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14 – January/February, 2016

The Business of Horses

The holiday season has come and gone and as we enter the 2016 breeding season, the business of breeding horses is in full swing. Babies are born, breedings are booked and broodmares are made ready, all with thoughts of the 2017 foal crop and the next “great one”.

The business of horses has evolved over the half-century in more ways than one can imagine. What used to be simple is now complex. What used to be reasonably cheap is now an expensive proposition. Odds are that if you are raising foals, you will have $5,000 to $10,000 in that foal by the time it hits the ground. Add another several thousand before it is weaned and it becomes very clear that in order to make a profit, you have to sell a weanling for a fairly large sum of money, which can be a challenge.

One of the more interesting evolutionary aspects of our business is the way that we do business in our industry. Decades ago, it was simple. You took your mare to the farm where the sire was and, for a nominal fee, she was live covered. If she conceived, you had a foal eleven months later. If not, you bred her again. In some areas, the mare was put in the pasture with the prospective sire and nature took its course. Today, we ship semen, (which is sometimes frozen from a long-gone sire) to all parts of the country and beyond and breeding managers work in conjunction with fertility experts to get the mare bred. Sometimes the embryo is transferred to a surrogate mare who serves as the mother. Some even talk about cloning. Obviously, this sophistication leads to a greater cost for producing a foal.

The way we do business today sometimes does not coincide with the cost of doing business. There are handshake deals, purchases that are actually leases, goods and services that are given away in the hopes of future business, and many other abnormal business practices…abnormal if you are trying to make a profit, that is. So why is this occurring? What motivates us to operate this business from an if-come point of view, when we know that the “if” in many cases never brings along the “come”?

There are several answers to this question. The first is that, in some cases, the people making the deals are not real businessmen. They are hobby breeders who just want to be involved and this is how they enter the market. Then there are the people who are making these decisions, but not playing with their own money. This can be a problem, because it is much easier to spend someone else’s money than your own. Finally, there are those who just can’t say no. And, sometimes, you should say ‘Hell, no!’.

You get someone who has a great mare that has produced a “great one” and they want a deal. Not just a deal, but a great deal such as “I want a free breeding, or even…maybe…you should pay me to breed my mare,” type of deal. Even though it may be enticing, in the long run, it probably won’t pay off. If you have the product, you should be compensated for it. If you don’t, it doesn’t matter how long you give it away, you will never make a profit, plus you’ll be haggling over the price for the rest of your life.

I was once told by a very good businessman that the easiest way to make money is to act like you don’t need it. There have never been more true words spoken. The business of horses is not easy, but it is still a business and the main objective of any business is to generate a profit. It’s Economics 101 and should be adhered to by anyone hoping to succeed.

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