Posted on 22nd April 2020
Spring is a popular time for new yards to open, and for established yard owners to review the previous year. This can range from yards based at large equestrian centres, to people offering livery at their private yard at home. Competition is fierce for affordable livery and it’s easy to provide competitive livery rates without considering your own finances or outgoings to run the business. If you don’t correctly price your livery and the services you offer, it may be that it actually costs you to run your yard! Below we give some useful advice as to how to calculate what your clients should be paying and what you should be considering when calculating these costs.
Below are some guidelines, and at the bottom of the page, you will find resources relating to the content including additional information and template documents.
Many yard owners base their price on what other livery is available locally, without calculating their own outgoings to see if this is financially viable, with many yards even choosing to undercut the competition purely based on price. It’s easy to forget that yards may look the same on the outside- offering the same services or facilities in a similar location- yet the management and financial structure can be very different yard to yard, and this can hugely vary and dictate which yards make money, and which don’t.
In order to calculate what you should be charging you need to include every cost you incur through your business for each livery package, plus a contingency amount to cover price increases or unforeseen costs. You can use the preceding year’s invoices and costs as a guide. Most importantly do not forget to put a value on your own time! It may seem complicated to work out, but with the right information to hand it should only take a few minutes. To make it easy, at the bottom of the article we have included a ready to complete calculation sheet, and example calculation.
Unfortunately, you may be surprised by the outcome and find that in fact, it is costing you to run your yard. In which case you will need to raise your charges in line with the costs you have calculated. There is no point ignoring the fact or making excuses so as not to raise charges because it will make you ‘expensive’ compared to other yards or worrying that you may lose clients. Your yard is a business, and people run businesses to earn an income. If you are running a yard and working full time hours on the yard every week, on top of covering your costs, it’s not unreasonable to be expecting to earn a full-time wage! So many yard owners cover their running costs but earn the equivalent of pence per hour for all the hard labour and stress involved with running a yard.
All businesses should do an annual review of their earnings and expenditure- it just makes good business sense. Record keeping is key. Having good records of your invoices to clients, and of any expenditure will allow you to see your true costs for the business. Reviewing the previous years running costs is also a good opportunity for you to see your outgoings and think of potential ways to bring them down for future years- from changing suppliers to introducing new yard procedures. This can only benefit your business in the long run and increase profitability.
Each stable on a yard will have the same base rate. Regardless if one of your client’s horses is retired and doesn’t use the arena, or one horse less hay than the horse in the next stable, what you are looking for is an average cost per stable. The next horse in that stable might use the arena twice a day and eat twice as much as its predecessor! Remember also, the calculation sheet allows you to work out your costs and compare them to your livery charges. This does not allow for any profit, so if you want to add profit onto your livery business, you should add your preferred profit percentage to your costs (all explained on the calculation sheet below).
This is also an opportunity to review your additional service charges as well, such as holiday cover or smaller one-off services. For any services you offer, be realistic as to the time and effort it takes to carry these out. In your mind it may only take a ‘few minutes’ to bring a horse in of an evening, but realistically by the time you’ve walked to the field, caught it, brought it in, hosed its legs off, checked it over, put it in the stable, changed its rug and so on its really more like 15 minutes, maybe longer if it’s a walk to the fields or they are a pain to catch. So, you need to ensure you allow for this time used and charge fairly for your labour. If you charge £2 for this service, that’s the equivalent of £8 an hour, less if it takes you more than 15 minutes. Is this an hourly rate you would be happy to work for anywhere else? Same for offering exercise. You may well charge a rate for 30 minutes exercise, but if you must catch, groom and tack up the horse, and then turn it out again afterwards, this is considerably more time than the 30 minutes you are charging for. Review each of your services on an individual basis, working out how long each would take on average, and basing this against what you pay your staff, or an hourly rate you’d be happy to work for. If you have clients who use services a lot, a small increase can soon add up and further help cover your yard costs and labour.
You simply cannot base any of your costs on what your competitors charge. Many new yards open that are cheaper than those in the locality, this could be because their outgoings are lower, or it could be that they are purposefully under-pricing, yet naïve of their true running costs and as such may soon fall foul of this lack of funds. Underestimating costs is one of the biggest factors leading to yard closures, with the yards that under-price unable to offer the quality of management or products, maintenance of facilities, of staffing expertise that other yards can once the shortfall of funds adds up. However, do not immediately discount all cheaper yards under this umbrella, as its equally the case that they simply have lesser costs that you!
It is also a universal fact that costs increase year on year, whether this is insurance, bedding, farrier services, council rates… they will all rise over time. As such, like so many other businesses and industries, you should reflect this increase each year. A smaller, expected and well managed annual increase will be better accepted by clients than a huge leap every few years. Include in your contract a clause that allows you to review, increase, and give notice as such on a fixed date each year.
Clients have the same with their home utility bills, council tax and other household costs so there is no reason why they should not be accepting of it for livery services as well. Below is also a template price increase letter to help with your administration if this is a step you need to take.
Overall, spending an hour reviewing your costs and carrying out these calculations can make you a lot better off financially. Any business advisor or accountant would recommend an annual review of any business, and even if you see running your yard as a ‘hobby’ its worth knowing where you’re at when it comes to your finances. Its no point being the cheapest yard in the area if you may as well be paying your clients to be there!
The following is a very basic example.
Yard X has 10 liveries- all on a DIY basis (stable and grazing rent only).
Based on their 2018 costs, the yards annual outgoings, including labour, are £15,670
Adding a 10% contingency (to cover price increases, unforeseen costs etc) gives a total annual outgoing of £17,237
Divided by the number of livery spaces (in this example 10) – £1723.70
Divided by 12 to gives a ‘per calendar month’ amount per stable – £143.64
Based on this calculation, Yard X needs to be charging a minimum per calendar month of £143.64 (say round up to £145) just to cover their costs.
If, for example, they are only charging £120 per month, they are not even covering their own costs.
For the full guide, you can download the Template Calculation sheet here:
Template Livery Charges Calculation Guidance Sheet
You can find further resources and templates on this topic on the following YOH Resource pages:
Business Management and Planning
Facility Planning, Management and Hire
This information as provided above is intended to provide guidance and areas for consideration for those intending to enter into such arrangements, and is best advice to our knowledge at the time of publication following extensive research. Anyone proposing to enter into agreements, processes or actions based upon the information contained herein are advised to carry out their own due diligence to ensure the information above remains current and factual.
© Livery List 2020
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