FOR OWNERS OF HORSE BUSINESSES

Transcription

1 W 371-B MANAGEMENT AND COST CONSIDERATIONS FOR OWNERS OF HORSE BUSINESSES Andrew P. Griffith, Assistnt Professor nd UT Extension Specilist Deprtment of Agriculturl nd Resource Economics BACKYARD VEGETABLES THE TENNESSEE VEGETABLE GARDEN - Building nd Using Rised Beds 1

2 MANAGEMENT AND COST CONSIDERATIONS FOR OWNERS OF HORSE BUSINESSES Andrew P. Griffith, Assistnt Professor nd UT Extension Specilist Deprtment of Agriculturl nd Economic Resources Mny people re involved in vriety of horse ctivities, rnging from owning horse to operting usiness ctering to horse owners. Horse ownership or the desire of horse ownership generlly results in the demnd y consumers for services relted to horses. Most horse-sed usinesses re estlished s for-profit entities. Horse-sed usinesses my include riding lessons, horse trining, ording fcility, roodmre opertion, frrier or numer of other services sought y people in the equine industry. The focus of this puliction will e the cost of operting horse ording fcility nd/or roodmre opertion with the intent of mrketing the offspring. An individul with the desire to operte horse ording fcility or roodmre opertion for profit should consider the following questions: Wht is the demnd for horse-sed usiness in given loction? Is the demnd for psture ording, stll ording or other equine services? Where cn lnd e purchsed for psture or to construct fcility? Wht size fcilities re pproprite? Will dditionl lor e hired? Wht services will e provided? How will clientele e cquired? How will services e mrketed? How much should e chrged for ording or other services? EQUINE BUSINESSES Cost nd Considertions for n Equine Business There re severl costs ssocited with operting n equine usiness. Some costs re directly relted to production of ech niml while some costs my vry sed on the size of the opertion. Costs for roodmre opertion include: Mrket vlue of the roodmre. Fcilities to house the horses. Breeding expenses. Bedding. Feed. Helth progrm. Frrier. Equipment. Trnsporttion. Wste mngement. Similrly, costs for ording fcility include: Fcilities to house the horses. Bedding. Feed. Equipment. Trnsporttion. Wste mngement. Mrket vlue: The mrket vlue of roodmres cn vry gretly. The vlue of horse is dependent on reed, pedigree (selective reeding nd desired trits), uild or conformtion, nd ility to perform oth in n thletic or reproductive cpcity. For the purpose of roodmre opertion, the focus is the reproductive cpcity even though the thletic ility remins n integrl prt of the vlution. Specific reeding progrms, desirle conformtion, desirle physicl trits with justified performnce, nd the ility of n niml to perform desired tsk cn increse the niml s vlue. Fcilities: Equine opertions require wellmintined fcilities. Opertors should consider the cost of constructing fcility to house nimls nd their offspring s well s the mintennce of the fcility nd the grounds surrounding the fcility. Lnd purchse should lso e considered in the cost evlution. It my e desirle for some opertions to hve considerle quntity of psture ville while other opertions my find this less importnt. Lnd cquisition in suitle res my e difficult or costly, so thorough evlution of the required lnd resources nd ssocited costs should e conducted prior to estlishment of usiness. The use of psture will require sufficient fence (wooden, high tensile, woven wire, fixed knot wire, etc.), which includes initil purchse costs s well s mintennce costs. Additionlly, opertors should consider costs ssocited with construction nd mintennce of working/trining fcilities nd hy/feed storge. Lstly, it is integrl tht property txes or rent, insurnce, nd interest on money should e considered to ccount for ll costs. Breeding expenses: The evlution of reeding expenses is similr to the mrket vlue of the roodmre. These expenses will e dependent on the stud s reed, pedigree, uild or conformtion, nd ility to perform. Animls with proven performnce in their respective res will often demnd higher reeding fee s well. Bedding: Bedding is nother cost tht cn vry depending on the type of fcilities nd how the Mngement nd Cost Considertions for Owners of Horse Businesses 1

3 nimls re housed. However, this is n item tht opertions should consider when evluting the costs nd returns to the usiness. Bedding lterntives my include wood shvings, wood pellets, pet moss or strw. Feed nd Wter: Feed costs cn vry sed on the mngement system eing utilized. Psture nd forge re generlly the preferred source of nutrients. However, horses in lte gesttion nd lcttion tht re kept on psture my need more thn psture to meet their nutritionl needs. Alterntively, horses housed in rn with no psture intke will need hy or n lternte forge source nd, in some instnces, my require supplementtion with concentrtes (grin) to meet nutritionl needs. Horses must consume t lest 1 percent of their ody weight in forge per dy for helthy digestive system. Non-lctting horses cn often e mintined t forge intke level of percent of ody weight in forge dily while horses in gesttion or lcttion hve higher nutrient demnd. Horses should hve free ccess to clen, fresh wter dily. A horse s dily wter needs will increse during lcttion. Additionlly, wter needs cn vry sed on mient temperture, ctivity level nd overll helth sttus. Helth progrm: Helth cre is vitl component to keeping horses helthy. Preventtive helth cre is generlly good option to mnge helth cre costs. Helth cre should include deworming sed on fecl egg count, medicines to tret minor wounds, vccintions, nd Coggins test (checks for Equine Infectious Anemi (EIA) ntiodies in the lood). Other helth cre costs nd veterinry expenses cn nd will occur. These other costs my include emergency cre nd humne end of life. Frrier: Horse hoof cre is lso importnt. Hoof cre cn either e performed y the opertion or frrier cn e hired for hoof trimming nd/or shoeing. Horses generlly need their hooves trimmed out every eight weeks. In ddition to trimming the hooves, shoes cn e put on the horse. Ultimtely, shoeing versus trimming depends on owner preference, hoof helth, climte nd environment, long with type nd loction of ctivity. Equipment: The cost of equipment cn vry gretly. Common equipment needed includes equipment for grooming, feeding, clening nd riding. Tck my include sddles, stirrups, ridles, hlters, reins nd its, while grooming, feeding nd clening equipment my include rushes, uckets, wter systems nd pitchfork. The forementioned equipment is for generl cre nd equine mintennce. Other specilized equipment my e needed for reeding opertions. It is importnt to rememer tht some equipment my require repirs nd mintennce with ssocited costs. Trnsporttion: Trnsporttion costs should lso e considertion for equine opertions. These costs my include ownership of truck nd triler s well s visits to the veterinry office nd potentilly reeding fcility. Wste Mngement: Wste mngement is cost considertion for equine usinesses. A 1,000- pound horse produces on verge 51 pounds of rw wste dy in the form of mnure nd urine. Mngement of equine wste is different for nimls housed in rn reltive to nimls on psture. The degree of mngement necessry for psture is dependent on the stocking density. In Tennessee, typiclly stocking rte of one horse per cres is recommended. The denser the stocking rte then the more intense psture mngement is necessry. Alterntively, incresed mngement is necessry for rn/stll-kept nimls. Wste disposl lterntives include on-frm psture spreding/ppliction, composting nd contrcting wste huler. Other expenses: Other costs my e incurred in equine usinesses tht re not outlined in this puliction. Budgeting Bsics Equine usiness ownership cn e expensive. Therefore, cost nd revenue mngement is importnt. Thus, it is importnt to crete udget to ccount for ll costs ssocited with owning usiness to determine if one cn fford to estlish nd operte vile usiness. An in-depth discussion is necessry for udgeting purposes. Costs tht should e considered include vrile costs nd fixed costs. Vrile costs re expenses tht chnge sed on production (i.e., the numer of horses produced or orded). Vrile costs in equine production include feed, supplements, veterinry/helth cre, frrier services, edding nd some other discretionry items. Fixed costs re expenses tht do not chnge sed on level of ctivity or production. For exmple, ssume tht fixed costs re $20,000 per yer nd this cost is spred cross two horses. Thus, the fixed costs per horse per yer is $10,000 ($20,000/2 horses = $10,000). Alterntively, if fixed costs remin the sme nd the costs re ttriuted to four horses, then the fixed cost per horse per yer is $5,000 ($20,000/4 horses = $5,000). Exmples of fixed costs re the purchse price of the horse, lnd, rn/fcility to house horses, tck, fencing, truck, triler, interest expense, repirs nd mintennce on uildings nd fencing, insurnce, rent, nd utilities. These costs cn e rther lrge nd cn ccount for lrge portion of the totl nnul cost of owning usiness. Even if lnd is owned prior to strting n equine usiness, it is importnt to include cost for the property utilized y the usiness. Deprecition is wy to llocte the fixed cost of items tht hve useful life of more thn one yer, i.e., the horse, rn, tck, fencing, truck nd triler. It is used to ccount for the reduction in vlue of the sset due to wer nd ter over time. For exmple, if fixed costs re $20,000 nd the sset hs useful Mngement nd Cost Considertions for Owners of Horse Businesses 2

4 life of five yers nd hs slvge vlue of $2,000 t the end of the five yers, then the nnul cost using stright line deprecition for the fixed sset is ($20,000 $2,000)/5 = $3,600 per yer. Similrly, usiness owners should consider interest costs. Interest costs represent n opportunity cost on purchsed items such s lnd nd equipment. An opportunity cost is the cost of forgoing one lterntive to pursue the current ction. Interest costs re ctully relized when money is orrowed. However, when money is not orrowed nd ssets re utilized, then n opportunity cost is incurred nd tht is clculted through n interest expense. For instnce, lndowner hs the option of using lnd for n equine usiness or the lndowner cn rent the lnd to someone else. Thus, usiness owner hs choice etween lterntives nd the interest expense represents the cost of choosing one lterntive over nother. Mny usinesses try to chieve economies of scle when producing good reltive to fixed costs. An exmple of economies of scle is in reltion to how much of the fixed costs re ttriuted to single unit of production. In the cse of horses, if fixed costs re $20,000 yer nd there re 10 horses, then $2,000 ($20,000/10 horses = $2,000) of fixed cost is ttriuted to ech horse. Alterntively, if fixed costs remin the sme nd there re 20 horses, then the fixed cost per horse would e $1,000 ($20,000/20 horses = $1,000). Broodmre Opertion Mrketing Offspring One exmple of n equine usiness is roodmre opertion. In this usiness, producers reed mres with the intention of mrketing the offspring. This usiness requires significnt reserch nd mrket nlysis. It is impertive for horse reeders to possess comprehensive understnding of the mrket they re in nd wht the demnd is for their product. Incorrect mrket informtion cn e just s d s, or worse thn, hving no mrket informtion. Thus, horse reeders nd potentil horse reeders re encourged to evlute the mrket for horses nd determine the reed nd skill set desired y potentil horse owners in the mrketing re. The evlution of this mrket includes the potentil mrket outside the immedite living/usiness re s mny horses re mrketed to owners outside the home stte. Additionlly, new entrnts to the industry re cutioned out using horse vlues from well-estlished opertions, s vlues sed on reputtion nd industry connections cn e difficult to estlish nd my not e resonle for strt-up usiness. Tle 1 contins exmple costs nd revenue from roodmre opertion reeding four mres nd mrketing four fols per yer. Nothing gurntees 100 percent foling rte, ut tht rte will e used in the exmple. The sle price of yerling horses cn vry sed on reed, pedigree nd initil trining, ut cn e rther high with very desirle pedigree. The udget in tle 1 ssumes four yerlings re mrketed t $10,000 per hed while it is ssumed mres hve reproductive life of seven yers for totl yerly revenue of $41,143 while totl yerly cost is expected to e $54,909 resulting in negtive return to mngement nd risk of $13,766 per yer. Vrile costs re clculted to e $33,517 per yer. Feed cost nd helth cost re generlly the lrgest expenses ssocited with horse ownership. Tle 2 nd tle 3 provide rekdown of helth costs for complete yerly helth progrm for mres nd their offspring respectively. However, reeding nd mrketing expenses tend to e the primry source of expenditures for roodmre opertions, with reeding expenses totling $4,860 nd mrketing expenses totling $6,240 in this udget exmple. A detiled rekdown of reeding nd mrketing expenditures per niml is presented in tles 4 nd 5, respectively. Utilities lso cn e rther lrge operting cost tht is esily overlooked. Thus, utility costs re presented in tle 6. Fixed costs contriute out 39 percent of the totl cost ($21,392) nd this is lrgely due to the cpitl investment necessry for roodmre opertion (tle 7) s it reltes to the horses, lnd, fcilities nd equipment. The mjority of fixed costs stem from nnul deprecition of ssets ($11,919) while opportunity cost (interest) ($6,278) is the second lrgest contriutor to fixed costs. Bording Fcility There re opportunities in the equine industry to crete for-profit opertion without hving ownership of the horses. One of these opportunities is through ording fcilities. Horses re often orded y horse owners in fcilities owned nd operted y other individuls. Bording fcilities provide services to horse owners who otherwise my not e le to provide everything necessry for the horse. Mny horse owners use ording fcilities ecuse they do not hve the time to feed nd cre for their horse every dy or ecuse they do not hve lnd nd rn. Bording opertions my provide full ord, prtil ord nd/or psture ord, nd ech of these types of ording cn look vstly different from one ording fcility to the next. Full ord is the most expensive type of ord nd generlly includes n individul rn stll, dily feeding nd wtering, wste removl nd edding, dily turnout for exercise, nd potentilly other services. Prtil ord often includes mny of the sme services s full ord ut it my only include cre on weekdys, which results in the owner providing cre on the weekends. Psture ord is exctly s it sounds. Horses re orded on psture, nd hy nd/or concentrte is provided s needed. Psture ord is generlly the lest expensive ord. There re ording fcilities tht require the horse owner to purchse their own edding, feed nd other items s well s providing veterinry nd frrier cre. For Mngement nd Cost Considertions for Owners of Horse Businesses 3

5 more specific cost nd mngement considertions, plese refer to previous sections. Tle 8 presents the estimted nnul costs nd returns to operting ording fcility with 25 horses on full ord. The nnul revenue is estimted to e $120,000, while totl nnul cost is estimted to e $105,294, which results in return to mngement nd risk of $14,706. Vrile costs mke up 71 percent of the totl cost of operting n equine ording fcility in this exmple. Aside from lor costs, feed costs re the lrgest vrile expense for the opertion (tle 9). The third lrgest cost of such n opertion is generlly utilities, presented in tle 10. Tle 11 detils the fixed costs ssocited with deprecition nd interest with operting n equine ording fcility. Annul deprecition ccounts for little over 50 percent ($15,499) of totl fixed costs while the nnul interest cost (opportunity cost) ccounts for out 34 percent ($10,571) of totl fixed costs. The cost of developing nd constructing ording fcility cn e lrge depending on the elorteness of the rn nd the menities included; thus, fixed costs will vry considerly from opertion to opertion. Potentil ording opertors re encourged to evlute fcilities closely to determine the need for certin menities. Bording fees lso cn hve wide rnge. In generl, ording fees re higher the closer the ording fcility is locted to n urn center. The services offered nd the qulity of service should lso e used in determining n pproprite fee level. Some ording fcilities lso provide horse lesing. Though horse lesing is not included in the udget, opertors of ording fcilities my wnt to consider the service of lesing horses to customers. Lesing horses cn e method of generting dditionl income while lso providing the horse owner (often the owner of the ording fcility) the opportunity to continue providing cre for the niml. prticipnts re encourged to use these udgets s strting point to help develop their own individul udget. For ssistnce developing udgets or other economic plns, contct your county Extension office. REFERENCES Burdine, K., R. Colemn, S. Iscs, R. Ngy, S. Goode, nd D. Trimle, nd Equine Enterprise Budgets. University of Kentucky Coopertive Extension Service, Deprtment of Agriculturl Economics. Puliction AEC Online: extudgets.php. Freemn, D.W. First Time Horse Ownership: Selecting Horses nd Budgeting Horse Interests. Oklhom Coopertive Extension Service, Oklhom Stte University, Stillwter Oklhom. ANSI Online: edu/docushre/dswe/get/document- 2083/ANSI-4004we.pdf. Virgini Coopertive Extension Frm Business Mngement Stff Virgini Frm Business Mngement Livestock Budgets. Virgini Tech nd Virgini Stte University. Online: Wilson, J. nd K. Mrtinson Equine Economics: Optimizing Horse Helth nd Mngement on Budget. University of Minnesot Extension, University of Minnesot, Minnepolis Minnesot. Puliction # Online: griculture/horse/order/docs/di8645.pdf. CONCLUSION The decision to prticipte in n equine-sed usiness requires extensive reserch nd evlution to mke n informed decision. Potentil industry prticipnts re encourged to evlute the costs nd returns of equine-sed usinesses efore entering the mrket nd expending significnt quntities of cpitl. This puliction is guide to help people understnd the costs nd returns tht should e considered when evluting equine usinesses. The udgets provided in this puliction re presented s guide for the cost nd revenue strems tht should e considered nd re not representtive of ll opertions, s ech opertion will hve unique costs nd returns. Therefore, potentil industry Mngement nd Cost Considertions for Owners of Horse Businesses 4

6 Tle 1. Annul Cost nd Returns of Operting Broodmre Opertion * Quntity Unit Price Group Totl REVENUE Sle of offspring 4 hed $10, $40, Sle of mres 0.57 hed $2, $1, Totl Revenue $41, VARIABLE COSTS Hy 7 ton $ $1, Concentrte c 3.6 ton $ $1, Slt/minerl d 8 lock $16.00 $ Psture mintennce e 3.00 cre/mre $ $1, Generl helth (mres) f 4 mre $ $3, Generl helth (fols) 4 fol $ $2, Breeding expenses 4 mre $1, $4, Bedding g 4 mre $ $3, Fence repir $3,600 percent 5.0% $ Brn repir $30,000 percent 2.0% $ Mchinery mintennce $58,750 percent 1.5% $ Wste disposl h 4 tons/mre $20.00 $ Utilities $6, Insurnce on mres $16,000 percent 2% $ Hired lor 0 hours $10.00 $0.00 Mrketing fees 4 yerling $1, $6, Breed ssocition memership 1 nnul $ $ Registrtion 4 fol $50.00 $ Other 0 hed/month $0.00 Totl Vrile Cost $33, FIXED COSTS Annul deprecition of cpitl ssets i $11, Annul interest on investment j $6, Insurnce: csulty nd liility $98,750 percent 1.5% $1, Property txes $81,600 rte/$100 $0.63 $ Opertor lor 100 hours/mre $12.00 $1, Totl Fixed Cost $21, Totl Cost $54, Return to Mngement nd Risk -$13, Opertion with four mres producing one fol yer for ech mre. Mres re ssumed to hve useful life of seven yers. In four-mre opertion, this would men n verge mrketing rte of 0.57 hed per yer. c Most horses needs for mintennce cn e chieved with only forge, ut lctting horses often need supplementtion. d Only needed if forge test determines minerl needs re not met y forge intke lone. e Includes weed control, mowing, fertilizer, lime nd seed. f Frrier costs re included in generl helth cost. g Bedding lterntives include shvings, wood pellets, pet moss nd strw. h Wste is ssumed to e composted nd spred cross ville psture. i Deprecition is clculted using stright line deprecition. j Annul interest on investment is clculted using simple interest over the useful life of the sset. * Tle dpted from Burdine et l Mngement nd Cost Considertions for Owners of Horse Businesses 5

7 Tle 2. Annul Helth Cre nd Veterinry Costs for Broodmres * Quntity Unit Price Totl Fecl Egg Count 2 tests $16.00 $32.00 Deworming 2 doses $16.00 $32.00 Vccintion EWE, WN, EHV, EIV, tetnus, ries 1 doses $50.00 $50.00 EWE, WN, EHV, EIV, tetnus ooster 1 doses $30.00 $30.00 Pneumort EHV 3 doses $18.00 $54.00 PHF 1 doses $20.00 $20.00 Strngles 1 doses $20.00 $20.00 Veterinry Visits Bsic Helth Exm 1 tests $20.00 $20.00 Trvel Fee 1 trips $40.00 $40.00 Frrier 9 trims $65.00 $ EIA/Coggins 1 tests $27.00 $27.00 Helth Certifictes 1 cert $30.00 $30.00 Totl helth cost per mre $ Deworming should e sed on results from fecl egg count. Administered during 5th, 7th nd 9th months of pregnncy. # Timing of vccintions: * Tle dpted from Burdine et l Mngement nd Cost Considertions for Owners of Horse Businesses 6

8 Tle 3. Annul Helth Cre nd Veterinry Costs for Fols/Wenlings * Quntity Unit Price Totl Fecl Egg Count 2 tests $16.00 $32.00 Deworming 2 doses $16.00 $32.00 Vccintion EWE, WN, EHV, EIV, tetnus c# 3 doses $40.00 $ Ries d# 2 doses $4.00 $8.00 Botulism e# 3 doses $30.00 $90.00 PHF f# 2 doses $20.00 $40.00 Strngles c# 3 doses $20.00 $60.00 Veterinry Visits 3 doses Bsic Helth Exm 1 tests $20.00 $20.00 Trvel Fee 1 trips $40.00 $40.00 Frrier 3 trims $65.00 $ EIA/Coggins 1 tests $27.00 $27.00 Helth Certifictes 1 cert $30.00 $30.00 Totl helth cost per fol/wenling $ Fols nd wenlings less thn 12 months of ge. Deworming should e sed on results from fecl egg count. c First dose t 4 to 6 months of ge. Second dose 4 to 6 weeks fter first dose. Third dose t 10 to 12 months of ge. d First dose t 6 months of ge. Second dose 4 to 6 weeks fter first dose. e First dose t 2 to 3 months of ge. Second dose 4 weeks fter first dose. Third dose t 4 weeks fter second dose. f First dose t 5 months of ge. Second dose 3 to 4 weeks fter first dose. # Timing of vccintions: * Tle dpted from Burdine et l Tle 4. Broodmre Breeding Costs * Quntity Unit Price Totl Pre-reeding exm 1 exm/mre $30.00 $30.00 Ovultion check 1 exm/mre $40.00 $40.00 Breeding fee 1 reeding/mre $1, $1, Pregnncy check 1 exm/mre $50.00 $50.00 Pregnncy follow up 2 exm/mre $40.00 $80.00 Breeding nd foling supplies 1 supplies/mre $15.00 $15.00 Totl Breeding Cost per Hed $1, * Tle dpted from Burdine et l Mngement nd Cost Considertions for Owners of Horse Businesses 7

9 Tle 5. Cost of Mrketing nd Selling Offspring from Broodmre Opertion * Quntity Unit Price Totl Advertising 12 month $30.00 $ Consignment 1 yerlings $0.00 $0.00 Fitting/Trining 60 dys/hed $20.00 $1, Trnsporttion 0 miles $1.40 $0.00 Sles Commission $0.00 yerling sles 5% $0.00 Pre sle rdiogrphs 1 yerlings $0.00 $0.00 Pre sle endoscopy 1 yerlings $0.00 $0.00 Pre sle helth ppers 1 yerlings $0.00 $0.00 Totl Mrketing Cost $1, Onsite privte trety sles ssumed; thus, no consignment fee, trnsporttion or sles commission. Highly vrile, consult locl veterinrin for cost estimte. * Tle dpted from Burdine et l Tle 6. Annul Utility Expenses Associted with Horse Ownership on Owned Lnd * Averge Monthly Bill Percent to Horses Annul Totl Wter $ % $ Electricity $ % $1, Phone $ % $ Gs $ % $0.00 Internet $ % $ Fuel (gsoline, diesel) $ % $3, Totl Utilities $6, Estimtes of the overll cost ttriuted to horse ownership. * Tle dpted from Burdine et l Mngement nd Cost Considertions for Owners of Horse Businesses 8

10 Tle 7. Broodmre Opertion Costs * Allocted to Business Enterprise Quntity Unit Purchse Price/Unit Slvge Vlue/Un it Totl Purchse Price Totl Slvge Vlue Percent Purchse Price Slvge Vlue Useful Life (yers) Interest Rte Annul Deprecition c Annul Interest on Investment d Horses 4 hed $4,000 $2,000 $16,000 $8, % $16,000 $8, % $1, $ Tck/Brn per equipment 4 hed $2,500 $0 $10,000 $0 100% $10,000 $0 3 5% $3, $ Brn 1 ech $30,000 $0 $30,000 $0 100% $30,000 $0 20 5% $1, $ Lnd 12 cres $4,000 $4,000 $48,000 $48, % $48,000 $48, % $0.00 $2, Fencing 0.6 miles $6,000 $0 $3,600 $0 100% $3,600 $0 7 5% $ $90.00 Truck 1 ech $35,000 $15,000 $35,000 $15,000 25% $8,750 $3, % $1, $ Triler 1 ech $20,000 $5,000 $20,000 $5, % $20,000 $5, % $3, $ Trctor 1 ech $30,000 $20,000 $30,000 $20, % $30,000 $20, % $1, $1, Totl $192,600 $96,000 $166,350 $84,750 $11, $6, Estimtes of the overll cost of n sset ttriuted to the equine usiness enterprise. Bsed on IRS deprecition, depletion nd mortiztion. c Annul deprecition is clculted using stright line deprecition, e.g., ($16,000 - $8,000)/7 yers = $1, per yer is the nnul deprecition chrge for the horse usiness. d Annul interest on investment is clculted using simple interest over the useful life of the sset, e.g., (($16,000 + $8,000)/2) X 0.05 = $600 per yer interest on investment for the horse usiness. * Tle dpted from Burdine et l Mngement nd Cost Considertions for Owners of Horse Businesses 9

11 Tle 8. Annul Cost nd Returns to Operting n Equine Bording Fcility * REVENUE Quntity Unit Price Group Totl Full ord fees 25 hed/month $ $120, Prtil ord fees 0 hed/month $ $0.00 Psture ord fees 0 hed/month $ $0.00 Totl Revenue $120, VARIABLE COSTS Hy c 110 ton $ $16, Concentrte 0 ton $ $0.00 Slt/minerl d 50 lock $16.00 $ Psture Mintennce e 1.00 cre/horse $ $3, Bedding f horse $ $19, Fence repir $7,200 percent 5.0% $ Brn repir $100,000 percent 2.0% $2, Mchinery mintennce $58,750 percent 1.5% $ Wste disposl g 25 tons/horse $20.00 $ Utilities $10, Hired lor 80 hours/horse $10.00 $20, Other 0 hed/month $0.00 Totl Vrile Cost $74, FIXED COSTS Annul deprecition of cpitl ssets h $15, Annul interest on investment i $10, Insurnce: csulty nd liility $181,875 percent 1.5% $2, Property txes $207,200 rte/$100 $0.63 $1, Opertor lor 50 hours/horse $12.00 $ Totl Fixed Cost $30, Totl Cost $105, Return to Mngement nd Risk $14, Full ord costs my rnge from $350 to $1,200 per month. Most horses needs for mintennce cn e chieved with only forge. c It is ssumed horses re fed t 2 percent of ody weight (1,200 ls mture ody weight) d Only needed if forge test determines minerl needs re not met y forge intke lone. e Includes weed control, mowing, fertilizer, lime nd seed. f Bedding lterntives include shvings, wood pellets, pet moss nd strw. g Wste is ssumed to e composted nd spred cross ville psture. h Deprecition is clculted using stright line deprecition. i Annul interest on investment is clculted using simple interest over the useful life of the sset. * Tle dpted from Burdine et l Mngement nd Cost Considertions for Owners of Horse Businesses 10

12 Tle 9. Annul Feed Costs for n Equine Bording Fcility * Quntity Unit Price Totl FULL BOARD 25 horses Hy 4.4 ton/horse $ $ Concentrte 0 ton/horse $ $0.00 Slt/minerl 2 lock $16.00 $32.00 Feed cost $22, PARTIAL BOARD c 0 horses Hy 0 ton/horse $ $0.00 Concentrte 0 ton/horse $ $0.00 Slt/minerl 0 lock $16.00 $0.00 Feed cost $0.00 PASTURE BOARD d 0 horses Hy 0 ton/horse $ $0.00 Concentrte 0 ton/horse $ $0.00 Slt/minerl 0 lock $16.00 $0.00 Feed cost $0.00 Totl Feed Cost $22, Bording opertions my provide full, prtil, nd/or psture ord, nd ech type of ording cn look vstly different from one ording fcility to the next. Generlly includes rn stll, dily feeding nd wtering, wste removl, nd edding, dily turnout for exercise, nd other services. c Often includes mny of the sme services s full ord, ut it my require owner to perform services on weekends. My require seprte feed purchse. d Borded on psture with hy provided s needed. * Tle dpted from Burdine et l Tle 10. Annul Utility Expenses Associted with Equine Bording Fcility * Averge Monthly Bill Percent Cost to Horses Annul Totl Wter $ % $2, Electricity $ % $2, Phone $ % $1, Gs $ % $0.00 Internet $ % $ Fuel (gsoline, diesel) $ % $3, Totl Utilities $10, The percent of the overll cost ttriuted to horses. * Tle dpted from Burdine et l Mngement nd Cost Considertions for Owners of Horse Businesses 11

13 Tle 11. Equine Bording Fcility Costs * Quntity Tck/Brn equipment 25 Purchse Price/Unit Slvge Vlue/Unit Totl Purchse Price Totl Slvge Vlue Allocted to Business Enterprise Purchse Price Slvge Vlue Useful Life (yers) Interest Rte Annul Deprecition c Annul Interest on Investment d Unit Percent per hed $125 $0 $3,125 $0 100% $3,125 $0 3 5% $1, $78.13 Brn 1 ech $100,000 $0 $100,000 $0 100% $100,000 $0 20 5% $5, $2, Lnd 25 cres $4,000 $4,000 $100,000 $100, % $100,000 $100, % $0.00 $5, Fencing 1.2 miles $6,000 $0 $7,200 $0 100% $7,200 $0 7 5% $1, $ Truck 1 ech $35,000 $15,000 $35,000 $15,000 25% $8,750 $3, % $1, $ Triler 1 ech $20,000 $5,000 $20,000 $5, % $20,000 $5, % $3, $ Trctor 1 ech $30,000 $20,000 $30,000 $20, % $30,000 $20, % $1, $1, Other $20,000 $5,000 $0 $0 100% $20,000 $0 5 5% $3, $ Totl $295,325 $140,000 $289,075 $128,750 $15, $10, The percent of the overll cost of n sset ttriuted to equine usiness enterprise. Bsed on IRS deprecition, depletion, nd mortiztion. c Annul deprecition is clculted using stright line deprecition, e.g., ($3,125 - $0)/3 yers = $1, per yer is the nnul deprecition chrge for the horse usiness. d Annul interest on investment is clculted using simple interest over the useful life of the sset, e.g., (($3,125 + $0)/2) X 0.05 = $78.13 per yer interest on investment for the horse usiness. * Tle dpted from Burdine et l AG.TENNESSEE.EDU W 371-B 10/ Progrms in griculture nd nturl resources, 4-H youth development, fmily nd consumer sciences, nd resource development. University of Tennessee Institute of Agriculture, U.S. Deprtment of Agriculture nd county governments cooperting. UT Extension provides equl opportunities in progrms nd employment.