Economics and Marketing

1
Economics and Marketing

• National and Regional Economic Impact
• Marketing Concepts and Concerns
• Animal Sciences 475 lecture one

2
Good Business Advice

• Start off with a sound business plan
• Record keeping is a must (adequate and accurate)
• Primary factor that is considered by IRS
• Detailed records or breeding, boarding, health
  care, and registration
  
• Financial records should document income and
  expense, buying and selling horses, employee
  payrolls, contracts, installment sales,
  depreciation.
• Accounting and taxation

3
Getting Started

• Horse Industry evolved into a complex and dynamic
  part of the economy
  
• Thus horse business operators must operate in a
  knowledgeable, professional manner
  
• Understanding basic business principles, keeping
  adequate business records, and planning for the
  future
  
• All critical to success!!

4
What to Do?

• Seek knowledge and advice from experts
• Owners can keep informed of industry trends
• Make educated financial forecasts for their
  businesses

5
National Economic Impact

• American Horse Council 1997
• Purpose
• Results of study
• Two Volumes on Economic Impact
• Estimates Impact on National basis
• Estimates Impact on State basis

6
Three Different Effects

• Direct - are purchases made by the industry
  itself
  
• Indirect - are purchases made by the industry
  suppliers and in turn their suppliers
  
• Induced - are purchases by persons employed by
  the industry or its suppliers

7
IMPACT ON US ECONOMY

• Total Impact on GDP 112.1 billion
• Breakdown
• Horse related goods 4,641 M
• Horse related services 4,611 M
• Overhead 3,753 M
• Capital Expenses 3,627 M
• Employee Comp. 4285 M
• Profits to Owners 917 M
• Taxes Land Purchase 3,460 M

8
Size Of The Horse Industry

• Number of Horses - 6.9 million
• Numbers includes
• Owners belonging to breed Associations or
  activity oriented organizations
  
• Owners not belonging to any organization

9
Participation In Horse Industry

• Form of Participation No. Participants
• Horse owners 1,958,500
• Jockey/Drivers 149,000
• Family Members/Vol 4,335,000
• Employees
• of owners 473,000
• of service providers 40,100
• of racetracks 96,500
• of shows 35,900
• TOTAL PARTICIPATION 7,062,500

10
Diversity

• Activity No. Horses No. Part.
• Racing 725,000 941,400
• Showing 1,974,000 3,607,000
• Recreation 2,970,000 4,346,000
• Other 1,262,000 1,607,900
• Total 6,931,000 7,062,500

11
Summary

• Total Impact on GDP 112.1 b
• Total FTE jobs generated 1,404,400
• Total Taxes and Fees Paid 1.9 b
• Services provided by racing, showing, and
  recreation contribute over 25 each
  
• Horse Industry in every state, contributes to
  both rural and urban economics
  
• 38 of horse-owners have household incomes below
  50,000, 21 above 100,000

12
Arizona Horse Industry-2001

• Three major activities pleasure riding (private
  and commercial), participant and spectator events
  (racing, shows, rodeos, roping, polo), breeding.
  
• Current report does not account for commercial
  pleasure riding, participants in rodeo, roping,
  polo or breeding of horses for export sale
  (outside AZ)

13
AZ Horse Industry

• 2001 report economic impact associated with
  private pleasure horses, horse racing, horse
  shows, resident spectators at rodeos, roping,
  polo and gymkhana events.
• INDUSTRY EXCEEDS A BILLION DOLLARS annually in
  direct, indirect and induced expenditures--(1.1
  to 1.3 Billion)

14
Total Direct Expenditures

• Direct expenditures on pleasure horse maintenance
  and ownership, horse racing and horse show
  activity, and resident spectators at other
  horse-related events
• 660-760 Million in 2001

15
Totals by Area

• Arizona Pleasure Horse Owners spend estimated
  500-600 Million on care and maintenance of
  pleasure horses and related infrastructure
  (includes annualized cost of horse, tack,
  equipment, land and facilities ownership)

16
Totals by Area

• Horse Racing in Arizona Estimated 108 Million
  in expenditures
  
• Horse Show Events contributes 43 Million in
  expenditures
  
• Arizona Resident Expenditures as Spectators at
  rodeos, roping, polo and gymkhana come to 9
  Million

17
Indirect and Induced Expenditures

• Combined indirect and induced (ripple) effect of
  the direct expenditures contributes an
  additional 444 to 504 Million.
  
• Households and Horses 48,000-64,000 Arizona
  households own 1 or more horses for pleasure or
  commercial involvement.
  
• Estimated 170,000 head (probably exceeds this
  number)

18
By Way of Comparison

• Direct expenditures on horses exceed gross sales
  receipts of most of the major sub-sectors
  comprising AZ agricultural industry.
  
• In terms of importance to the AZ economy direct
  horse-related expenditures rival state government
  expenditures on security and safety.

19
Per Household Costs of Ownership

• Total Annual cost per Pleasure-Horse Household is
  10,465 based on 2.07 horses for each household.
  
• Variable ownership costs 2208/horse or
  5013/horse (owner care vs. boarded)
  
• These are averages for high and low in each
  category

20
Horse Racing Estimated Expenditures

• Race Track.22.9
• Off-Track Betting.7.7
• Horse Training and Maintenance43.5
• Breeding10.3
• Combined out of state fans/owners23.4
• Total..107.8 M

21
Summary of Arizona Horse Economy

• Significant economic contribution in exceed of 1
  billion annually.
  
• Is there room for growth?
• Where will it come from?
• How do we encourage it?
• Where do we go from this point forward to
  accomplish greater economic importance and
  success?