The Business of Horses- A Financial Perspective.ppt

The Business of Horses- A Financial Perspective Denise Joyce, Practical Business Solutions Teagasc Workshop, Clonakilty, Co. Cork 19th September 2007 Why Horses? Hobby Lifestyle Business Example 1: Farmer X Farmer X…………..on reflection Farmer X…………….restated Business Fundamentals for Success To run a business successfully, you need to understand the fundamentals i.e. Cost Structure Revenue Stream Margin or Profit Cost Structure Costs may be grouped as: Variable Fixed Variable Costs Costs which relate directly to the horse Vary proportionately as the number of horses increase/decrease Examples: feed, bedding, farrier, vet Each horse held for a year costs approx. €4,400 or €12 per day Fixed Costs Costs associated with running the business Fixed in nature i.e. do not vary as the number of horses increase Examples: insurance, maintenance, electricity etc. 30 acre farm would incur approx €30,000 p.a. excluding depreciation Fixed Costs If horses only held, then the €30,000 needs to be recovered from horses If the farm is split between cattle and horses, you need to allocate costs between the two businesses e.g. number of acres dedicated to horses versus cattle Example 2: Farmer X Assumptions: Owns 5 acres grassland and 5 stables Variable cost = €4,400 per horse p.a. Fixed cost = €3,000 p.a. Changing from a 1 Horse Farm to 5 Horse Farm Investment Cost Funding the purchase cost Savings Bank loan Line of credit available at Sales Houses Commissions due to Sales Houses e.g. Goff, Tattersalls Buyer’s commissions 3-6% Tests Transport costs Changing from a 1 Horse Farm to 5 Horse Farm Growing the Business To raise finance, a detailed Business Plan needs to be prepared Business Plan documents your strategy Growth plan over the next 2-5 years Facility requirements i.e. farmland, stables etc. Labour requirements Running Costs Funding requirements Example 3: Farmer X plans for growth Impact of Growth on Cost Structure 5 Horse Farm to 20 Horse Farm C