December each year offers us opportunities, for better or for worse. You can get caught up in what is exciting and the potential for what can happen next year, or you can get bogged down in the economy, lack of resources and time, and whether you even want to continue running a boarding stable or farm.
I challenge you to choose the first road, while learning from the alternative. Yes, the horse industry has had a hard time of it, but if you are still in business, then you have weathered the worst of the storm. You probably have become leaner and smarter about how your business runs. And I’m guessing you are thinking about some ways to expand on your business in the new year (out of desire or necessity).
Here is your challenge: Take a hard look at your books (and if you don’t keep exquisite records, then forget the rest of this article and start with that for the new year, because if you don’t know where you are financially, you won’t know where you are going or how to get there).
Your financial records should show you the truth about your business. Talk to your CPA; if you don’t have one, then spend a little money to go over your business with a CPA. Figure out what services you provide that are most profitable, and which ones are costing you money. That doesn’t mean you will eliminate all of the unprofitable services (some of them might support your most profitable areas), but you need to know what is making you money in your business and what is not.
If you say that boarding and lessons are your two most profitable areas, then you are in the majority of our readership based on our latest surveys (see below comparing 2013 versus 2013 survey results).
PROFIT CENTER 2013 2012
Boarding 42.0% 30.0%
Lessons 26.9% 28.0%
Training 11.3% 11.0%
Sales 6.6% 9.0%
Competitions/Events 4.2% 6.0%
Breeding 5.7% 4.0%
Camp programs 3.3% 2.0%
When you and your CPA look at all the costs associated with boarding, however, you find that you are really only breaking even! By the time you add in maintenance for the farm, barn, machinery, arena and equipment; electricity and water; employee costs plus your own time spent directly caring for boarders’ horses, there isn’t much left over for profit!
However, when you look at what you made putting on a small horse show, you realize that even taking into account all of your expenses, that you made a tidy profit of 20% over expenses!
If you don’t know your numbers, then you can’t know whether you are really “making” the most of your money on a specific service that you provide.
If we go back to our boarding example, let’s delve into what you could do to make that area more profitable. Here are five tips:
1. Raise your rates. Unfortunately this can be a double-edged sword. If you are competitive in your area, then raising your rates might decrease the number of boarders you have. Sometimes that isn’t necessarily bad. If you can eliminate a full- or part-time worker by reducing your boarders by three people, and your income stays the same, the question becomes: Do you make enough from those boarders on other things (such as lessons, training or shows) to justify having the higher number of boarders and additional staff?
2. Introduce an a la carte menu of services. If you read our Finding Out forum, you will see that many boarding stable owners and managers run into this problem constantly: Customers want services that you aren’t charging for (so they cost you money). If you are having a hard time deciding to raise your rates on all of your boarders, consider raising the rates on the boarders who demand the most of your time and facilities. Some examples given in the forum of things stable owners charge extra for include: blanketing (especially daily blanketing), holding for the vet or farrier, and horses that require more feed and hay. Check out some of the discussions in the Boarding/Training category.
3. Charge facility fees. Many farm and stable owners don’t like doing this because they say, “But having the (indoor arena, outdoor arena, trails, stadium jumps, individual paddocks, cross-country course, etc.) are what make my boarders choose my facility.” Okay, but if you aren’t making money on your boarders, then you are basically paying these people to use things that cost you money. And if all of your boarders aren’t using the facilities at the same rate, then perhaps the wear-and-tear on your facilities and equipment are coming from 20% of your boarders. Isn’t it only fair that they should pay more for the greater use of those facilities and equipment?
4. Offer other services. For example, if you don’t have a trainer or offer lessons yourself, perhaps 2014 will be a good year to start. If you are teaching, have contracts with your students (boarders and outside students). If you allow an outside trainer to come in, make sure you have a written agreement with that person, and make sure they have agreements with your boarders and that your boarding contracts reflect that service.
5. Talk to or survey your boarders. If your boarders are open and honest with you, then be open and honest with them. Share your concerns about your business and seek their input on how to solve those problems. Sometimes your customers (and you) might feel more comfortable asking and answering some questions via a survey. You can do an inexpensive (or even free) survey through a variety of online services if you have emails for your boarders. (I like to use SurveyMonkey.com.) Ask questions that will help you make business decisions, and let your customers know that is why you are asking for input. The questions you ask, and how you ask them, are extremely important. You might seek help from your local small business association or ask someone at your local college or university for help.
Your business is important to you, and to your customers. If they are happy with you and your operation, then they are good sources to help you make your business better (and more profitable). But make sure that you remember that your farm or stable IS a business! You provide facilities and services that are valuable, and they should be willing to pay a fair market price for those facilities and services.
Take some time at the end of 2013 to reflect on your business, and to look forward to 2014 and how you can make your business better, and more profitable.
May you have a prosperous New Year!