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  1. #1
    Join Date
    Dec. 27, 2007
    Location
    California
    Posts
    40

    Default Value of Boarding Business

    I am looking for opinions on how to value a boarding business that is for sale.

    The boarding business is not currently doing well and is operating at a loss, but this is more due to mismanagement. Debt in the low five figures exists. There is room for growth and success in the business. The boarding business leases the facility and tractors from an uninvolved Owner, so there are no assets owned by the boarding business.

    Essentially the only thing of value is that the facility has established customers - Goodwill - so the business would not be starting from scratch. While it's possible some customers may leave under new management, it is expected that most would stay.

    There is a very small lesson program in place with no more than 25 students, some of which are boarders.

    So how do you put a price on this business?

    ANY help is appreciated!



  2. #2
    Join Date
    Aug. 17, 2004
    Location
    Rixeyville, VA
    Posts
    6,521

    Default

    Look at the lease and look at the books VERY CAREFULLY. Do a business plan --if it hasn't been run successfully in the past, what is the new owner going to do that will improve the bottom line?
    Where Norwegian Fjords Rule
    http://www.ironwood-farm.com



  3. #3
    Join Date
    Apr. 26, 2010
    Location
    WV
    Posts
    244

    Default

    I've owned boarding businesses in 3 locations. They ALWAYS lose money. Their only value is to bring in customers for other activities. It's a service, not a money maker.



  4. #4
    Join Date
    Jan. 17, 2008
    Location
    Dutchess County, New York
    Posts
    4,062

    Default

    I wonder if you have a small community bank if they would talk to you about this. You could ask them what they would loan such a business. My guess is nothing . . . I'm not sure why you would need to buy the business, why not wait till they closed and then lease the facility? (There may be good reasons, but they aren't mentioned in your post)



  5. #5
    Join Date
    Oct. 20, 2001
    Location
    San Jose, CA
    Posts
    1,112

    Default

    I wouldn't pay a cent for a business with no assets, five figure debt and consistent operating losses.



  6. #6
    Join Date
    Aug. 25, 2007
    Posts
    8,691

    Default

    Quote Originally Posted by Zevida View Post
    I wouldn't pay a cent for a business with no assets, five figure debt and consistent operating losses.
    Have you considered running for Congress? You've got a pretty good grasp of economics, here!!!!!!!!

    G.



  7. #7
    Join Date
    Oct. 2, 2007
    Location
    Beyond the pale.
    Posts
    2,957

    Default

    a horse business with no assets and some debt, is not worth anything.

    Remember the old joke: How do you make a small fortune in horses? Start with a large fortune.

    Too true.
    "The Threat of Internet Ignorance: ... we are witnessing the rise of an age of equestrian disinformation, one where a trusting public can graze on nonsense packaged to look like fact."-LRG-AF



  8. #8
    Join Date
    Dec. 31, 2007
    Location
    AreaII
    Posts
    1,348

    Default

    Quote Originally Posted by Zevida View Post
    I wouldn't pay a cent for a business with no assets, five figure debt and consistent operating losses.
    THIS!!!!

    I agree- it is not WORTH anything. You don't "make" money off a boarding business. You make it with lessons, other services, add ons, etc. 25 students is not going to pay the rent either depending what your location is. Be prepared to donate your funds to a good cause (horses!).



  9. #9
    Join Date
    Jan. 26, 2001
    Location
    NC
    Posts
    4,373

    Default

    No assests, no value. Are there lesson horses? What horses are used for the 25 lessons?



  10. #10
    Join Date
    Jun. 27, 2010
    Location
    SE VA
    Posts
    1,206

    Default

    Quote Originally Posted by Almost Heaven View Post
    I've owned boarding businesses in 3 locations. They ALWAYS lose money. Their only value is to bring in customers for other activities. It's a service, not a money maker.
    Not to be *that* person, but I have a nine stall boarding business myself. I do not teach, lease, etc... Just board, and I do make money doing it. Also I get my mare boarded for free so there is another 450 a month in my pocket. I never understood why everyone says you can't make money boarding. You just have to look around for deals on hay, shavings, etc...

    Good luck!



  11. #11
    Join Date
    Jun. 4, 2002
    Location
    Suffolk, VA
    Posts
    16,684

    Default

    Quote Originally Posted by mpsbarnmanager View Post
    Not to be *that* person, but I have a nine stall boarding business myself. I do not teach, lease, etc... Just board, and I do make money doing it. Also I get my mare boarded for free so there is another 450 a month in my pocket. I never understood why everyone says you can't make money boarding. You just have to look around for deals on hay, shavings, etc...

    Good luck!
    I'd agree that counting direct costs like feed/hay/bedding, you generally do make a small amount of money boarding...however...when you count in overhead and indirect cost like utilities, liability and care/custody as well as farm insurance (a big one if you are doing it right), payroll taxes, depreciation, mortgage/lease, repairs, maintenance, etc...you aren't making anything or very little.

    When I'm at low capacity, the boarders are actually costing me money to keep here...figure those indirect costs you must have to simply operate. At full capacity, I can make a little money. That concept is overhead absorption...the more activity you have, the more you can spread your fixed and indirect costs out over more "units" (horses).

    BTW...I spent most of the last 15 years in cost accounting so I know how to crunch numbers.

    For the OP...I'd agree that the business has little real value. Goodwill, which is an "intangible asset" is generally worth something but it's not generally going to pay the bills. If you can't put together a business plan showing enough profit to pay yourself a salary, I'd avoid this deal.



  12. #12
    Join Date
    Jun. 2, 2009
    Posts
    1,258

    Default

    Quote Originally Posted by mpsbarnmanager View Post
    ... I never understood why everyone says you can't make money boarding.
    Me neither. I make a decent living from my boarding farm too. The income from it pays for my family's daily expenditures and the whole expense of everything related to running my farm. It does not pay for extras though (new cars/house remodelling/vacations etc) so for that I do use the income from horse/hay sales and our other related equine businesses. Perhaps my situation is different to many on here in that my farm has a large acreage and everything is owned outright, therefore it is easier for me to make my living from it.

    In the OPs situation, absolutely no way would I touch this "business" in a month of Sundays.
    Last edited by Cloverbarley; Aug. 5, 2010 at 08:18 AM.



  13. #13
    Join Date
    Aug. 25, 2007
    Posts
    8,691

    Default

    I hear people claim they make money strictly from boarding, but before I buy it I'd like to review their Schedule F.

    The biggest money-maker you can have in the boarding world is pasture board. That's because it has few overhead costs. Any sort of stall board has significant overhead costs. With pasture board in most places $150/mo. will give a nice profit margin, but full care board at $450/mo. will be break even at best (and be a loser in most circumstances).

    The vast majority of "small scale boarders" do not factor in their own labor. It is a "labor of love" and who can put a price tag on "love"? While it might be emotionally correct, it is not financially correct.

    The value of this boarding business would be a minus number from the information given. There may, in fact, be some value in the business name if they have a good reputation in the local horse community. But that value will not break a low four figures under the facts given.

    G.



  14. #14
    Join Date
    Jun. 27, 2010
    Location
    SE VA
    Posts
    1,206

    Default

    OP, I have to agree, bad idea to take on someone else's debts. You will likely aquire some of your own. I like the suggestion of waiting for the current business to go under, then rent the place yourself. Also buy the book Running your Own Horse Business. There is a new edition out, it was very helpful to me, and I had a good idea of what I was in for when I began. What G said was true too, if you have employees and the headaches that come with them, you won't make as much. I think everyones situation is different though. Good luck.



  15. #15
    Join Date
    Jan. 17, 2008
    Location
    Dutchess County, New York
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    4,062

    Default

    Quote Originally Posted by Guilherme View Post
    The vast majority of "small scale boarders" do not factor in their own labor. It is a "labor of love" and who can put a price tag on "love"? While it might be emotionally correct, it is not financially correct.

    I agree. I also think that people don't factor in the sunk costs. We do pasture board, and to fence four fields of 20-ish acres total it cost us approx. $25,000 (using our own equipment with hired labor). Renovating the barn for horses was about $10,000. Digging a well and installing four automatic waterers $10,000. Installing electricity at the barn $5,000. Buying new tractor $25,000. Three run-ins $15,000. We did it over time, and a few years ago so my numbers are approximate.

    So I'm up to $90,000 in fixed costs. I *do* live in an expensive area, but that also allows me to charge $425 for (mostly) pasture board (they have stalls for horrible weather).

    I hire someone to help with mowing/repairs but not for the horses which I do twice a day every single day. If I have five boarders I "make" money in that my own two horses' costs are completely covered and I pay myself. If I had to amortize that $90,000 and pay it back -- no way.



  16. #16
    Join Date
    Jan. 24, 2000
    Posts
    1,041

    Default

    Can the words BOARDING and BUSINESS even be put next to each other?? uMM NO WAY!!
    Corner Stone Farm
    Weeki Wachee,FL .Follow us on FB!



  17. #17
    Join Date
    Apr. 28, 2008
    Posts
    7,300

    Default

    I think the key question here should be -- how much would they have to pay you to take this business off their hands? At least the low five figures....

    A business with no assets, with significant liabilities, and a history of not making it? Ehh, use the same test you use when buying a horse. If this never improves an iota, would I be happy with it? Certainly not in this case.



  18. #18
    Join Date
    Apr. 18, 2006
    Posts
    180

    Default

    LISTEN TO SMF11 werry werry werry carefully. This is precisely why I no longer board horses. When I had boarders, it was a full care 12 in 12 out of stalls. When the last boarder left, my horses went on full pasture. Now no grain, no hay, no bedding, very little maintenance - just mow the fields. It's much cheaper. And you will get your fill of boarders who want to work off the board, or every phone call is "O that is too expensive", it will just drive you nuts because it seems that most boarders refuse to understand that a grassy field requires fertilizer, lime, mowing and dragging. That fences in good repair require repair, that a clean stall and orderly clean barn require effort, a manicured riding ring requires maintenance, and lights and water just aren't free and that plumbing and electricity need maintenance too. Chasing down deatbeat and lax boarders costs time and effort. Add taxes and insurance. Boarding horses is a money loser. If that is what you are planning, just say to yourself. I want to subsidize someone else' horse-ownership by trying to run a boarding barn.



  19. #19
    Join Date
    Dec. 27, 2007
    Location
    California
    Posts
    40

    Default

    I am aware of the potential detriments and downfalls of running a boarding business. However, like some who have chimed in here, also believe it possible to break-even on boarding. If this was impossible, there would be no boarding barns. The plan is to build the existing training and lesson program to earn the true profit.

    The business is not currently making money but has made solid profits in the past. It's current lack of profitability is a result of mismanagement, as I previously stated. I cannot put in details here, so trust me on that.

    The question is: For a currently existing boarding business and small training and lesson business, is there a formula for determining a value? There is debt, there are no assets, this I understand.

    But is there value to already having an established clientele from which you can grow even more?

    For hypothetical numbers - lets say the facility is 2/3rds full and the lessons/training alone makes about $20K per quarter (with TONS of room for expansion) - what is this worth?



  20. #20
    Join Date
    May. 22, 2002
    Location
    where the grass is greener
    Posts
    706

    Default

    And the Goodwill goes right out the window when you take over the business and realise the only way to make ends meet is to Raise the Board!!
    You're entitled to your own opinion, not your own facts!



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