Equine Business Management & Development Gillian McKnight

Consultant

Inverness

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Programme

• Equine Industry UK & in Scotland – Scoping Report 2015 (20 mins)

• Your Equestrian Business

– Look at the bigger picture

– Business planning – why, where & how to start

– SWOT analysis (group exercise)

– Finances - Profit & Loss accounts

– Options appraisal (group exercise)

– Case Studies

– Funding & Pointers

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Facts & Figures

• It is estimated there are of 100,000 horses in Scotland.

– Numbers of horses/equines are an estimate

• The estimated expenditure on horses in Scotland is £216 million

• > £3,105 per horse into the rural economy

– Statistics taken from UK wide data

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Scoping Study

The Scale & Impact of the Equine Industry in Scotland

• http://www.sruc.ac.uk/downloads/file/2391/2015_scoping_study_on_the

_equine_industry_in_scotland

• Nathalie Micoud, Gillian McKnight, Helene Mauchlen

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Equine Industry Statistics - UK

• 2nd biggest employer in the rural sector in UK

• Wide variation across the sector – professional to leisure to tourism

• Contribution of ancillary services & businesses – vets, saddlers, building

stables, arenas, equine physiotherapy, equine sports massage, saddle

fitting, rug washing etc

• Changes to land use/grazing, planning & environment eg construction of

arenas, stables etc

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Current Trends in Horse Ownership

• National Equine Database 2006-12, closed (although focused on

industry & many leisure horses were excluded)

• Database – to be introduced in 2016 at UK level – no Scotland wide

data although ScotGov has responsibility for a devolved legislation

• Largely due to lack of traceability (food fraud)

• At 1-2 acres (0.47 – 0.81ha) per horse, the land area devoted to equine

industry is increasing

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Scotland - Key Information from Report

• Expenditure & Benefits to Local Economy

– Sport, leisure, tourism

• Benefits to People – Health & Wellbeing - physical & mental

• Welfare of Equines – problems of neglect, obesity, burden on welfare

organisations

• Equestrian Industry is fragmented & needs better coordination

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Geographic distribution & trends

• Higher horse population in commuter belts

• A greater increase in horses in rural areas

• Overall increase in small holdings

• More farmers who let or use land for horses

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Holdings in Scotland <0.3FTE & Horse Density

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Horses on Farms in Scotland

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Issues raised by the Industry in Scotland

• Needs better co-ordination between equestrian organisations

• Passports & Licensing of Horses - complex with irregularities

• Horse welfare & over-breeding issues – image of industry

• No licence or qualification required to own or keep a horse

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Issues raised by the Industry in Scotland

• Inconsistencies across industry BHS/UKCC qualifications & training

• Licensing & Accreditation of Premises eg BHS/TRSS, inconsistencies

due to accreditation not compulsory

• Pay, terms & conditions for staff are inconsistent.

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Gaps in Information & Provision

• Health & Wellbeing benefits for people/quality of life is not widely

recognised especially for some key groups

– eg RDA & equine assisted therapies generally funded privately but with

huge social benefits, also fitness, social, psychological for many people who

are otherwise not active

• Access to the Countryside – more demand for safe on & off road riding

to realise these public health & wellbeing benefits

• Ownership & Welfare - BHS Welfare Conference

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Barriers to Sector Entry & Growth

• High costs associated with planning, setting up & running an equestrian

business

• Issues with planning, change of use, business rates, non agricultural

businesses

• Lack of awareness of financial & specialist business support

– BHS Scotland/Business Gateway/SRUC

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Equestrian Businesses

• Are people businesses!

– Need soft skills –people oriented, selling

• BHS support & advice

• BHS website guides

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Soft Skills & Confidence

• “I can’t do this” – too big, too much work, too much money

• Personal planning – daily list, plan ahead

• Prioritise – quotes, banks, contractors, Business Gateway,

LEADER

• Avoid distractions – say no, finish jobs

• Good use of time – delegate

• Spend time doing research

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BHS Website

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Useful references

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Your Equestrian Business

Should be:-

• Simple – or as simple as it can be with straightforward aims & objectives

• Customer focussed – accessible, value for money, well advertised,

• Effective – achieve objectives, identify & minimise barriers

• Sales focussed - generate revenue

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A Business Plan - for bank or grant support

• An outline of the proposed business activities

• Business proposals, objectives and priorities

• Staff skills and requirements

• Market and feasibility

• Financial projections

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Needed for funding, direction, management

• Concept, Vision, Mission Statement

• Legal Structure

• Break even/profit & loss accounts

• Review procedures

• Legal services, accounting

• Record keeping procedures – evidence base

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Profit & Loss Accounts

Income

Total Income

Expenditure - Variable Costs

Fixed Costs

Labour

Rates

Property Repairs

Electricity

Telephone & Administration

Insurance

Vehicle Maintenance

Total Expenditure

Net Profit

Income

Total Income

Expenditure - Variable Costs

Fixed Costs

Labour

Rates

Property Repairs

Electricity

Telephone & Administration

Insurance

Vehicle Maintenance

Total Expenditure

Net Profit

CURRENT

PROJECTED

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You – Owner/Manager

Family – how does the business fit with family or vice versa

Finances – background, secured loan, overdraft, borrow

Values – welfare of horses & people

Vocation – improve life for people or horses

Pleasure – time to ride your own horse(s)

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Business Planning

• Assess business

• SWOT analysis

• Identify opportunities –”options appraisal”

• Cost options – return on capital

• Best options to fit with business

• Training & skills development

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Analysing your business

• What do you deliver now?

– Services: niche or general market

• What are the present challenges?

– Capacity, staff, regulations?

• What do you want to achieve? Ideas?

– More sales, more /new customers?

• Where do you start?

– What can you do to move forward?

– Do you or your business have limitations & can you address them?

– Directly or indirectly?

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SWOT analysis in groups

• Strengths

• Weaknesses

• Opportunities

• Threats

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SWOT analysis in groups

• Strengths – Motivated staff/family, suitable horses, existing premises, good facilities, reputation, locally well known, experience, qualifications, H&S

• Weaknesses – new staff with limited experience/qualifications, parking poor, not set up for on-line payment, no website, turn away business during peak season, limited advertising, prices do not reflect demand

• Opportunities – large market nearby, good hacking, opportunity for shop/café, scope for website, create off-peak discounts

• Threats – similar business setting up with competitive prices, profits reducing, regulation, business rates, overheads & cost increases

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Options Appraisal/Opportunity Analysis

• Can we justify our prices to existing & new customers?

• Can we deliver better quality or offer extra benefits than our

competitors?

• Do we have the skills & resources for this?

• New advertising?

• Can we achieve financial return to meet or exceed targets to cover

costs & reinvest?

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Threats

• Profits reducing & costs increasing

– Look at costs

– Can charges be increased

– New products

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Setting Objectives

• SMART

• Short/specific – clear

• Measurable – set milestones

• Attainable/Actioned – include others

• Realistic – within resources

• Timed – provide a short to medium term timeframe

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SMART Objectives

• What do I want to achieve?

• Who is involved?

• When should I be able to complete it?

• What are the requirements and constraints?

• Why am I doing this?

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Reduce Costs, Increase Charges, New Products

• Plan a meeting

• Have facts & figures

• Discuss with employees, family, business partners

• Look at alternatives

• Inform liveries

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Regulation Does Matter

• Health & safety, staff & horse welfare –aim high

– Risk assessments

• Accreditation, BHS Approved

• Make a plan with a timeline showing achievable steps

– Shows that you are working towards these standards, certification, etc

for staff, customers, etc

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eg Existing Business - Small Livery Yard

• Facilities

– 6ha existing fields, some fences

– determine the capacity of the business

• Owners labour

• Some skills & experience

• Limitations/barriers

– Soil type, wet fields, natural shelter/exposed?

– Water in all fields?

– Access to fields

– Subsoil & substrate for drainage needs assessed

– Capital/loans availability

– No relevant qualifications

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Eg Livery

• Low input/low output?

• New fences & 2 field shelters

• Income from grass liveries per horse per month

– DIY £90 = £1,300 per year

– Part £130 = £1,560 per year

– Full £210 = £2,520 per year

• Pros & Cons

• Income – limited but regular through the year

• Labour requirement – regular but seasonal work on fields, fences

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Proposal to Expand Livery

• upgrade 850m of perimeter fencing and 5 gates with electric mains top wire and solar powered unit

• 2 field shelters

• internal fencing for several grazing paddocks using semi-permanent electric fencing

• installation of small scale renewables to provide electricity

• health and safety equipment?

• managed muckheaps, tying up areas

• small scale shrub planting to provide shelter and screening

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Capital Outlay for Grass livery

• Permanent mains/solar external electric fencing and 6x4m gates

estimated at c£4.50/m

= £4,500 + VAT

• X 2 Field Shelters

= £2,200

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Develop from grass to stables

– 2 grass liveries plus

– 6 stables with turn out

• Livery owner to work part time?

• Include or charge separately for turnout/hay/bedding/changing rugs?

• Offer exercise/schooling/clinics etc?

• Accredited/Approved/Training

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Assess the Market

• New local indoor arena

• Other local liveries?

• What services do they provide?

• What is your market?

• What else can you offer?

• Own horses?!

• Build in expected occupancy for Years 1 – 3

– eg 75% > 100%?

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Example Income from livery & services

• Example 1

• Income for 100% DIY liveries using monthly rates of £90 and £130

• 2 grass = £2,160

• 5 stable = £7,800

• Total = £9,960

• Example 2

• Income for 100% part liveries using monthly rate of £130 and £235

• 2 grass = £3,120

• 5 stable = £14,100

• Total = £17,220

• Example 3 for 100% full liveries using monthly rate of £210 and £405

• 2 grass = £5,040

• 5 stable = £24,300

• Total = £29,340

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Capital Outlay - facilities proposed

• Proposed shed with 6 stables & hay store

• Access track & hard standing for parking

• Outdoor arena

• Quad, wheelbarrows, feedbins, rug storage

• Office/portacabin/toilets

• Fire, health & safety equipment

• c £80,000 Need like for like quotes

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Fixed Costs

• Insurance and public liability (estimated cost) £1500

• Business rates – estimate (exemptions?) £1000

• Vehicle maintenance £500

• Property repairs and maintenance £250

• Administration (telephone, postage, advertising) £500

• Electricity (estimated cost) * £750

• Misc £500

• Bank interest charges (borrowing requirement over 15 years) will depend on individual circumstances eg borrow £40,000 at 4.6%

£5,000

Total c£10,000 per annum

* Renewables – solar PVG/small wind turbine

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Variable Costs

• Hay/transport £2,000 - £3,000

= £330 per horse per annum

• Staff – holiday/sick cover £500

• Skills training & development £500

• Advertising £500

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Potential Expenditure v Income

• £13,000 - £15,000 expenditure including repay loan

• Income between £9,960 (DIY) - £29,340 (100% full livery)

• From £2,220 loss to £16,000 profit

• Few or no DIY as less cost effective

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Viability

• The full livery service would require 3.4 hours per day = 1,241hrs

• A labour demand of 0.56 full time equivalent (FTE = 2,225 hours)

• This would not include exercising livery horses which could add an extra couple of hours per day as well as extra income

• Additional income from renting the outdoor arena, organising training, clipping service, clinics & competitions (need additional H&S, warm up area etc)

• Cost each of the additional options

• Overheads won’t change, variable costs might eg set of poles / jumps?

• Set up one bedroom as B&B

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Large Livery Yard

• 16ha divided into grazing paddocks & good hacking

• 10 stables in yard & 4 in fields

• Tack room, storage room

• Hay/straw store

• 8 full liveries & 16 grazing liveries

• 2 lorries for hire

• 2 own brood mares – bring on & sell

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Development Proposal

• Currently 3 labour units

• But no house on site

• Needs a business case for

– A house

– Expand by 10 new stables for additional full livery

– Labour requirement of 6.48 – local employment

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Financial Performance - Income

• Year 1 £57,600 current annual

– Grass liveries £57.78 per month x 15 = £866.65

– Full liveries £325 per month x 8 (80%) = £2,600

– Lorry rental £50 x 27 per month = £1,333

• Year 2 £90,720 proposed annual

– Grass liveries £0 per month x 0 = £0

– Full liveries £347 per month x 20 (@85%) = £5,893.32

– Lorry rental £50 x 33 per month = £1,666.67

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Financial Performance - Expenditure

• Overheads

– Insurance, business rates, vehicles, repairs, admin, labour

• Fixed costs Year 1 £19,990 Year 2 £45,730

• Variable costs

• Hay, Straw, Feed Year 1 £6,720 Year 2 £10,800

• TOTAL Year 1 £26.710 Year 2 £56,530

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PROFIT & LOSS ACCOUNT

Income

8 Full Liveries 31,200

15 Grass Liveries 10,400

Hire of horsebox 16,000

Total Income 57,600

Expenditure - Variable Costs

Feed 2,400

Hay 3,680

Straw 640

Fixed Costs

Labour 15,000

Rates 2,000

Property Repairs 750

Electricity 300

Telephone & Administration 500

Insurance 440

Vehicle Maintenance 1,000

Total Expenditure 26,710

Net Profit 30,890

Income

20 Full Liveries, £80/week, 85% occupancy 70,720

Hire of Horseboxes 20,000

Total Income 90,720

Expenditure - Variable Costs

Feed 6,000

Hay 3,200

Straw 1,600

Fixed Costs

Labour 38,000

Rates 3,000

Property Repairs 1,000

Electricity 600

Telephone & Administration 750

Insurance 880

Vehicle Maintenance 1,500

Total Expenditure 56,530

Net Profit 34,190

6 PROFIT AND LOSS ACCOUNT - CURRENT

7 PROFIT AND LOSS ACCOUNT - PROJECTED

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Conclusions

• In order to manage the expanding business competently and provide a

high level of horse care it is essential the proprietors reside on the

premises: use for Operational Needs Assessment

• High capital /cost structure

• No grass liveries frees up some fields to make hay to sell to liveries

• Use contractors or own machinery & labour?

• Rent additional fields? Backing & Schooling?

• Link & work with other businesses/organisations

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Adding Value & Innovation

• Environmental considerations – hedges, semi-natural grass and

grassland management

• Weight management/remedial management/retirement

• RDA, equine therapies, link with councils

• Create safe off road multi-use access

• Specialise eg cross country course, shows, events

• Renewables, shop/café, tea room, table top sales, other services?

• Innovation Centre/ Group, education eg run courses

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Gaps in the Market, Innovation

• Sport, leisure, tourism

• Benefits to People – Health & Wellbeing - physical & mental

• Welfare of Equines – education & training

• Equestrian Industry is fragmented & needs better coordination

54 54

Gaps in the Market, Innovation

• Access to the Countryside – Provide safe off road hacking?

• Health & Wellbeing?

– RDA, equine assisted therapies, link with schools, councils?

• Welfare & Breeding: Transparency & Education

• Provide local facilities for integrating organisations/holding meetings

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Funding

• Bank loans

• Equity investment – dragon’s den

• Unsecured loans - eg from family or friends

• Government grants focused on helping and supporting new start-up

businesses

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Ongoing Review & Marketing

• Ask customers for feedback, ideas

• Assess your competitors –what they do, where there are gaps

• Do you need to specialise or broaden out

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Employing People

• Eligibility checks

• Pre employment checks

• Working hours, time off

• Pay rates & pensions

• Health & safety

• Legal requirements

• Training

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Business Help & Support

• Business Gateway

– Workshops on project management

– Business Planning

– Guides for Businesses

– Growth

– Marketing

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http://www.bgateway.com/business-guides/employing-people/templates-for-employers

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Skills & Training

• Help with staff/training

– Modern Apprenticeships

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SRDP 2014 – 2020 Priorities

• Enhancing the rural economy

• Supporting agricultural businesses

• Protecting and improving the natural environment

• Addressing the impact of climate change

• Supporting rural communities

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LEADER

• LEADER including farm diversification & SME’s ..…......£ 86m

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LEADER

– Local Action Groups - Funding Conditions & Restrictions

– Local Development Strategies – follow Scottish Government guidance

• Employment & Economic Growth

• A bottom up partnership approach

• Encourages Local Business Links

• Minimum expenditure on farm diversification & rural businesses

– Eligible applicants – Individuals, Rural Businesses, Constituted

Organisations, Legal Constituted Collaborations

– Some Monitoring & Evaluation requirements

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The LEADER Approach

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Case Studies

• Community account management

• Cultural events

• Museums

• Footpaths

• Landscape Initiatives

• Skills

• Employment and Broadband

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LEADER – Rural Perth & Kinross

• Business Plan published September 2014 prioirities:

– Local economic & community development

– Enterprise development, skills

– Employment & youth

• Community engagement, sustainability, innovation

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LEADER Expression of Interest

• On-line 500 words general statement

• LEADER team can help work with you & provide support

• Maximum grant is generally 50% of total eligible costs

• Evidence of match funding

• <£10,000 project funding – fast track process

• >£10,000 assessed quarterly with application deadline/cut off

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Business Planning

• Need robust financial figures & appraisal - provide a budget with 2

years accounts/profit & loss

• Must help deliver “national priority” eg community benefit,

employees, environment

• Evidence of some added value/ additionality eg access provision

• Evidence of positive impacts eg feasibility study/business plan

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Cont.

• Evidence of reducing negative impacts eg renewables, waste

management

• Collaboration is sought where possible – links with other local

business

• Two valid quotes (must be “like for like”) for eligible items

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Thanks for listening

• Please complete an

evaluation

Gillian McKnight

SAC Consulting

Drummondhill

Stratherrick Road

Inverness

IV2 4JZ

01463 233266

07803 222367