Profit Margins and Ideal Customers for Your Horse Business
For horse businesses, an average profit margin of 20% or higher is considered healthy. However, it is not uncommon for boarding stables (or the boarding portion of a business) to be lower - for example 5 to 10%. This is why it is essential for businesses that rely on boarding for their primary income to carefully watch their profit margins - a little shift can quickly put a business in the red.
Let's say your annual gross income is $100,000 and your profit margins are about 10% (or $10,000) on average. So after all expenses are paid, your business made $10,000. If you increase your profit margins to 15%, you would be earning an additional $5,000 ($15,000 total profit) annually.
Here are a few ways to increase your profit margins:
- Raise Prices: This might be an option if you raise your rates and still be competitive in your area.
- Cut Expenses: Alternatively, if you can reduce your costs such as by changing feed suppliers, purchasing a good used tractor instead of that shiny new one or even moving to another facility.
- Reduce or Change Services: In order to reduce expenses, you may need to reduce the services you are providing to your clients or you may need to begin charging for things that you previously included.
- Re-arrange your Customers vs. Services: If you have one service that has a higher profit margin than you other services, you might want to upsell your current customers or attract new ones to those high-profit services.
Attracting the Right Clients
Far too often, horse professionals mistake a larger business for a profitable business. If you determine the problem is that you have too many pasture boarding clients and not enough stall boarding clients, you will need either need to attract more clients that want stall boarding or convince your pasture boarders to switch to stalls.
How We Can Help
At Equestrian Professional, we constantly strive to bring you the most relevant, effective ways to improve and grow your horse business while achieving your equestrian career goals. Our aim is to support you in this effort. As an EquestrianProfessional.com member you'll have access to tools, articles, videos, indivual consulting and more to help you be more profitable.
Watch the Profit Margin Videos and Use our Profit Margin Calculator to
- Check your overall profit margins
- Play with various scenarios and pricing options
- Compare different parts of your business, for example: boarding vs. training etc..
- Compare different types and numbers of clients and offerings
Understand Lifetime Value - The type of client you attract and the path they follow as a customer in your business is essential to profitability. We highly recommend that you watch "The Lifetime Value" and play with the value calculator too! It will help you gain valuable clarity about your business and the clients that make it work.
Consider Income Diversification - Another way to improve the profitability of your business and to leverage your skills is by diversifying your income. Diversifying your income can provide much needed security. It is a complex subject, but well worth exploring. We've made it very efficient for you to learn and apply. Try our Income Diversification - Fast Track Solution!
Check Cash Flow - There are only two reasons why businesses ultimately fail - they run out of cash (cash flow) or they are not profitable. Good cash flow is particularly important for high overhead and low profit margin businesses - most horse businesses are both! There are several excellent tools and a very good seminar replay video for you to watch that will help you in this area. Try our Cash Flow - Fast Track Solution!
Business Growth - The size of your business greatly influences its profitability. A good marketing plan is essential for growing and for maintaining a healthy business. Creating a written marketing plan will help to achieve the greatest return on your investment (whether that investment be money or time) by helping you to gain clarity and market consistently. Try our Marketing - Fast Track Solution
Members and future members of Equestrian Professional
One of the most important benefits of being a member of EP is that we understand how different the horse business is from mainstream businesses. Our members gain access to a proven system and collection of tools and resources specifically for professional equestrians that help you to unify your equestrian career and business goals so that you are able to build both a successful career and a profitable business.
Many national equestrian associations participate in our educational partner program. If you belong to any of the organizations below, be sure to take advantage of the discounts they have provided for you.