Tuesday, December 9, 2008

It's Ownership Day!

I read a couple of excellent posts from fellow TBAers Pull the Pocket and The Gathering Wind on the vagaries of ownership and what to expect and not to expect when owning a racehorse. At first I was going to comment on their posts and then decided that maybe this topic required a little attention of my own.

I'll start off by saying that I don't disagree with them. In fact, anyone who decides that racehorse ownership is the fast track to retirement is more than a little loopy. You have to get in for love of the sport and love of the horse. You also need to be responsible for your chargers - get involved with finding homes for off the track racehorses, support horse rescue charities, support disabled jockey's charities, basically be a part of your local racing community.

These caveats out of the way and upfront, here are some of my guidelines as an owner and a managing partner of a partnership.

  1. When you are accepting people's money and they place their trust in you, you need to take your fiduciary responsibility seriously. The needs of your animal come first, but this, to me, is 1A. This doesn't mean discarding your animal when they're no longer viable, but certainly means taking them out of training quickly if there is a problem and getting them to a vet and a farm so you're paying a turn out rate rather than a track rate. Sometimes it's the little things, but stay on top of them and protect people's money like it were your own.
  2. Try to make money. This is kind of a corollary to point 1. Yes, you know that you take good care of your horses and that not everyone else does. That being said, if you don't have an allowance/stakes horse then you're in the vast majority of claiming owners that have their horses up for sale each and every time they race. You can't be afraid to have someone claim your horse. You need to run them where they have a chance to win. Sure, challenge them up the class ladder if they can handle it, but to run them over their heads so you don't lose them? It's bad business and you're not giving yourself a chance. Also, if a horse cannot compete they will become defeated. Sure it sounds odd, but it's true. A horse than runs consistently over it's head may never be competitive again even against inferior stock once his will is broken. Claiming is a big part of this business - if you're not comfortable with that, then perhaps this game isn't for you.
  3. Communicate, communicate, communicate. I stressed this one a few weeks ago. Make sure folks are getting in for the right reasons and have an expectation of the business. I tell them that we're not racing robots, we're racing horses and these athletes can develop issues and that, while making money is one of the goals, so are the enjoyment and excitement of owning a racehorse. After the expectations are set, let them know whenever you know anything about their horse. I send out a major update once week when horses are in training to everyone on the mailing list, but I get each group information as soon as I can get to a PC and let them know - by phone if it's anything urgent. This could mean they get updates a couple of times a week in addition to the master update.
  4. Don't be afraid to make money. This applies to folks who run partnerships. I do charge a monthly fee (low compared to many, but I'm comfortable with it for now) as well as a percentage of purse money. I pay the bills, get licensed, communicate with the trainers, make decisions on turns outs, keep everyone informed, decide which horses to claim and which races to run in (along with the trainers), coordinate tax information and more. I'm not embarrassed to be compensated for it. Be fair but be compensated.
  5. Keep good records. This is hard for many of us, myself included. In fact, business is growing enough where I need to pick up some accounting software to help out. I have files for each group and each horse with all receipts. I have a notebook where I tally any and all activity that concerns the racing venture with hours put in and any mileage driven. You need to be able to prove that you're running a business and not just being passive in your investment for the IRS. A great book available outlining what you need to keep track of is the Official IRS Guide to Auditing Horse Activities. If you don't have this and you're running a horse business - pick it up. The info is important and could be necessary (let's hope not)!
  6. Finally (and this is not a comprehensive list), enjoy what you do. Get to the track. Get to the backstretch. Visit your horses. Get to know their personalities. If you're a managing partner, make sure your partners have access to do the same. It is such an important part of being in the game and those memories, photographs and videos will last a lifetime. The sport has a lot to offer - take advantage of it and enjoy yourself!!

Again, this is far from a comprehensive list and I'm sure as I read over it I will come up with things I missed or wish I put in here. But these are the basics and the biggies. Take care of your animal. Have fun. Have honest and reasonable expectations. Get involved in the racing community. Try and make money. Make memories that will last a lifetime.


Pull the Pocket said...

Super post.

#2 I think is the hardest thing to do, and I imagine it is extra difficult for a syndicate manager. When a horse is racing well, no one wants to sell. When he is racing poorly everyone does. Giving up a horse that has been winning I think, is akin to selling a stock that is going up.

Being in this as a hobby we have been met with that many times. I think the true success stories have always been able to sell a winner, for a good sum, rather than keeping him and seeing him not realize potential.

Anyhow, good luck.

Ted G said...

Thanks and I agree. I think I'd rather get claimed from a race too early then wait too long. I guess all you can really do is run them where they belong and don't try and get too cute with your placements.

Thanks for visiting!

Geno said...

Thanks for the link to the IRS book, I will be picking this up for the stable I am the CPA for.

QuickBooks is pretty easy to use, I trained my client to use it in less than a day and set up each horse as his/her own class so you could track each horse's profitability, etc.

Good stuff Ted.

Winston...not really said...

Great post. I too will be picking up a copy of that IRS guide.


Ted Grevelis said...

The IRS guide is a great resource, but very dry reading. That being said, ALWAYS better to be safe then sorry...