Horse Training Business Plan

Ereidi Farm’s largest market segment will be owners of quality thoroughbreds who do not reside in Pennsylvania.  As racing purses and breeding fund monies begin or continue to decline in several traditionally strong racing states, owners are searching for more profitable venues in which to place their horses.  This coupled with the anticipated growth in purse and bonus monies available to Pennsylvania-breds and in Pennsylvania races, has made this state an attractive possibility for owners relocating their bloodstock to more lucrative markets.

This trend is beginning to reveal itself in statistical data.  Pennsylvania has increased its U.S.  Foal Crop share (2.7%) and is now in the top ten of all producing states.  The average stallion book size has also increased and Pennsylvania now is ranked in the top ten for stallion book size.  Top ten states posting a decrease include:  California, Texas, Maryland, Oklahoma and Illinois, indicating declines in their racing programs.  Neighboring New Jersey has also posted a decline (-38.1%) reflecting the health of the industry within its borders.  Ereidi Farm has received many requests for boarding and foaling services from residents of Maryland and New Jersey reflecting the need of residents from these states to relocate their thoroughbred operations.

Research indicates that today’s thoroughbred owner is most likely to fit the following profile:  male (special note: women thoroughbred investors are on the rise although they usually invest in ownership through partnerships); average age is 45+, lower than previous years supporting overall national salary statistics and many more owners are pooling their resources and forming partnerships; income in excess of $90,500 per year; is a knowledgeable investor and takes a business approach to thoroughbred investing; focus is on quality not quantity and understands and expects to pay for better quality services; over 80% utilize the Internet and its resources.

Pennsylvania provides great opportunity for new or migrating investors as our state’s historical position of thoroughbred production and racing has been one of “low end” quality.  These facts make Pennsylvania an opportunity zone for those with quality bloodstock programs and for those who can offer quality services and facilities to accommodate incoming horses.   

4.1 Market Segmentation

Ereidi Farm has targeted the following markets for its growth strategy:

1. Potential clients who are currently breeding and racing their horses in states with declining racing and breeding programs.  These clients are not only looking to relocate, they are used to spending more per horse than the traditional Pennsylvania thoroughbred owner.  States with declining racing programs will have declining Foal Crop share percentages as owners relocate their mares to more lucrative states.
   Declining US Foal Crop share is present in: California (-26.6%), Texas (-12.4%), Louisiana (-19.0%), Maryland (-35.8%), Oklahoma (-39.6%), Illinois (-35.4%), New Jersey (-38.1%), Virginia (-32.9%).  These figures correspond directly to overall racing programs and conditions within each of these states.  Thoroughbred owners within these states have been specifically targeted by Ereidi Farm.
2. Pennsylvania thoroughbred owners who are looking to upgrade the quality of their racing and breeding programs.  Small owners who fail to upgrade their programs within the state will get squeezed out by incoming competition, upgrading will become key to staying in business.
   Pennsylvania has begun to prepare for the upgrading that slot machines will have on racing purses within the state by bringing in new, better quality stallions.  Pennsylvania is now in the top ten for Distribution of Active Stallions and Mares Bred, standing 103 stallions in 2002, breeding 1,009 mares in 2002 posting an average book size of 9.8% (increasing from 2001’s 8.5%).
3. New thoroughbred investors/partnerships represent great opportunities and investors are comparing state programs.  Pennsylvania scores high posting not only increasing purse monies but also substantial owner/breeder/stallion owner awards.  The breeder of any registered Pennsylvania-bred foal earns 20% to 30% (depending on state stallion stands in) residual income from the bonus program if a foal finishes first through third in any Pennsylvania race, not including stakes races.
   The owner of the horse at the time of racing is eligible for an additional 40% in bonus awards and the stallion owner (if a registered Pennsylvania stallion) receives a 10% bonus – all residual income! Ereidi Farm will specifically market to non-thoroughbred owners with incomes in excess of $90,500 who are professionals with investment backgrounds.  We have attracted several new clients this way including non-U.S.  residents.

4.2 Target Market Segment Strategy

Ereidi Farm provides a high-end type of quality and service within our industry, it is therefore imperative that we define, locate and attract clients who have the funds available in which to purchase our services.  Understanding the historical flow of regional racing is important to client recruiting.

The better regional racing stables traditionally raced on the New York, New Jersey and Maryland circuit.  Horse that could not win in these states were shipped to the “low-end” racing circuits (i.e., smaller purse sizes) of Pennsylvania and West Virginia.  Because horses racing in these “low-end” states did not earn as much money, their owners did not have the means to pay higher prices for services, hence most farms in Pennsylvania (there are some exceptions) focus on price before quality and rely on quantity numbering to reach their quotas.

As our standards for acceptable care are quite different from the traditional Pennsylvania farm, it was most important to define and locate clients who would meet our defined “ideal client” profile.  Our clients are well-educated professionals, they utilize Internet resources to stay current with industry changes and trends.  They expect outstanding service and are willing to pay for it.

Upon securing financing for our expansion, Ereidi Farm is prepared to roll out its marketing campaign.  We will target our client base through the use of:  Internet advertising of sites frequently visited by our clients, our website, print advertising in selected magazines and national newspapers, industry sales, seminars and trade shows, business-to-business contacts, organizational memberships and open houses at our facility.

4.3 Service Business Analysis

The thoroughbred industry in the United States is the largest in the world, offering 55,127 yearly races (2001).  Japan is ranked second with 23,820 races and Australia third with 21,218 races.  Thoroughbred racing as an entertainment choice is growing.  Pari-mutual handle on thoroughbred racing in the United States topped $15 billion for the first time last year according to the statistics contained in the 13th edition of The Jockey Club Fact Book released 02/07/03.  Handle on U.S.  races in 2002 reached $15,062,131,835.  (including separate pool first reported in 2000), an increase of 3.5% against 2001.  This marked the ninth consecutive year of growth in handle.

U.S.  purses, meanwhile, advanced 0.6% in 2002 to $1,074,247,738.  The bulk of the increase was derived from states whose tracks offer expanded forms of gaming, namely Delaware, Louisiana, New Mexico and West Virginia.  Pennsylvania will join this list upon the passing of current slot machine legislation and its purse sizes will increase as will the number of thoroughbreds racing for the increased purse offerings. 

In addition to purse offerings, owners and breeders have another source of income and this income is residual.  The Pennsylvania Horse Breeders Association (www.pabred.com) manages the Pennsylvania Breeding Fund Program.  This program distributes more money, on a per foal basis, than nearly every other state-bred program now in operation.  Currently, it distributes approximately $9.5 million annually with specific percentages being awarded to owners, breeders and stallion owners.

These specific percentages are awarded to the human connections of the horses finishing first, second or third in Pennsylvania races.  The criteria for qualifying for these residual income awards are simply that the horse must be a registered Pennsylvania-bred foal.  To be a registered Pennsylvania-bred foal, a mare must foal in the state of Pennsylvania and meet residency requirements.  This has increased the demand for quality foaling and boarding facilities within the state.  Awards are based off of percentages from purse monies earned and they are a very attractive incentive to draw clients from outside of Pennsylvania.

Pennsylvania racing is poised for a lucrative and dramatic growth period, smart investors are positioning themselves within the state, preparing to capitalize on the new purse structure that slot machines will provide.  This has already lead to a shortage of stall space at tracks and farms throughout the state as well as increased demand for quality services and programs.

Ereidi Farm realizes that market entry into any expanding market is always time critical, it is our intention to be properly positioned to absorb the expanding growth as it occurs within our state.  Research indicated that most of the expected growth will occur as outside owners enter Pennsylvania.  These owners have already been targeted as those most desired by our farm, it is our strategy to have completed our relocation prior to this time in order to better provide the services the incoming owners will be searching for.

4.3.1 Competition and Buying Patterns

Pennsylvania has many small farms operating with a “Price is Vital” philosophy.  These farms were created to service the traditional Pennsylvania thoroughbred owner.  It is not our intention to run our facility in this manner, our focus has always been on exceptional quality care and outstanding customer service.

Pennsylvania does have a few large farms that do market themselves as being full service facilities.  A few of them do attempt to market to our intended client base.  These farms include:  Pin Oak Stud, Xanthus Farm, Reigle Heir Farm, Castle Rock Farm and Swatara Farm.  Of these, only Pin Oak Stud positions itself as a full service facility, the others are focused on the stallion and breeding market.

One of the most frequent comments we hear from our clients is how happy they are with the care their horses receive while at our farm.  We exceed their expectations.  Another frequent comment is how comfortable our clients feel talking with us.  Their focus is on the quality of our programs and our business relationship.  Price has not been an issue for our clientele as they understand the cost of delivering world class care and service.  These are the driving factors our clients consider when making decisions about where to send their horses.