be using the horse. Rich feels that a half lease should equal half the monthly board. He has had several horses with two half leases and one with three. Theoretically, he says, a dependable, healthy horse should be able to carry four half leases as long as the riders are able to work out the scheduling logistics. Guenther bases her month-to-month leases on the number of rides per week with monthly lease fees running from $150 to ride once a week to $200 to ride three times a week.

Sanders has always tied the price of a half lease to board. Initially, he reckoned that if board was a certain amount, a half lease should be 50 to 75 percent of that. Based on demand over time, he now feels that 75 percent is more appropriate. His current half lease is priced at 70 percent of full board and he regularly turns people away for lack of horses. Sanders Ranch has between four and 10 horses available for lease at any given time and that, says Sanders, provides 10 to 25 percent of his income. He caps his leasing program at 10 horses only because he wants to keep his income sources diversified.

Like Sanders, Rich also finds demand for leasing exceeds his available horses. He advises other equine entrepreneurs who lease horses to mention that fact in all of their advertising and on their web sites. “You’ll get people knocking on your door,” he says. Advertising individual horses with their photos can be very effective. Leasing provided no income at all in Rich’s original business plan. Now, he says, leasing brings in about 10 percent of his total business and he foresees it becoming as much as 30 percent in the future.

A New Business Model

What Rich, Sanders and others have found is that demand for leasing is strong. It fills the void left since liability issues have eliminated so many hack stables where people were once able to try riding as a sport and enjoy riding time even if they could not afford horse ownership.

Like Rich, Kathy Lovingood and her sister, Mary Lovingood Gallant, started out with a business plan for Lovingood Springs Farm in Louisville, Tennessee, that included zero income from leasing. They planned, says Lovingood, to make 100 percent of their income from boarding. Less than a year after they opened, a friend asked her to help him get ready for a two-week vacation ride. She realized they were not set up to respond to that kind of request but she saw opportunity in her friend’s need.

The result was creation of the Trail Riding Club, a variant on the typical leasing situation that now provides 50 percent of Lovingood Springs Farm’s income. The Club owns its 10 horses and for $100 per calendar year, a family of up to four individuals becomes a part owner of them. Club members then pay for ride time at the rate of $25 an hour, $35 for two hours, or $50 for the day. Members of the Rocky Top Club can pay $200 monthly for unlimited riding. Riders who own their horses can join the club for $100 annually and enjoy group activities and access to trails on the farm’s 1,000 acres. “I tell people it’s cheaper than golf,” Lovingood laughs.

The club now has 80 members but not all are riders. Some are family members who simply like the club’s regular supper socials. Others like to hike on the trails that criss-cross the farm’s 1,000 acres. Riding members must pass a basic skills test or take lessons to reach the necessary skill level. Then they can choose a horse to call their “own” and are responsible for catching, grooming, and saddling it themselves.

Overuse of horses has never been a problem, Lovingood says. While they have one member who rides different horses twice a week and seven or eight people who come once a week, many members come less frequently. The only time there are any conflicts, says Lovingood, is when then club holds its monthly group rides. Then the horses are available on a first-come, first-served basis. The farm has set up a reservations board on the internet for club members.

As The Riding Club concept grew, Lovingood searched the internet and could only find a handful of places offering similar programs. She feels, however, that The Riding Club is a program whose time has come as aging baby boomers look for places to indulge a desire to ride that was suppressed during child-rearing and career-building years. A former patent attorney, she is currently packaging The Riding Club concept as a business franchise in response to requests from other equine entrepreneurs for help with their business plans.

“This program really helps people who can’t own horses because of time or money constraints,” she says. Lovingood notes that a club is ideal for entry level riders and offers people more opportunity to ride than the lesson programs that are often their only other option. Lovingood says she has changed her outlook since first writing the farm’s business plan for boarders with their own horses. “Now I say horses are for everyone.”