Monday, March 22, 2010
How to make money breeding horses
Disclaimer: this is just my opinion, based on what I have observed and discussed with successful breeders. This blog is written with the intention of maybe enlightening a few, particularly those who are struggling to breed - maybe here are a couple tips that might help you tweak your program, from I have learnt thus far.
Ok, first off, yes. It is possible to make money at breeding, contrary to what some naysayers will tell you (don't believe me, just go talk to some of the successful breeders out there and you will find ones making money who worked their way up from the bottom). I am not saying that breeding horses will ever fully provide you a proper income, particularly if you have a family, but they can certainly pay for themselves, your ranch, and earn you a little profit. Are you ever really making enough money to cover all your time? Probably not. However we donate our time to such endeavors not because we want to be rich, but because we can make enough money and because we love the lifestyle and being around our horses. I do not have enough fingers to count the farms out there who obviously are making money at breeding horses, including friends of ours. The key is to do it intelligently and according to the market. This usually means you are breeding high-end, in-demand horses such as (but not restricted to) Warmbloods, Sportponies, racehorses (as per the current market), and western performance horses (ie, cutting and reining). Racehorse breeders who are making money though are ones who are already established, who put in great investments over the years, and who are raising the great horses - I definitely do not recommend the average person go into horseracing intending to make money because you most likely will not. The successful ones are out there, but as I said, they already had the start-up money and are well established in the industry so the gambling risk is lower. As it pertains to breeding Warmbloods, while I am not knocking the Clyde/TB, Perch/TB, etc 'Warmblood' or 'Sporthorse' crosses (love them, actually), most individuals are not going to make money raising these horses - it becomes instead an expensive hobby. To make money, you really have to cater to what the high-end market demands. Figure out a niche and what the high-end market demands, and you've got it made. So on that note, here is the criteria I have drawn up, that is necessary for one to create a profitable business:
1. You have your own property and facilities
Facilities that include, as the bare essentials, good fencing, paddocks, shelters, and preferably, a barn. Sufficient grazing pasture and hayfields is a plus that will greatly increase your profit margin and that could make the difference, dependent upon your area and local hay costs, between making money and not. On a related note, the ones who are paying for these $50,000 or even $10,000 and $20,000 horses are coming to your place expecting a place appearing 'worthy' of raising a $50K horse, regardless of whether or not your place is just as suitable to raising such a horse as a multi-million dollar facility. If you have just the bare essentials, consider boarding your sale horses out locally at a nice facility that creates a good impression. Good fencing, shelters and barns that are in good condition, etc, are a must.
2. Breed only the best to the best
With the goal of creating a foal better than its parents. You might not have the dollars to invest in a 50K or 20K mare to start, however you can start small and 'breed up'. Start with what you can afford but invest in the best quality possible - well-conformed mares suited to the discipline you intend to breed for (ie, Thoroughbreds to breed to Warmblood stallions). You can also choose older mares who can be purchased at a deal at the end of their breeding career, but who still have a few years left to produce a few premium foals for you - choose broodmares who consistently produce high quality foals. Choose stallions who are in vogue but also who have the bloodlines that count and who have proven to pass on their abilities, who have progeny successful in their respective disciplines and who test well in their registries. Keep back the best and breed those to the best. Don't be afraid to cull a mare if she proves she cannot successfully produce high quality progeny - do NOT settle and accept less! Eventually your goal is to obtain fillies with breeding at the top of the game, whether initially bred by you or not. By 'breeding up', you ultimately create a decent broodmare band for yourself and you create horses who will sell for a decent dollar and thus afford you the ability to go out and buy the quality mares who are worth top-dollar. Pay attention to current trends and what is winning in the rings. Talk to BIG successful breeders to gain wisdom as to what bloodlines mix best, which are the most successful competitively, etc.
3. Make your horses stand out
This includes picking the best bloodlines carefully, the bloodlines others are going for and maybe cannot get. Watch the up-and-comers and get foals out of them before others do (this takes a good eye and a lot of knowledge!). I know breeders who put in orders on quality semen of top-of-the-line stallions who have recently died, just prior to said semen becoming unavailable. They pay attention to the market, much like a stockbroker would, and buy what is 'in' and purchase semen that will increase in value quickly. They either sell the banked semen later or breed their mares later for a foal out of "So and So" who is now deceased, whose foals are in demand.
The best way (maybe the only way, at least when you are first starting) to make a profit is to do this yourself rather than paying others to do it. Compete your horses - your mares, your progeny, everything. Get your own name out there, your farm's name, and your mares' names and those of their foals. Take your mares and foals to the top of their discipline, if possible. This means winning multiple Championships, Grand Prix, etc.
5. Breed for amateurs
While your foals might have what it takes to make it to the top, most of your purchasers are amateurs and that means breeding good, amateur-friendly minds. You or I might be capable of dealing with the difficult, challenging horses, but if you want amateurs - which make up the majority of your market - to purchase your horses, they have to have solid, easy-to-train-and-ride minds and temperaments a.k.a. rideability. They need to have solid basics, which means your foals are handled throughout their time with you. For your babies 0-2 years of age they should be used to being clipped, bathed, shod, trailered, stalled, asked to stand in cross-ties, blanketed, tacked-up, touched all over, etc. They should be well-behaved, mannerly, respectful, quiet being longed, used to weight across their back (2 and 3 year olds), free-jumped (if applicable and age-appropriate), and should lead and tie well. They should also be registered and tested/inspected in an appropriate registry, accustomed to the show atmosphere, etc. Make them stand apart or at least on par with other high-quality babies their age.
6. Look for the deals
Like quality proven broodmares who can no longer be ridden and who are going for a decent price, quality mares who are being sold cheap because their owners do not realise what they have, quality mares who are being dispersed because their owner went under, 'problem horses' who have great temperaments underneath but have simply been mis-handled or mis-managed. Foals in-utero or on the ground or weanlings that are going for a more affordable price (say, 5-10K) but whose value will increase exponentially later.
7. Gather the knowledge
You need to have knowledge of the industry(ies), have a good eye for horses (and for the potential in horses), and know your bloodlines. You need to know your business inside and out. This is not a business for the faint of heart, the inexperienced, or the non-equestrian. Do your research, do your time in the industry, and consult with the successful and wise.
8. Buy only the best
Buy the best you can afford and work your way up. It costs just as much to feed and train 'crappy' and non-marketable mares as it does the quality ones, so feed and train up the quality ones who are going to earn your money back.
9. Do not try to use your own stallions
As a whole, and not at first. Eventually you might produce something of exceptional quality, but your best bet really is to sell it to someone who is going to make use of that quality and make a name for you (or do so yourself). Unless you are going to take that stallion to the Grand Prix or Olympic ring, there will always be another stallion better than him. Furthermore, there is no absolute guarantee your stud will pass on his talent. Instead, breed to the stallions who are proven, have top-notch bloodlines, and who have strong competition records. If you are going to compete a stallion and he does decently well, you can of course still be successful (and save some breeding fees), however your room for error and your profit margin will be smaller unless you have absolutely outstanding mares and your stallion somehow really stands out. You want to breed to stallions that complement your mares specifically, which will likely require outside stallions. If you are going to stand your own stud, make sure he is outstanding!! As in, he possesses all the aforementioned qualities and can command a high stud fee because he is in demand.
10. Be prepared
This includes being prepared to put in a financial investment and being okay with not seeing your return for awhile (it will take many years for the average person to build up a quality self-sustaining herd that actually turns a profit), as well as surrounding yourself with the appropriate mentors, contacts, and people who will and can help you - people who are successful themselves. It pays to be personable and to be a sponge open to learning! Research your market - watch advertisements of horses bred and sold within the market you intend to target. Take note of not only what is offered for sale, but what sells - take note of what type of horse sells and at what price. Budget your costs to raise your foals and plan accordingly - choose your focus according to what is successful in the current market.
As in any business, the best way to make any money is to do all the work yourself - the breeding, the training, the raising, the marketing, the competing. When you consider all the time you put into it you really probably do not make enough to cover all your time however most people do not expect to be paid to do their hobbies anyway! If you can make enough money to pay for your farm and live comfortably, you are doing a great job. Another thing to consider is professionalism: it's a small world, so it pays to always stay professional and be honest, and to make a good impression on those you meet.
A couple of successful examples I wanted to provide:
Some family friends of ours worked their way up from the bottom. She competes all her horses and currently has horses who sell in the high 5 figures, including foals who sell in-utero and on the ground for $10,000-$20,000. She started with Thoroughbred mares and gradually bred into the Warmbloods. She now has some of the top foals at inspection in Western Canada and some outstanding foals who are bred to the hilt and worth their weight in gold. These horses pay for their ranch and for the purchase of the next broodmares.
Another friend currently breeds sportponies. She stands her own quality pony stud who is not only accomplished himself, but is also very marketable (ie. in colour, temperament, type, etc) and breeds him to quality Thoroughbred and Warmblood mares for sportponies that sell for 5 figures across North America.
If you think about it, if you purchase, just for example, a mare for $10,000 who throws a $10,000-$20,000 foal next year, she has paid for herself by year one. By year two she has paid all her upkeep expenses and possibly has also caught up on her foaling and vet expenses. By year three or four, she is potentially earning the profit to help build your herd. By the time you have built up a quality, established herd, you are turning mostly profit. Be prepared for it to take a lot of years though, this is not a business that turns a quick profit, but rather an investment with long-term profit goals and benefits.