Farriery Finances, Part II

© J. Scott Simpson

published in ANVIL Magazine, February 1997


It is crucial if you are going to change the way you've done business in the past, to learn exactly how much you spend to shoe each horse that you work on. To the penny! I know that this will not seem as important to many readers as I think it is, but if you are going to establish a plan it must be genuine and this is where it begins.

One of the problems with cost analysis is the little incidentals that we let fall between the cracks and minor items that we absorb the cost of rather than passing them on to the clients. It is very easy to do this, but for accurate computing, everything associated with the job must be considered as part of the overall cost. Begin by calculating the obvious costs associated with the shoeing process itself. For a professional horseshoer this can be done in about a week. Start the process by figuring the individual cost of the shoes in your inventory. Also establish the cost of each nail. This may require some counting, but it has to be an accurate figure. Know exactly how much you paid for each incidental item you have used such as pads, packing, filler materials, topical hoof dressings, medications, tape etc. Don't eliminate anything from this list. Shoe twenty horses and record the exact costs involved with each individual horse as you do them. At this time, determine the amount and cost of all the forge fuel used on these horses, average it out and add it to the cost for each individual horse. Remember that at this point you are only trying to establish the cost of just shoeing each horse. For the sake of awareness and to begin a critical thinking process, establish a dollar amount in your head as to what you think you will arrive at when you've completed this part of the planning. Don't do a lot of mental calculations, just tell yourself a number. In my experience, the majority of shoers will underestimate this figure by about 50%. (Just for your own awareness, estimate the time you physically spent on these horses.) Is the light beginning to come on?

The next step is to add up the total amount of the costs involved in just putting shoes on these twenty horses and average it out. Now you must calculate all of the other expenses in doing business. This can be a complex job, but it must, again, be done to the penny. Vehicle operating and maintenance costs can be very difficult to figure, so the easiest way for me to do it was to use the per-mile cost that the Internal Revenue Service allows. Currently this is 31 cents per mile. You must now prorate the amount of legal depreciation you are allowed on your rig and calculate it into these twenty horses. Vehicle insurance costs also need to be figured into this sum. John Stucker of Montana did an annual survey of exactly how much it cost him to just be there to perform his shoeing duties. This has been a few years back, but even at that time, he came up with a figure of seven dollars a head for every horse he shod and trimmed that year. Granted, John had a large practice and traveled a great deal, but those figures are probably well below what most farriers are experiencing these days. Hard to believe, isn't it?

Another quick digression here. In 1961 I bought a brand new Chevy pickup for a little over eighteen hundred dollars. In 1996 I bought a two-year-old Chevy truck for twenty-three-thousand-five hundred dollars. In '61, my shoeing price was $10.00 to $12.00. In '95 it was $85.00. Something not quite right here?

Determine next the expenses involved with making the appointments to shoe these horses and don't forget to include office supplies, postage and all billing costs involved. It may help with the perspective if you keep track of the time spent doing this part of the business.

By subtracting the totals of these actual expenses from your fees, you may now think that you have the answer: how much do I make? Or, how much do I get to spend? Not quite yet. In the United States, self- employed persons are required to pay a self-employment tax which is the equivalent of Social Security taxes. Add to this the percentage of federal income tax that must be paid and subtract these from what you think your net fee from those twenty horses was and I'll bet that you are fast learning that this sum is much less than you had expected it to be (35% tax is a realistic number). But, as they are so fond of saying on radio and TV sales pitches, "Wait, there's even more." Consider the fact that if your revenue from these horses is even $20.00 dollars per head, that would be $400.00 that you are more than likely going to spend soon. Most states and counties have sales taxes that they subtly relieve you of as you spend this hard-earned money. Where I live the rate is currently 7.8%, which, in my kind of math, equates to 8%. Subtracting that from your $400.00, you now have $368.00 left for yourself. This comes out to about $1.65, per horse, less than you thought you had before. States which don't have sales taxes still get their share of your dollars by having an income tax. A few have both sales and income taxes.

There are probably more accurate ways of calculating your net, get-to-spend amount per horse, but this is close enough to serve as a wake-up call for anyone with a sharp pencil. Is it time to reform your business practices?


If you have even one particle of common sense, you will begin a program of protecting yourself and your family with health and life insurance plans. Income protection is costly and can be prohibitive, but can you get by without it if you are unable to work for awhile? The biggest problems I have found with most of this kind of coverage is the length of time that you have to be unable to work before you can collect any sum of money. Also, this money amount is probably too small to help with more than the bare essentials. Aside from having a hefty bit of ready cash on hand, there are some alternative schemes which could put you in the self- insured position. They can help you if your ability to work is suddenly curtailed for some time. Putting aside a set sum of money each week into some highly liquid commodity can, after a period of time, accumulate into income security in the form of ready cash once the commodity is sold. The beauty of this is that you can use the asset while accumulating income security.

Here's an example. A farrier buys a new or used horse trailer. This could be a cash transaction or an installment arrangement. You become sick or injured and can't work. You sell the trailer for money to sustain yourself for one to two months. If you don't have to sell your asset, begin to acquire something else that can be converted easily into cash. The list is endless, but whatever you purchase for this plan must be easy to sell. I used to buy cattle which always had an immediate market price. This can be tricky though, as cattle are a fairly fragile commodity and the price can fluctuate rapidly. Almost anything that you don't need for your business can be quickly transformed into cash.

Recreational items can be sold quickly, but at a greatly reduced price from what you paid for them. A boat may be easy to sell, but it may bring only half of its price in a quick sale. If you used it a lot while you owned it, this could take the sting out of offering it at a bargain price. But here's the benefit of this scheme - even if you should lose some money, you have gained something more than just receipts from an insurance company. For the long-term security blanket, continue to accumulate more things. Diversify and you will also begin to build an estate. Purchase only things that you can use or enjoy having such as art work, jewelry, antiques, real estate etc. Savings bonds can always be converted into instant cash and do not depreciate. They're just not much fun to play with.

Health insurance is something that no one can afford to be without. Every family or individual has different needs in this area. Only an insurance specialist can help you in your quest for the coverage you require. If you are fortunate to have a working spouse whose job has benefits, you're pretty well set. If not, you can expect your per-horse amount to be an enlightening amount for even minimal coverage. Where does this money come from? Unless the hoof fairy bestows it on you, it comes out of the money-left-to-spend part of your shoeing fees.

Long-term financial planning is essential for anyone who ever plans on retirement. Acquisition is sometimes the only way many of us establish any wealth while we are in the family-raising years. But that isn't enough when you are hoping for a comfortable future. "What? Horseshoers looking to the future? You must be kidding!" No, I am not. I know hundreds of horseshoers, and most of them have no long-term financial security plans. My own are not what they should be at this stage of my life. I always thought that solvency was the key to financial security. All I would need was Social Security payments and a pension to see me through in great style during my twilight years. The problem is I have established a life-style that I would like to be able to continue to afford. This won't be possible on what I have established for myself. In some form or another I will have to work, at least part time, to be able to enjoy my life-style. I could liquidate assets and manage to stay out of the "poor house," but there would go the things I enjoy in life.

Long-time horseshoer, Steve Eastman of Montana, has had a professional financial planner manage his retirement funds for a number of years. By diversifying his allotment of funds, Steve has secured a very rosy future for himself and his wife. This has only taken 20 years and he plans on shoeing for several more. I obtained a similar firm to manage my pension fund for the past five years. They keep it very busy in investment fields. This firm has earned about 15% more for me than what I would have gained, on my own, during this time. I regret that I waited so long to get professional help. Very few of us are capable of doing this for ourselves. Some words of caution. Before you hire someone else to manage your money, check out their track record thoroughly.

Until you have accumulated enough funds to need this kind of help, you must make yourself invest a percentage of your monthly profits into an Investment Retirement Account (IRA) or another form of tax- deferred plan. Your banker can help you with this. If you say that you cannot afford to do this right now, you definitely need to revise your pricing schedules.

Business smarts have to be part of this big picture. Horseshoers should consistently purchase supplies from companies who offer competitive prices and dependable service. The same goes for the extraneous things associated with your business such as fuel, work clothes, office supplies and such.

Too many shoers get into the habit of buying their supplies from hardware and feed stores when they first start shoeing. These outlets sell horseshoe supplies as convenience items and take a full retail markup on them. For today's market, there are so many full-service farrier suppliers around. Most of them offer mail-order convenience. Having shoes and supplies shipped to you may seem like an added expense, but what is your time worth to go and buy them in person? Pencil it out and include the fuel and mileage you consume when buying.

Always consider quantity discounts and sale-priced items. These add up to significant sums during a career. Money saved on sundry items of supplies comes back to you in the form of a bonus when used.

Always take a fair markup on any articles that you use that are not considered to be part of the regular job. Accessories such as pads, studs, repair materials and borium can earn a farrier thousands of dollars in extra profit a year.

Travel costs are probably the greatest single expense incurred by the majority of horseshoers. Look at these expenses and try to find ways of reducing them. Better scheduling and trip fees should be considered.

Sideline ventures can be considered as an adjunct to your horseshoeing. Almost every shoer has products or other skills that can be sold to customers. I made bits at one time. I enjoyed the craft and certainly had a lot of potential customers. I made barn hardware such as hinges and latches which found a ready market. I tried my hand at being a horse trainer for awhile. It was not a profitable business for me for the amount of time that I had to commit to it. Training horses did, however, improve my horsemanship skills and helped me to develop empathy and perception from the client's point of view.

Collecting your fees can be a frustrating situation at times. I have spent too much of my own career allowing people to put me at the bottom of their bills-to-be-paid list. I have sent far too many statements and been beaten out of too much money to think that I ran this part of my business correctly.

How many times have you been shoeing a horse, and as you were nailing on the last shoe, the customer would say, "I've got to leave right now so just send me a bill." You must have an up-front policy about this and insist on payment at the time of service. Yes, insist!

This is the day and age of the credit card. It provides a convenience for the customer and assures you of payment. Subscribing to a credit card service usually increases book work, and there is a small percentage paid to the card company. I would prorate my fees in order to be compensated for this if the client chooses to use this form of payment. Should you elect to put your business into this system, your bank is the place to begin. They will help you make the proper applications.

Commercial accounts are the ones where you shoe several horses each month for one client. Payment for your services is expected to be billed monthly. (These include breeding farms, training stables and boarding facilities.) Some training stables expect you to bill their clients individually. This situation can be a real headache, as many of the horses are only with the stable for short periods of time. Once the clients move on, it can be difficult to collect for shoeing that was done while the horse was in someone else's care. Trainers are already burdened with having to provide feed, shelter and care for these horses, and it is difficult for them to also be responsible for shoeing bills. Some will and some won't, but the ones who will pay for the shoeing should be allowed to make something on their investment. There are all kinds of arrangements that can be made between the shoers and trainers and/or owners of boarding stables in order to make them amenable to collecting your shoeing fees. Something that worked for me was to shoe an appreciation horse for them once in awhile.

The reserve accounts system can work for the business-minded farriers who can sell their larger accounts on the idea. This reserve money must be protected for the client until it is drawn upon, but several of these in one bank account assures the horseshoer that he/she is working on the client's money rather than the other way around. Back in the sixties I had a client who didn't want her husband to know how expensive it was for me to shoe her Saddlebred horses. Every time she would win a stakes class she would endorse the checks over to me and we would deduct my shoeing fees from these funds.

Later on I had an account which became very shaky in its ability to pay their bills. Their accountants held a meeting with me, the feed people, the vet and the transportation firm they used. It was decided to establish a reserve account with each of us against which we billed our monthly services. This worked so well that even when the stables got on a sound financial footing, they continued with this program. There was no apprehension or dissension associated with doing business with this firm because we did not have to worry about whether or not we would get paid. The worst part of this deal was my having to reimburse them more than a thousand dollars when I sold my business and moved to another state. If you choose to initiate this type of system into your business, there will need to be some ethical assurance to the client that this money will be managed correctly and disposition of any remaining funds will be accounted for and returned if something does happen to you or your relationship with this enterprise.

The one thing I enjoyed most about the reserve account system was the stability it created at the farm. I was pretty sure that my services were secure for at least the contract periods. Each revenue renewal created feelings that the business was on a healthy footing and I was an integral part of it.

If a client asks you to put a job on the cuff (give credit), it is essentially the same as asking for a loan. I would rather loan them the money to pay me and then charge interest on the loan. Hard nosed as this may seem, it is an effective way of not letting this situation become a habit. Note that interest must be reported as income.

Shoeing for barter or services is done by many shoers. This system works for some. I have had a little experience with it. It seems that I came out all right when I would agree to shoe a horse X number of times for an item of like worth. I remember one period of time when I was working off a garden tractor, a pistol and a saddle. This curtailed my spendable income to some extent, but it was an okay deal. It was one way for me to acquire a few things for myself without depriving my family of the money to purchase them outright. I have known a lot of shoers who shoe for services. If you elect to do this, make certain that you think it through and will come out with an equitable exchange. For some reason, the horseshoers usually come out short on these deals. I once had a deal with a tire dealer to keep his two horses shod and in turn he would keep my truck in tires. After three years of this arrangement, I calculated that I could have bought several more sets of tires with the money I didn't receive. All in all, you are better off paying for what you get and collecting for what you do.

For certain, you will have good customers who fall on some tough times and may need to be helped out with either credit or perhaps even some charitable work. Good will is always part of any successful business. One thing you will learn soon enough though is this: If someone owes you money, relationships become very strained.

Collection of past-due accounts is always an unpleasant duty for any business owner. We work too hard for our money to be beaten out of it by an irresponsible owner. Every business has to eat some bad accounts, but if you are on top of things, you can keep these situations to a minimum. When you do have to go after a delinquent account, make certain that your tactics are legal. Hitting a deadbeat client alongside of the head with a rasp may make you feel better temporarily, but it is sure to find disfavor with the legal system. One of the dumbest things that a shoer can do to avenge for non-payment is to go back and remove the shoes from the horse. For certain, the client, then would not even owe you for the work you've done. You may also be guilty of criminal trespass if you were not invited back on their premises. If the fee is truly uncollectible, why do more work for nothing?

Small claims court is probably the best place for horseshoers to use to collect accounts which they are certain are not going to be willingly paid. The system is simple and effective. Just keep in mind that disputes over your fees will arise and the defendant, in most cases, will refute your right to the money. If you have to resort to this means of collection, be thoroughly prepared to argue your case in a dignified manner. For court appearances, dress, speak and conduct yourself in a manner which construes professionalism. Judges are impressed with proper demeanor in their courtrooms. If you win your case, you will awarded court costs and in some cases, interest on long standing accounts. If you are lucky, you will not have your case heard by Judge Wapner.

Occasionally a client may challenge the amount you charge for a procedure. Listen to their side of the story and be willing to either arbitrate it or compromise if they make a good point.

Recordkeeping is the lifeblood of any successful business. Farriers are becoming proficient with computers and there are programs designed specifically for horseshoeing records. Financial as well as shoeing records need to be accurately kept. When it is the time of year to satisfy the government with their share of your dollars, pounds, pesos, rubles or yen, a good tax accountant will always save you more money than they charge in fees. Having your taxation forms prepared by a reputable firm may also keep the risk of an audit to a minimum. Very few horseshoers are capable of doing this task as well as a tax professional. Also, in the event that you do get selected for an audit, you will have someone to help you through it.

The bottom line to all of this is to earn enough to begin with and then to manage what you make. Set your own fees for your work and if necessary, restructure your prices to where you can pay yourself well and provide your family with the benefits that you all deserve. I don't like to have to defend or justify my fees to my clients, but perhaps if you would share with them a copy of your expenses breakdown, they will quit thinking that your fee is all profit and that you are not overpaid for the skill, expertise and service you render to them and their steeds.

Someone once said, "Take care of the pennies and the dollars will take care of themselves." I don't happen to believe that. We are living in times where dollars compare to the pennies of old. Take care of yourself. Your customers aren't going to do it for you.

Money is meant to be spent. Bill Miller, a horseshoer of six decades, says, "They don't put pockets in those coffins." I agree, but they do put pockets in Wranglers and I like to reach into mine and feel plenty of it in the silver money clip that Rusty Brown made for me.

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