The focus of this presentation is to explain one or more relevant and significant business-school insights from each of the five key disciplines (accounting, economics, finance, management, and marketing), and demonstrate how they relate directly to the planning and operation of all kinds of enterprises in the horse industry, whether large or small.

Rich Wilcke

altRich Wilcke is the director of the Equine Industry Program at the University of Louisville. He is also the president of the Kentucky Quarter Horse Association, a member of AQHA’s Racing Committee, the treasurer of the American Youth Horse Council, a board member of the Kentucky Equine Education Project, and a board member of the Racing Officials Accreditation Program.

Introduction
The majority of people who own or manage for-profit businesses in the horse industry, if interviewed, would likely admit that they consider themselves experts – at least to some degree – in their knowledge of horses and maybe also of a certain breed or discipline. They are also apt to admit, if they are honest, that the main reason they are in their business is their love and affinity for horses, and, as well, for the lifestyle that horses make possible.

This reality is not to be criticized. Most people who teach do so because they like teaching. Most physicians like the prestige and self-satisfaction of helping their patients. Most farmers and ranchers admit that an important reason for their vocation is the independence and lifestyle that they have, and often also the desire to raise their children away from the influences of cities.  We can think of hundreds of similar examples, and I think we should agree that there is no shame in choosing a profession or a vocation because the work or the location is interesting or because of any other reason or reasons that make it especially appealing to us.

In a free society, we have the right to choose for ourselves how we want to make a living. Now, there are many people, although I’m convinced it’s a minority, who put earning money way ahead of other considerations. If we asked them if they’d like to teach, they would say, “Oh, sure, but it doesn’t pay well enough.” And if I were to ask them, “Would you like to be a rancher,?” they would say, “For sure I’d like to own a ranch, and maybe I will some day, but there’s no money in ranching. The return on investment is way below average. I’ll leave ranching to those folks who love it so much that they don’t mind being poor. That’s not for me.”

Is there a right or a wrong here? There’s NO moral right or wrong. There are only choices that are made by individuals. In a market economy, you get compensated in direct proportion to the efficiency with which you satisfy the needs or desires of others. One has every right to spend his or her days writing sonnets that hardly anyone appreciates, or painting landscapes that even relatives don’t want (even as gifts), or producing horses that are seen as ordinary by prospective buyers, or trying to sustain a family on a farm that will not produce enough to pay the mortgage, or running a stable just to have a chance to mess with horses all day.

The challenge, then, is twofold. First, those of us in the horse industry have to recognize and admit to ourselves why we chose this path. It was NOT because intensive research on many   industries convinced us that this was almost sure to be the most profitable. Rather, it was solely because we liked horses and thought we knew something about them. We are like the chef who opens a restaurant simply because he has good recipes. Well, just as the best recipes don’t mean that a restaurant will be successful, knowing something about horses – even being the foremost authority in Alberta – does not mean that your business will succeed.

The second part of the challenge here is that because we have handicapped ourselves to a degree by choosing our field of business enterprise for emotional or lifestyle reasons rather than strictly financial ones, we should strive to be better-than-average business managers to succeed, or to maximize.  An irony is that not only do most post-secondary education programs related to horses not stress business, stressing instead horse science or equitation, most adults who have a horse business would rather spend the bulk of their energy and time “messing with horses” than working on that business.  This recommendation is an uphill climb.

There are thousands of business schools throughout the world offering students graduate and undergraduate degrees in business. Most of these so-called “b-schools” feature five essential fields of study. These are accounting, economics, finance, management and marketing. There are others, such as computer information services and entrepreneurship, but these five are the most common. As with most disciplines, each field encompasses insights that would, if understood, be of help to laymen. Indeed, the goal of b-school faculties is to ensure that, at least, graduates leave with such insights understood and deeply embedded in their minds.

To be sure, many successful businesses in all industries are owned or managed by people who never formally studied business theory or application. However, just as one can improve the ability to train horses by trial and error, so too can one improve managerial skills through profit and loss, sometimes bankruptcy.  Most successful business owners will have come to understand the principles necessary in business management, even if they can’t define or express them, as an instructor in a b-school would do. The principles are unchanging.

What we want to do here is look at a few of the most important or relevant insights from the major business disciplines. While some of them may sound fairly obvious, I hope you will be able to appreciate their significance.  Students often complain that business executives who give guest lectures rarely say anything revolutionary. But what these entrepreneurs often say is that they struggled until they understood the true significance of some basic insight, such as holding down overhead costs or stressing customer satisfaction. To students, this is boringly obvious; to the entrepreneurs, time and experience taught them their priorities.

BUSINESS SCHOOL INSIGHTS FOR OWNERS AND MANAGERS

OVERALL
1.  Genuine literacy in business is a fundamental asset for business success
ACCOUNTING
2.  Accounting is the foremost topic because management requires control
3.   A financial firewall between personal and business finances is essential
4.  Building equity – not just earning profits – should be the foremost focus
ECONOMICS
5.  Economics emphasizes choices – and their costs – that individuals make
6. Value is subjective while price is an objective function of supply-demand
7.  A business has to transfer an economic good from lower to higher value
FINANCE
8.  The focus of finance is managing capital, owned or borrowed, over time
9.  Interest, which is paid for use of money, helps calculate its “time value”
10.   No one should borrow or lend until compounding is clearly understood
MANAGEMENT
11.  Management is a constructive utilization of labor and capital resources
12.  Expertise in horses does not offer a vital advantage for an entrepreneur
13.   Businesses, small and large, fail or languish due to ineffectual planning
MARKETING
14.  Experts in marketing seek to advance the efficiency of commercial trade
15.  The orientation is producing what will sell; not selling what is produced
16.  The essential value of advertising is to inform customers and prospects

Copyright © (2010-2011), Richard W. Wilcke, University of Louisville.

2018

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