Ereidi Farm is intending to grow its cash profits by expanding to a larger turn-key facility. Although more expensive to purchase, a turn-key facility of world class quality allows the immediate generation of cash flow at the higher end of the market. The facility we are purchasing does not require the additional expenditure of capital resources to be fully functional, it is ready for business.
Our farm sells a service and does not maintain an inventory.
We operate on a "Cash Only" basis and choose our clients accordingly. It is very rare that we except payments of any type although we may do so when selling one of our home-grown foals to a well-known and trusted client. Our cash only approach allows us to maintain sufficient cash on hand and not waste valuable time and resources collecting amounts due.
At this time, the owner's husband supplies additional capital as needed from his current job. He will continue in his current employ.
Important assumptions concerning the thoroughbred market and Ereidi Farm's targeted market include:
The thoroughbred market industry in Pennsylvania will continue to grow. The added slot machine legislation will cause a dramatic growth spurt in racing programs within the state, quickly causing an increase in the demand for services within the state.
Statistics will continue to indicate the decline of racing programs in traditionally strong racing states. Owners of bloodstock within these distressed states will actively seek out new locations in which to relocate their horses and operate a profitable, quality stable.
New owners will invest in the industry, they will be reached by large industry umbrella operations such as the NTRA and TOBA. (National Thoroughbred Racing Association and Thoroughbred Owners and Breeders Association) respectively.
Our targeted markets will continue to post personal income growth despite fluctuating economic conditions. They will continue to invest in non-traditional "exotic" investments such as thoroughbred racehorses.
Break-even assumptions are as follows:
Break-even calculations are shown in the following table and chart.
Our planned expansion realizes a profit after total expenses are deducted from gross profit. As growth occurs, expenses increase accordingly, however our net profit also continues to grow. This reflects the typical cost of doing business in the horse industry as a whole.
Ereidi Farm is a "Cash Only" type of business. Although we do accept payments for the horses we raise and sell, the rest of our business is cash based in order to increase cash flow and limit the farm's liabilities.
The balance sheet in the following table shows sufficient growth of net worth, and a sufficiently healthy financial position. The monthly estimates are included in the appendix.
Please note that specific variable and fixed expense categories have intentionally been left blank as these expenses are already figured into our "cost-per-horse" expense.
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 0752.0102, [Breeding services, horses: racing and non-racing], are shown for comparison.