Preparing a Business Plan

In creating a business plan, remember that neither Thoroughbred racing nor breeding are static activities.

A written business plan will help you stay focused, as well as assist in demonstrating active participation in the activity. Tax regulations and business sense require that you make the investment with the intent to make a profit.

A sound business plan is not necessarily an elaborate plan; however, it should be in writing and should:

  • Define the type of business form. Is it a sole proprietorship, a corporation, a limited liability company, a general or limited partnership? If you opt for the latter, you should list the partners. Each form of business entity has specific economic and income tax attributes which should be considered in order to select the appropriate form of business for your particular circumstances.
  • Identify goals and objectives. Besides the goal of having fun, is the business geared toward breeding to race, breeding to sell commercially, racing with hopes of developing breeding stock or racing to make a profit and sell?
  • Specify the type of consultants to be utilized. Depending upon the circumstances, it may be appropriate to identify, by name, the professionals consulted and include a brief outline of their credentials.
  • Outline the means of acquiring the equine assets. Will the horses be acquired through auction, claims or private purchase?
  • Establish a timetable.
  • Indicate the location and scope of the activity. Will the business operate on a regional or national basis?
  • Project expenditures and revenues. Create a preliminary budget with reasonable projections. Budget line items should include, at the very minimum, purchase price; depreciation; typical operating expenses such as board/lay-up costs; breeding fees; training fees; transportation invoices; veterinary and farrier charges; nomination, starting and entry fees; administrative expenses; insurance; professional services; travel and entertainment.
  • Provide the appropriate insurance. Depending on the type of equine investment, you should consider obtaining insurance coverage for the risks inherent with that investment. For example, would commercial general liability, mortality, fertility, live foal or transportation insurance be appropriate?
  • Articulate the term of the activity. Do you intend to remain in the business indefinitely or are you limiting the term of your equine business activities? For example, if your goal is to race, you may want to articulate that your intent is to review each horse's performance at the end of each year. Based on that performance, decide whether to continue to race the horse, retire the horse for breeding purposes or sell.

If you are looking for help putting together a business plan, American Express has an excellent website that will assist you in developing a plan. It can be accessed at http://home3.americanexpress.com/smallbusiness/tool/biz_plan/index.asp.

Exercise Sound Business Judgment

  • Open separate bank accounts for all equine business activities.
  • Maintain complete and accurate financial books and records.
  • Employ professional consultants when necessary.
  • Document the number of hours spent on your equine business activities, including all meetings, telephone calls, stable visits, sales attended, inspections, farm visits, travel time, industry-related reading and studies, etc. Be sure to note the time, place, and purpose of such activities.
  • Save all business-related bills and receipts.