No one will miss it: inflation is currently high in the Netherlands, but the cost price of many products is also rising rapidly. Raw materials and fuel are becoming scarcer while demand is only increasing. As a result, prices for fuel, gas and electricity have skyrocketed, which in turn greatly affects the costs of other products and services. Higher prices affect expenses and income and thus the margins of an equestrian entrepreneur. Figures from the FNRS show that 43% of equestrian entrepreneurs operate at a cost price of their pension! As an entrepreneur, do you have enough insight and control of your costs?
High prices cause financial problems
Previously high prices of hay and straw had caused financial problems for equestrian entrepreneurs. Due to the dry summer, stocks of hay and straw are scarce, which is why prices rise sharply. In addition to the scarcity of straw and hay, the prices of raw materials and energy, such as electricity, gas and fuel, have risen sharply. There is still a shortage of affordable horses and ponies, so the price of a horse or pony continues to rise. Liability premiums have also risen sharply in recent years.
Comparing insight into costs
Experience from the FNRS shows that equestrian entrepreneurs are often not fully aware of the actual costs on their farms. Pension storage costs or driving lessons often depend on what companies charge in the area or have been the same for years because inflation or increased costs are not passed on. To make entrepreneurs more aware of the actual cost price of their products and services, FNRS performs cost price calculations at the company level. This provides insight into cost price, revenue and available margin in order to set a healthy price. These figures can be compared with similar types of companies in the sector. This way you also know if your costs are higher or lower on average.
If you constantly monitor your finances, you will see deviations faster and will always know how your company is doing at that moment. Equestrian entrepreneurs who are able to read their numbers reap the benefits in their own entrepreneurship. Financial insight teaches you to look ahead. You can see potential risks soon and can make timely adjustments. Just the balance in your bank account does not provide the right insight to make choices in the short and long term. Depreciation and the work of the entrepreneur are often things that are not included in the total cost picture.
Account Manager Patrick Marsmann meets regularly with entrepreneurs to help them gain insight into costs and margins within their company. He says: “When entrepreneurs fill out a cost price account, it often turns out that they demand very little for their services and therefore often do not make a profit, or even worse, lose what they offer in their company.”
Don’t pay for your customers hobby
Implementing price increases in response to rising costs and implementing annual inflation is a common practice in many industries. However, equestrian entrepreneurs are often very cautious when it comes to raising their prices, despite the fact that it is a logical consequence of inflation and rising costs. The company is the source of income and it is important that the financial situation is in order. A financially sound company should not cost more money in the short term than it generates. There are always situations where profit margins can be lower, for example due to large investments, but they also have to pay for themselves in the end. Not in the intention as a customer hobby financing entrepreneur.
Create a clear budget for your company’s finances. If the cost price increases during the year, it is necessary to carry out this increase. Only in this way can an equestrian company remain viable. Do you work with additional one-time fees or raise your prices? Take a close look at your agreements with clients to see when and how often the price can be increased.
Good affordable price is a challenge
Setting a good price and keeping it affordable for your new and existing customers can be a challenge. You want to keep customers and give everyone the opportunity to play their favorite sport. On the other hand, the horses must eat and the chimney must also continue to smoke in the house. Balancing these two aspects is becoming increasingly difficult due to rising costs. Is a price increase necessary to remain financially sound? Then it is important that these changes are communicated well with the clients. It is important for entrepreneurs to clearly explain the need for price increases in order to create understanding. Communication is key when implementing a price increase with the lowest possible loss to the customer.