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Avoiding Horse Business Pitfalls in a Recession

Foreclosure Being in business always has its challenges, but they're usually more formidable during bad economic times, such as those we're currently experiencing. This can be even more true for equine businesses. That's because a horse business brings additional challenges. Here are some of them:

  • While horse business customers are very mobile and can shop almost anywhere, the nature of equine businesses themselves are often more fixed in place with either real estate fixed costs, or the large expenses necessary to provide their particular service.
  • While there are certainly some horse owners that are well off financially, on average, there are fewer deep pockets over all. Most horse owners fall in the middle class, some are still lower on the income ladder and struggle to keep their beloved horses.
  • In good times, many barn owners and trainers do well enough that following good business practices is not strictly required to prosper. This often results in a somewhat widespread trend heading towards informal and casual dealings, such as verbal agreements. But this hurts the business all the more when the economy, followed by finances go south.

The answer to these problems is to adopt good business habits immediately, and to follow through with good practices even when the economic situation isn't so dire. These actions can have legal repercussions, so what follows is a primer of legal notes for good business practices during hard times.

Insurance
Many businesses trim down insurance costs in an effort to save money — this is short sighted. Businesses don't need LESS insurance, they usually need BETTER insurance. The best thing to do is to bid the insurance out to at least two independent equine insurance agents and have them explain exactly what the insurance is buying for your business, AFTER you invite them to your premises, so they can walk around and see exactly what your needs are. Once you're assured that you have exactly what you need, and no more or no less, then you should be able to see which insurance companies offer the lowest price for that particular coverage.

Be careful when you get a suspiciously low bid because there is no free lunch in this area — a very low bid usually means less coverage. If you're comfortable with the lowered protection, you can decide to take it as long as you find out exactly what that means to your bottom line in the event of a problem.

Liability and Additional Profit
A major area for many barns to review is in how the barn owner deals with trainers who teach on the premises. Such trainers can either be independent contractors or employees. If the trainer is an employee, that may entitle the business to more income earned by the trainer, but there are increased costs in the form of worker's compensation insurance and unemployment insurance, and increased responsibilities for oversight over the trainer because you have some responsibility/liability as their employer.

Conversely, if the trainer is an independent contractor, there are steps the barn will have to take to ensure that the owner of the barn preserves that designation. In other words, the independent contractor status of the trainer protects the barn from suits and insurance claims because the barn is not directly responsible for the trainer's activities, but it also lowers the amount of income that the barn owner can earn from the trainer. Depending on how the business is structured, either decision can be financially sound and appropriate. But the barn owner should consult with an equine attorney to ensure that legal problems will not arise.

Contracts
Review all of the contracts you have with your clients and suppliers. Make sure the contracts fairly and accurately protect you and that all contracts are in writing and signed by the parties. An oral contract, which many boarding stables rely on, can leave a barn vulnerable to goods and services being extracted and not paid for. Likewise, a trainer's services can be used and not paid for. Suppliers of goods or services, such as hay dealers or feed dealers, should review their invoicing arrangements and the terms under which they allow credit, as well as whether or not attorney's fees can be collected in the event of a default. If the client makes an agreement with the supplier signed in writing that allows for such attorney's fees in the event a collection action has to be filed, the likelihood of getting such fees ordered by the court are greatly increased.

Where there is not a written contract, in the event of a dispute, a court will look to all sources to see what the dealings of the parties were. In that case, it means that all emails and text messages between the parties become fair game for review by the court. Many people are not aware of this kind of "look back" available to the court and may have a view of events not supported by the emails between the parties. This includes those emails with that have been sent TO them, as well as FROM them. In other words, just the fact you were "notified" may place certain requirements upon you even though you didn't respond.

Employment Matters
Many equine industries rely on barter services. Most people don't seem to realize that barter services can be taxed as income and bring with them all the same headaches as regular paid employment, including the need to have worker's compensation insurance and unemployment insurance. Therefore, although employers may find it superficially easier to manage barter in terms of real costs and benefits, in actuality, there is really not much of a difference. Barter arrangements also tend to be very informal. The danger there is that when problems arise, a worker may get his rights enforced more quickly than the employer, usually for example, a barn who did the hiring. This is because, when a worker wants to get paid in cash money for his services, most states have laws concerning wages that tend to be more rigidly enforced and have tougher regulatory protections than do the laws regarding payment, for say, goods or board charges. Barter arrangements should be avoided for these reasons. Bring all such arrangements above the table and reduce them to a written contract so that problems can be avoided.

With attention to detail and using good business practices, equine businesses can survive a recession. After all, equine businesses have one thing going for them that other businesses don't: the participants will all spend their last dollar, as opposed to their first, to stay in the horse world!

Kathleen A. Reagan, Esq. is an equine attorney practicing in Braintree, MA, available at www.kathleenreaganlaw.com, has developed a course in equine law at www.concordlawschool.com, and is co-founder and Vice President of QueryHorse, the largest horse information resource on the Internet.

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