stallion business question

[Monmouth Matt]

Although the horse racing business is my hobby, I try to understand each element of the game inside and out. Over the past 3 years I have learned quite a bit from the educated posters on this board.
I am currently trying to get my arms around the business of owning a stallion. I have run numbers and figures and tried to get to a breakeven point and I thought I would ask for some additional guidance. What started this process was the surprising (to me) sale of Good and Tough last year. He seemed to get solid running offspring for a lucrative state-bred (NY) program, and my reaction was "i wish I knew he was for sale!"

Can anybody share or venture an estimate on what the La. folks may have paid for G&T? A handful of horseman that I am friendly with have figured anywhere from 50K to 100K depending on how the back-end of the deal may have been structured. I would like to try and pin down that value to use as a comp in my business plan.

The following are some of the figures I have plugged in. Keep in mind that the stallion would be boarded at a farm that has current stallions and experience in the business.

Day Rate: (includes the work of breeding the prospective mare)

$40-45.00 in season
$30.00 out of breeding season

Vet: $3000-4000 annual

Marketing/Advertising: $5000. annual

Initial acquisition cost (purchase): $75,000.

Insurance for replacement cost: ? (ie. 12 yr. old stallion)


Thanks in advance for any thoughts, experiences or advice that can be provided!

[CA Michael]

Matt,

Promotion is the center of gravity in stallion ownership. In a market overflowing with new horses, you need to be prepared to 1) spend far more than $5,000 in advertising; 2) work your fanny off in booking mares; 3) support the horse with good mares of your own. Anything less than this will yield nil results. I've owned stallions for almost 30 years and can vouch for one thing: if you want outcomes better than most, you must accomplish these three things better than most.

One other word of advice: the farm choice is critical to success. Unfortunately, I have made the wrong decisions far too often. I've caught farms red handed using Artificial Insemination; switching mares from my stallion to their own; lying and covering up their mismanagement and incompetency, etc. You must be able to trust that the farm operates in an honest and hard working fashion. That takes homework. Good luck.

[tinners way]

Matt, Michael in CA is right on. The farm is the all important thing. Your costs on average are pretty close, except for the advertising. Depending on the stallion, location, history, you will need to spend much more, although not necessarily in stallion registers and magazines. Since it is all about getting mares, if there are no superstars on the track as of yet, you have to target very carefully.

Another approach is to syndicate the stallion, spread the risk, and assure that you will get some good mares to the horse. That also is where the farm is going to come in. The clients that currently support the other stallions at the farm are also looking for opportunity. Once you make your selection of the stud, see how he compliments the roster that is already in place.

[Monmouth Matt]

Thanks Michael.

Your point about the farm is a major concern. Being an owner at the track, I realize how important trust is in your trainer. I can imagine that the wrong farm could bury your operation pretty quickly. My concern, which you mention, is that the farm would try to sell my client's mares away from my stallion to their own. That's a tough situation. Also, I currently claim and have bought at yearling sales. I do not have mares of my own,so I would be completely dependent on booking mares initially. My plan would be to acquire a couple of mares to breed. I foolishly dropped my favorite prospective mare into a $14 claimer at GP last year (2006) and she won and got taken. She's being bred in Ocala....tough mistake.

I appreciate your advertising budget info. How about my day rate numbers? Are they in the ballpark?

[Monmouth Matt]

Thanks Tinner. I've spoken to a couple of other owners that breed a half dozen mares each, and they would like to hear how the numbers play out, but their initial response was "tough business". As we all know, the entire horse business is so darn tough.

[magic code]

The most important part of it is that YOU support your stallion with GOOD mares. That's putting your money where your mouth is.

[CA Michael]

Matt,

Board rates for stallions vary by region. I pay $1,000 a month for my studs in CA. I don't think I've spend a nickel on vet charges other than the customary worming, innoculations, and annual check up.

Without a reputable farm and farm manager, you're sunk. I've been there, done that!!!

One final word: Make sure the stallion you purchase is attractive to breeders--not just yourself. WAY, WAY, WAY too many stallions are purchased because 1) the buyer rationalized the horse's market appeail; and 2) the price seemed right. BE CAREFUL!

[Rokeby Forever]

Isn't it also a matter of a stallion getting off to a good start? If a stallion isn't going to sire a lot of two year old winners, the market will drop it like a hot potato.

Officer doubled his fee off his first crop to race results, while Came Home's dropped almost in half off his first crop to race results. But what if Came Home progeny improve with age and Officer progeny doesn't? Does the market care?

[Monmouth Matt]

From a marketing aspect, NJ has a very interesting opportunity for the local regional breeders. Two years ago...the rules to the NJ-bred restricted races were changed to include horses sired by registered NJ stallions. This would seem to me to be a very attractive proposition for neighboring states (ie. NY/pa.) breeding operations. By breeding to a NJ stallion and dropping in your home state (ie. NY/Pa), the breeder would now have a foal eligible for lucrative restricted racing in 2 different states..... so a Pa./NY-bred that is also eligible for NJ restricted racing. A good horse could spend an awful lot of time running state-bred allowance and restricted stakes in both states.

The problem is two-fold......1. the ability to have a foal with dual eligibility has not been advertised very well and 2. the strength of the NJ stallion roster has been questionable.

Getting back to my original post, would a solid stallion such as Good and Tough be attractive enough at a stud fee of $3500. to cover....let's say...25 NJ mares and pull another 20 mares from PA/NY that would find the dual resticted racing worthwhile. At 40-50 covers, the stallion would appear to make sense. It will be interesting to see if many breeders find Crafty Friend at $6k worthwhile. I would think his covers would be easily 50+ at a slightly lower stud fee. I don't know what the financial arrangements were that got Crafty Friend to NJ.

Anyway...that's what I'm kickin' around on paper. Any Pa/NY breeders have any thoughts or comments on whether or not the dual eligibility would have any weight when deciding who to breed to?

[Gerry]

Matt,

I think you are close on your bugeting ideas, and the advice you are getting is right on. Advertising and word of mouth and making deals to get mares to your stallion are key. One component you did leave out was nomination fees..state bred fees (in NY stallion registration is $250/year), Breeders Cup nomination fee $2500 or stud fee which ever is greater, ect..all are important. Finally I agree you need to have a good base of mares to support your stallion in his first few crops.unless he is a classic winner the drawing power will be limited until his first crop hits the tracks running.

Good luck
Gerry

[bcassidy]

Monmouthmatt---There is so much to write on this topic it will be difficult for me to do it justice in such a short reply. NJ is a tough state to stand a stallion. There really aren't that many mares being bred in state and Defrere gets most of the ones that do. I don't have to tell you--but to stand a stallion in NJ he has to produce speed for short distances-- most breeders in this state want to produce 6f speed balls and the racing secretaries at our local tracks don't help any by writing mostly 6f races with very few distance or turf races for our own NJ breds. So if you are seriously looking for NJ think SPEED.
There are other ways to make a stallion (in any state) and I have opted for one of the other ways. I have purchased my own mares to be bred to my stallion and offered his services to friends which also have their own mares. If his progeny run well than you won't have to do much advertising, if not, then he won't get many mares---(which will be a good thing if they don't run). The other state bred programs offer incentives to progeny foaled in their state and sired by an in state stallion so attracting outside mares is difficult but that rule does keep many mares that would have left the state from leaving totally. Their wouldn't be a stallion within 4 hour drive if not for that rule.
The stallion game is the most difficult because it has the greatest risk and expense but if you are intent on playing that game----I think you are best advised to start a syndicate where each member has to bring their own mares, at least one per share. Than you have a fighting chance but still only if the stallion is a producer. As you know most stallions turn out to be bad investments the good ones are great investments.
If Good and Tough couldn't make it in NY why do you think he would have made it in NJ? Curious to hear your response to any of my comments.

BTW---George Gross has a beautiful 2 yr old by my stallion Honor Defend--his name is Dead Money. When you are at the back stretch go by George"s barn and tell me what you think. Hopefully he will be making his first start soon.

[Monmouth Matt]

Unfortunately, I tend to agree with almost all of your comments. I did notice that last year the racing secretary did start to write a few J-bred races going long.....but not many. They did fill beautifully and if I remember, the races were either split in two divisions or had AE's.

It does seem that the most viable approach would be a syndicate with each owner supplying mares. What were your thoughts on the dual eligibility or is that not as attractive as I view it? I know from an owners perspective, I would love to be able to race my horse in nothing but restricted races!

How has Crafty Friend been greeted by breeders? I would think for a very similiar stud fee, he would be taking a few Defrere mares away, but I guess it's to early to tell. For many of the reasons you mentioned , I thought Good and Tough would have been a nice fit for NJ. He is a bit of a one dimensional speed sire.... where in NY you have a much more balanced condition book for state breds. Plenty of breeders in NY looking for 2 turn horses.....look at the popularity of Freud and Wheelaway. In my book, for the $3.5 fee, he would be a more attractive choice than Defrere at $5k.

I appreciate your help and will keep an eye out for your Honor Defend babies. Did you race him or acquire him for stallion duty? Are the 2 yr. olds his first crop of racing age? I wish you lots of luck and soundness for the offspring!

[bcassidy]

Lots to answer---hope I don't miss any of your questions.
Dual eligibility is very attractive for anyone who owns mares and was thinking about dropping their foals out of state (because of the reduced racing dates in NJ) . It really gives you the option of keeping your NJ Bred status but also keeping your restricted bred status for other states as well---thereby increasing your opportunity for racing dates and restricted bred races. For example in PA if you dropped a foal by a PA stallion you qualify for another large bonus, not so if that foal was foaled by a NJ stallion. So I mostly see a NJ mare dropping her foal in PA by a NJ stallion but rarely a PA mare coming to NJ to be bred and then foaling in PA----I think the PA mare would rather go to a PA stallion and qualify for the extra bonus by racing in PA all year long. Hope that is clear.
I too hope the NJ racing secretaries continue with their experiment---it will be much better for the breeding stock in NJ if they do. Speed on top of speed just gives you speed balls not good for the breed long term. These foals are mentally and physically not what we should all be aspiring to in our breeding programs. Look at how few of them are competitive outside of NJ.
Most syndicates work that way--- when a syndicate is formed---it is usually filled with syndicate owners who own their own racing mares and who are also looking for a long term solution to their stud planning. Occasionally their investment is rewarded handsomely but usually they have their money out before the stallion proves himself. It should only be an upside for them if they are doing it correctly.
I don't know how crafty friend is doing this year but most of the people who breed to Defrere are syndicate owners---- so it would still be in their best interest to breed to defrere rather than Crafty Friend. I wouldn't predict that he would get many mares----maybe 15-20. That is totally a guess for me----he might be doing much better if the syndicate that brought him here is sending out of state mares to him for the dual state registry bonus. It won't be long before we know what happened with him.

I claimed Honor Defend at Monmouth Park in his first claiming race on the turf. He had already cleared all of his conditions so it was only stakes races or claiming races left for him to race in. I had quite a few wins and placings with him and really loved the courage he showed when he raced.
He is a beautiful animal that sold at the Keeneland July select sale for 575k. He was from a young mare and few people had even looked at his pedigree. His brother Grass Wonder, made 6 million US dollars and was champion 2 yr old colt in Japan. He (Grass Wonder) started his stud career in 2002--so his first babies made it the races in 2005. He is tearing it up in Japan and has also (until this year) been shuttling to Australia. He has been covering over 200 mares/ year for the 3 years he has been breeding.
My stallion also had a sister that started to race after I claimed him---named Wonder Again---she went on to win over 1.4 million and is now a very nice broodmare. Richard Santulli (jayeff and colts neck stables) bought her and she delivered a Distorted Humor foal this year. What a foal that must be----it will bring a huge price when it walks through the sale----I can't even imagine what that foal is worth. One of the Sheiks purchased another brother of my stallion (his name is Al Tharib) and he just broke his maiden in England and is being pointed to the King George IV stakes race----a very prestigious race in England. HD also has a 2 yr old brother named Believe in Honor (by Aldebaran) and I am not sure who owns him.
If you look at the female side of Honor's pedigree there are many excellent stallions that come from his lineage. Saint Ballado, Rahy and Singspiel to name a few. You also have some great females like Glorious Song not that far back.
His babies have looked fantastic---very good if not excellent conformation and they appear to be very sound. Now they just have to race well. The time is almost upon me and I am getting very excited. While he doesn't have many foals on the ground---- the ones that he does have---appear to be quite nice----it has been a long three years!

[rudydee]

I hear Crafty Friend will get to "in the low 40s" mares this year.

[Pete]

Hi Matt,

You're getting some sound advice here.

I understand your thinking about dual qualification with a NJ based stallion but I think that you'll find that almost all breeders' in NY and PA will opt to send their mares to KY if they're willing to accept the lower breeders' awards or else keep them home for the extra 10%.

Gerry makes a good point about the fees and If you really want to make the stallion then your figure for advertising is very low, whether you syndicate him or not.

Someone mentioned syndicating the stallion and that's an option to spread the costs and perhaps turn an initial profit but you need a good base that will support the horse. Just because someone has seasons doesn't mean that they'll use them.

I was arranging a syndicate where the partners were given a 'stipend' for every mare that they sent to the stallion (a fractional refund if you will) and had we gotten the stallion we had 45 confirmed mares from the partners before the purchase (in December).

Especially in regional markets I believe that a guarantee (based on the stallions’ breeding soundness) of two seasons per share for up to 4 years makes sense and I've also proposed that any partner that sends 2 mares in a given season get an additional breeding to use or sell. States that have stallion awards have an incentive to use seasons.

You should consider mortality and perhaps fertility insurance but certainly you need to have semen tested before purchase.

A few years ago the owner of a KY farm told me that you need to be willing to invest $1,000,000 in a stallion to give them the right support. While that figure might be germane to high profile stallions in KY it can be a lot less in regional areas but it’s still a considerable expense. To make a stallion commercially it’s probable that you’ll need to purchase some respectable mares and perhaps sell some in foal - even at a loss, to get a wider base of support.

I don't need to tell you about the manipulation of sales prices to enhance the appearance of commercial appeal with stallions. Its part of the game, something that you might have to consider and the bottom line is that it costs.

Someone mentioned something about rationalizing the purchase of a stallion and making certain that he’s appealing to potential buyer as well as you and I couldn’t agree more. There are a lot of potential stallions but few that will have the requisite qualities that will excite breeders enough to send their mares to him. Good And Tough was ‘hot’ in 2003 and 2004 based on some gaudy 2yo sales prices but his numbers fell off in the following years.

Commercial appeal of a stallion prospect is based on race record, sire line, conformation and pedigree. The hot young sires in KY sometimes have all these qualities but they’re expensive to acquire. In a regional market you can often have potential when missing one of these qualities but I’d not try and stand one that lacks two (qualities).

Regards,

Pete