Gaited horse breeding business for profit?

To shed some light on this, let me tell you a little story.  A few months ago a woman, who works for a magazine I have written articles for occasionally off and on over the years, came to me at my booth at a horse expo, where I was a featured clinician.

She asked me if I would be willing to let a young lady (about early junior high age) interview me.  Naturally, I said, “Sure”. I really enjoy doing things like that.  This sweet young gal asked me the same question you are now asking me; what did I think about her making a career as a horse/breeder trainer?

Without hesitation, I told her she’d be better off to stay in school and become a doctor, lawyer, or business executive, and play with horses as her hobby… her recreation instead of her vocation.

Well, no surprise, the lady from the horse magazine was horrified by my answer.  She got really angry with me.  In fact, come to think of it, I haven’t been invited to write for that magazine since then.  I guess the little girl was surprised by my answer too.

They were obviously expecting me to give them some sugarcoated answer, describing the financial rewards of my chosen profession. Sorry to be such a party pooper!

But, I’d bet if you were to ask the parents of the young lady what they thought about my answer, they’d probably concur… and be slipping me a few bucks under the table when no one was looking.  So, I’ll stand by my advise – it was based on my personal experience.  And it was honest.

As apparently you already know, I’ve been breeding, raising and training horses for about thirty years now.  Let me give you a little background about how I got started doing this.  Back in the early 70’s, after I had bought, retrained and sold a handful of Quarter Horse type “grade horses” successfully, I came up with the bright idea of buying some young Appaloosa stock at an old time breeder’s annual production sale.

My plan was to purchase them cheap and train them myself, from the ground up, for fun – and a little profit.  Each year I’d go out to this remote ranch in the middle of the San Louis Valley where I spent a few days checking out the hundred or so head of totally wild, untouched, unbroke horses, deciding which ones I was going to bid on.

I usually bought three or four loud colored ones (that’s what I could fit into my stock trailer): all two and three-year-olds.  Horses that age aren’t fully grown (or in their full strength), making them a little easier to handle than the older ones.  I could get them started under saddle right away, and turn them around in a year or so – quick and simple.

The horses I was working with back then weren’t the Quarter-Thoroughbred type of Appaloosas you see so often today.  They were real Indian Ponies, with lots of Spanish blood showing in them. Compact, athletic and agile, some of them even gaited.  I bought unbroke colts for about $300.00, and resold them, after training, for $1,000.00 to $1,500.00 a piece.

In those days (back in the mid-70’s) that looked like pretty darn good money, considering I had just bought a brand new Dodge Club Cab four-wheel drive pickup for about $3,500.00.  I was Town Marshall in Crested Butte, Colorado at the time, so I had a modest, but regular income to rely on.  Getting a few horses under saddle in my spare time, and selling them, just gave me a little extra income to add to the financial pot.

Then, in 1980 I moved from Crested Butte to Crawford, Colorado (not be confused with Crawford, Texas, thank you), for the purpose of becoming a fulltime horse breeder and trainer.  I sank all my savings into a magnificent 40-acre piece of land and built my dream home, barns, and outbuildings on it.  Big cattle ranches, confined by a semi-circle of high mountains, surrounded my Needle Rock Horse Ranch.  The place was drop-dead beautiful, a perfect spot from which to raise and (more importantly) market my horses.

Having moved my family and my 25 head of Appaloosas to this more isolated location, I quickly realized that this breed wasn’t going to bring in the income necessary to sustain my ambition of making my living being a fulltime horse rancher. That’s when I began shopping for a new breed.  After some market research, I decided to switch to Peruvian Pasos.  The mares I now own are third and fourth generation offspring from the breeding program I started way back then, twenty-five years ago.

At first, in spite of the much larger upfront financial commitment, we did very well with our newly adopted naturally gaited Paso horses.  I discovered that I was able to buy mares in California (usually from divorce sales) for $5,000.00 to $7,500.00.  We re-sold those same horses for about $10,000.00 to $16,000.00 a piece, usually doubling our money on our investment in a year or two.

Reinvesting our profits in horses, we quickly accumulated a nice broodmare band.  At one point we had about 45 mares and their foals and stood three stallions at our facility.  Over the course of the next ten years, we produced anywhere from six to sixteen foals per year.  The colts sold as weanlings for about $3,500.00 and fillies brought $5,000.00 or $6,000.00 each.

Fillies brought more in those days because people could write them off their taxes as potential breeding stock.  At about this time I bought a brand new Ford Extended Cab, four-wheel drive pickup with a big 460 V8 engine for $7,500.00…considerably less than what I was getting for one of my Peruvian Paso mares.

After being in the Peruvian Paso breed for a few years, I bought a beautiful two-year-old liver chestnut colt from Hacienda de la Solana for $25,000.00 (over $100,000.00 in today’s dollars). He’d already been doing well at halter in the show ring in California.

Once I got him going under saddle, and I had won a few championships with him in bosal, I syndicated my new stallion, a horse named Granadero, for $400,000.00.  I divided the syndicate into forty shares, always keeping twenty-one shares for myself, thus maintaining control of the syndicate-and the horse.  At the height of the syndicate’s success, I sold shares in Granadero for $10,000.00 a piece.

Each share gave the shareholder the right to one breeding to Granadero per year, which he could use on one of his own mares, or sell to someone else.  Many of my syndicate shareholders bought their broodmares from me too and kept them boarded at my ranch, year round. Of course, I got extra money for boarding, training, and showing the mares and foals, and my clients could write off all their expenses on their tax returns and thus justify a few trips to Colorado each year to check on their “equine investment” – and go skiing, etc., as well.  

It was working very nicely – until the government changed the tax laws.
If I recall, those dramatic tax code changes took place somewhere in the mid-80’s.  In a matter of years, all my wealthy tax-deducting Peruvian Paso devotees wanted out – not wanting to run up a “red flag” to the government, and draw on automatic IRS audit.  Unwanted horses quickly overloaded the market.  Big breeders in all breeds went bankrupt, their horses flooding the already saturated equine marketplace.

Many investors were willing to take .20 cents (or less) on the dollar, just to “unload” their horses, cut their losses and move on.  The Arabian market, exemplified by Lasma in Scottsdale, Arizona, was a sad example of the tremendous fallout. Horses that had been bought as an investment became a liability, almost overnight.  Speaking on a personal level, stallions that I had offered to buy for $20,000.00 (and been turned down) a year before, sold at auction for less than $5,000.00.  In my opinion, the recreation/pleasure horse industry went into the toilet at this time and has never really recovered – end of story.

So, if that doesn’t discourage you, or scare you off, let’s look at some of the financial realities you’d be faced with, being a horse breeder today.  First, you must own a good quality mare to produce a good quality colt.  Why?  Roughly speaking, I’d say that mares contribute about 60% of the qualities of the get – the stallion about 40%.

Let’s say you pay $8,000.00 for your mare as a three-year-old.  Using national breeders’ statistics as a guide, you can expect to produce a foal from that mare every other year.  If nothing goes wrong, she might produce six to ten foals for you over the course of her lifetime.  So, let’s say you use her until she’s twenty years old, and you get eight foals (probably overly optimistic) from her.  At the end of that time, you have no value left in her, but you have had eight foals.

So, it cost you $500.00 per year to amortize her over her lifetime, just to own her.  Then, it costs you about $1,000.00 more per year to keep her or $2,000.00 per foal.  So, that means you have already invested about $3,000.00 in each colt before you are even started – follow me so far?

Next, you must either buy and keep a stallion, or purchase a stud fee for each colt. Let’s say you decide to pay stud fees and use shipped semen. You’ll pay at least $500.00 stud fee, plus another $500.00 in shipping and vet services to get the job done.

Remember, each time you inseminate with shipped semen you only have about a 50% chance that it will take, at best. If the mare doesn’t catch on the first few tries, your time will run out for that breeding season, and you’ll have to wait until the next year. Or, you purchase a stud horse worthy of your good mares. Let’s say you pay $10,000.00 or more for him.

Divided over 10 years, that will cost you $1,000.00 per year, plus $1,000.00 more per year to feed and care for him. If you have more than two mares to breed, owing your own stallion may be the best way (financially) to go – provided that you can afford (and can actually pick) a horse that compliments and improves your mares.

Note: most people don’t do this, and end up producing inferior horses as a consequence. Either way, you’ll have at least $1,000.00 tied up in getting your mare bred. So, now you have at least $4,000.00 in the colt…before it even hits the ground.

O.K., so let’s say you get a nice colt every other year from your mare. Remember, you’ve got $4,000.00 invested already. Now, you have to feed and care for this colt, at least for the next three years, before you can get him sold (everyone wants a fully trained, kid proof, bombproof trail horse these days). That will cost you at least another $1,000.00 per year for feed and care, unless he gets sick, in which case your bill could skyrocket, (or you might decide it’s financially more feasible to put him down and lose everything).

By the time he is ready to go under saddle you’ve got $7,000.00 invested in him.  Now, add another $600.00 per month for training.  Before he’s ready to sell, that’s going to add at least another $2,000.00 to your invested expenses.  Now you are at $9,000.00 – if everything goes as planned.  Unfortunately, horses are an accident waiting to happen, so you may have other unexpected costs not listed above, not to mention the various other items I have undoubtedly left out in this quick, thumbnail synopsis.

Now, think about the price of a new four-wheel drive extended cab pickup truck today.  Just thinking about it makes me go into sticker shock — $35,000.00 or more!!!  But, owning a pickup is almost a necessity for a horse breeder, so its price makes a good benchmark to work from.

Based on that price, in order to keep pace with rising costs, and the obvious devaluation of our good old American currency (that we have all experienced of the twenty-five years that I have been breeding Paso horses), you’d have to betting at least $35,000.00 for a mare, just to have kept pace.

In fact, truth be told, in today’s market you’d be lucky if you could get even one-quarter of that amount.  On that basis, you’d have to sell at least four mares to buy one pickup.  Given this information, I ask you, and what do you think a nicely bred, nicely trained three-year-old pleasure-trail riding gelding should be selling for today?  How much return on your work and investment do you think you should be able to anticipate?

If you were to ask me, given today’s low rate of inflation, I’d say you should at least be able to make 10% per year, or a 30% markup over costs in the three years you have your money invested – let’s say roughly $3,000.00 in profit, for the $9,000.00 you’ve got invested.  That would mean that your gelding would have to sell for at least $12,000.00, minimum.

Now remember, this does not take into account the truck and trailer, the stalls and paddocks, the manual labor, the farrier, and, of course, all the advertising and promotion you’re going to have to shell out more money for, to sell this horse.  Add those to the picture and you probably are looking at a price tag of around $15,000.00 minimum to even begin to make it worth it!  Does this still sound like something that you want to do?  Or could do?

We all know how much most horses actually sell for in today’s overstocked, undervalued marketplace.  Based on that knowledge, I’d have to say that for most people horse breeding isn’t a good business opportunity…it’s an expensive hobby.  Most horses are not a financial asset – they are a liability.  Don’t want to believe me?!  Go ask your friendly banker for a loan using your horses as collateral.

Coming to grips with this reality, even though we still own eight Peruvian Paso mares of breeding age, Maria and I have cut our horse-breeding program back to two to four foals born per year.   We do this more as a labor of love than an occupation, knowing full well that we probably won’t sell any of those horses for enough money to cover the actual costs incurred – let alone make a decent profit.

We now breed our remaining Peruvian Paso mares to our Mountain Pleasure Stallion, “Big Red”; producing naturally gaited horses we call Paso-Pleasure Horses. Currently, these horses have no registration papers (although they could be registered as Part Blood Peruvian Pasos and/or Kentucky Mountain Saddle Horses).  By not registering them, we avoid the unnecessary expense, and unwanted politics and backbiting so prevalent in most breeds.  Our Paso Pleasure Horses sell based on their own qualities and my reputation as an equine clinician.

That said I want you to know that we are enjoying our little experiment.  We are very pleased with the horses that we are producing; horses that are: “beautiful to behold, smooth to ride and easy to handle”. Still, we have no illusions about making money with them. We finance this hobby with the income from our company Have Saddle-Will Travel, innovative outfitter for people who were “Born to Ride”.

We produce Paso-Pleasure Horses for our own pleasure. If you want more in-depth information on these and related subjects, let me recommend a copy of my book Paca Paca, A Sure Cure for the Trots: Everything You Ever Wanted to Know About Peruvian Paso Horses, But Didn’t Know Who To Ask or Horse Handling-Horse Sense: A Practical Guide for Today’s Pleasure-Trail Riders (especially for naturally gaited horse riders).