Slide2

Frankly Speaking: Financial Frankness

Slide2Elwood P. Suggins, a character played by the late comedian Jonathan Winters, claimed to be a “Detroit Dynamo.” He knew what it meant to “crash, burn, roll over, have a flat tire and things of that nature.” I guess I’m a little like Elwood P. Suggins, at least with my experience in the horse business. Anyone who’s spent much time in this industry knows exactly what I mean. We’ve all been down that road, and right now it’s about time to wake Leroy up from the back seat so he can witness the crash that’s fixin’ to happen!

Many equine-based organizations (like most not-for-profit institutions nowadays) are experiencing revenue shortfalls. There is less breeding and registering, slower buying and selling (transfer fees), lower entry counts and new memberships. Less, slower and lower add up to fewer dollars, all the way around. Why has this happened? Most recently we point to the “Great Recession of 2008.” But even before that, numbers were trending down because of factors that are still gnawing at our industry today: aging membership demographics, decline of youth members who evolve into adult members, decrease in youth participation numbers, and lessening of the average family’s discretionary income. All these elements, coupled with a dwindling middle-aged membership base, can be a recipe for disaster.

Breed associations, as well as competition-based organizations, continued confidently along in the management of their finances until just recently, especially since 2010. (Right here it is important for all of you to understand that basic horse-mentality has, over time, shown that you can’t participate in the horse business until you possess the feelings of an eternal optimist and have a great capacity for suffering! Keeping those basic tenants in mind, follow me, if you will, to the mindset of leadership.) Officers, executive committees, directors, committee members and staff have managed the affairs of their respective organizations as if this lingering economic recession is but a large “bump in the road.” The horse industry has assured itself, “Things will be better soon and the horse business will once again be back to normal and sustained growth.” Because of the inherent optimism and fortification from external revenue sources – from sponsors and others – the financial budgets of horse-based organizations have not been altered enough to match a true forecast in financial analytics. The operation model that worked in decades past has been kept in play, even though our current economic dynamics are now very different.

Slide3Folks, it has become quite apparent that this ship isn’t turning around anytime soon!

There are solutions to the financial challenges the horse industry faces, but the frame must fit the picture, so to speak. If the number of horses produced annually is going to continue to decline to a point that reaches a plateau of sustainment – and revenues from registrations, transfers, memberships, entries and sponsorship are going to mirror the same – then our business models must be contracted, as well. Organizations cannot simply continue along the “business as usual” route it took in the boom years.

The big-ticket expenses, such as membership services and perks, show production including purse structure, marketing, payroll, employee benefits and general overhead, must be put in line with a revenue stream that fits the budget forecast. We can’t spend what we don’t earn!

It’s no sin to scale back the purse structure within our organizations, especially when entries fall short of what they used to be in the past. There is no endless money stream  that enables the industry to spend what it simply doesn’t have. And membership should understand the need to reduce costs involved with operations and production because of shrinking numbers. We can all stomach a leaner profile in the business model if there still remains a venue in which to compete with our horses. It would be different if the bottom line was where it was in 2006 – then our horse-based organizations could continue along that “business as usual” route. But it’s not. Numbers don’t lie. So the horse industry – like so many people who’ve had to adjust the way they budget for their day-to-day expenses – must also adapt. 

We simply can’t run the boat on to the sandbar, hoping the tide comes in to rescue the ship. 

It’s time for industry leaders, officials and members to take a good, hard look at the numbers and then develop solid plans that keep our activities affordable, yet entertaining. Yes, the bills need to be paid. But it’s also important to make sure that shows and events , draw people in and make them want to stay in our industry. Our activities need to be financially enticing while also being fun, designed to attract participation so that our membership numbers hold steady until such a time that a strong, widespread economic recovery becomes a reality.

This horse business that we all love so much can take a punch or two and still survive. But right now leadership just has to make the hard calls to place our organizations in a more sustainable posture. By doing this, we all benefit and we, as members, should support their efforts.

As always, I remain,

Frank