Is Your Business Ready to Fund Your Retirement?

Baddest Good Boy before the Razorback Handicap, Feb 23, 2025. Photo by Christa Jordan.

For small business owners in the thoroughbred racing industry—jockeys, trainers, breeders, and other horsemen—planning for retirement often falls to the bottom of a long list of priorities. However, failing to create a strategy for your financial future could leave you without the retirement you deserve after a lifetime of hard work. The truth is, there are only two paths to funding retirement for small business owners:

1. Build and sell the business to fund retirement.

2. Extract income from the business during its operation and invest it elsewhere.

Let’s explore these options and why the second scenario—extracting and investing business profits—is the most viable for nearly all small businesses in the horse industry. We’ll also delve into actionable steps you can take today to secure your financial future.

The Myth of Selling Your Business for Retirement

Many business owners hold onto the idea that they’ll eventually sell their business and use the proceeds to retire comfortably. While this is a possibility for some, the reality is much less certain for small businesses in niche industries like thoroughbred racing. Here’s why:

• Limited Market: Unlike larger, scalable businesses, a training or breeding operation often depends heavily on the owner’s skills, relationships, and reputation. Once you step away, much of the value disappears. Buyers may be hesitant to invest in a business that lacks inherent, transferable value beyond the current owner. And jockeys have nothing to sell as their business is literally themselves.

• Unpredictable Valuation: Assets like horses, equipment, and facilities have highly variable values tied to market conditions, making it difficult to rely on a sale as your retirement plan. The worth of these assets can fluctuate based on everything from age and economic trends to the success of particular racing seasons.

• Buyer Scarcity: Finding a buyer who is both capable and willing to take over your business can be challenging, especially in a specialized field like thoroughbred racing. The niche nature of this industry limits the pool of prospective buyers who understand its unique demands.

If your retirement plan hinges on selling your business, you’re taking a significant financial gamble. While preparing your business for sale is always wise, the reality is that the odds are against you.

The Practical Path: Extracting Income and Investing for Retirement

For most small business owners, including those in the horse industry, the second scenario—extracting profits from the business and investing them—is the only reliable way to build a retirement fund. This strategy ensures that you’re not dependent on uncertain factors like market timing or finding a buyer for your business. Here’s why this approach is essential:

1. Control Over Savings: By setting aside a portion of your profits regularly, you take charge of your financial future. You don’t have to rely on specific external events or market conditions to secure your retirement. Instead, you build a steady, predictable path toward financial independence.

2. Diversification: Investing outside your business spreads your risk across different assets, such as stocks, bonds, and real estate. This diversification shields your retirement savings from industry-specific downturns, such as a bad racing season or unexpected veterinary expenses.

3. Compounding Growth: The earlier you start investing, the more time your savings have to grow through the power of compounding. Even small, consistent contributions can grow into significant retirement assets over time. For example, investing $500 per month at a 7% annual return can grow to nearly $600,000 in 30 years.

4. Flexibility: Unlike relying on a business sale, building an investment portfolio gives you financial flexibility. You can retire on your terms without needing to find a buyer for your business. This flexibility is especially valuable in an industry as unpredictable as thoroughbred racing.

5. Peace of Mind: Knowing that your retirement doesn’t hinge on selling your business or achieving a specific profit margin allows you to focus on running your business without added stress.

Why This Matters in the Equine Industry

The horse industry is unique, but it faces many of the same challenges as other small business sectors. Here’s why extracting and investing profits is especially critical for professionals in thoroughbred racing:

• High Overhead: Maintaining horses, paying staff, and covering operational expenses often leaves little room for savings unless proactively managed. Strategic financial planning is essential to ensure day-to-day costs don’t entirely consume your profits.

• Irregular Income: Racing earnings, breeding fees, and other revenues can be inconsistent, making it even more critical to prioritize saving during profitable periods. A disciplined approach to saving ensures that lean times don’t derail your retirement goals.

• Physical Demands: Careers in thoroughbred racing are physically taxing, and many horsemen and jockeys are forced to retire earlier than in other industries due to age or injury. A shorter career span means less time to save and invest, making it even more crucial to start early. Of course, you may be able to start a second career, but do you want to be forced into that?

• Economic Sensitivity: The horse industry is deeply affected by economic trends, making diversification outside the industry a vital component of a robust retirement plan.

Don’t Let Your Business Be Your Only Plan

If you’re not consistently saving a portion of your business profits and investing them for the future, you’re essentially betting your retirement on a high-risk, low-probability scenario. Instead, take these steps to ensure your business supports your retirement:

1. Assess Your Finances: Determine how much income your business generates and identify areas where you can reduce expenses to free up money for retirement savings. A detailed financial review can uncover opportunities to boost profitability.

2. Create a Savings Plan: Commit to saving a specific percentage of your profits each month or quarter. Automating this process can help make it a consistent habit. For instance, allocate a specific portion of your earnings to a dedicated retirement account.

3. Invest Wisely: Work with a financial advisor like me to build a diversified investment portfolio tailored to your goals, timeline, and risk tolerance. Your advisor can help you navigate complex investment options.

4. Plan for the Unexpected: Ensure you have an emergency fund and appropriate insurance coverage to protect your financial stability if something goes wrong. This safety net allows you to maintain your retirement savings even in tough times.

5. Monitor and Adjust: Regularly review your financial plan and make adjustments as needed. Life changes, industry shifts, and market conditions can all impact your retirement strategy, so staying proactive is key.

The Bottom Line

For thoroughbred racing professionals, the key to funding retirement lies in proactively saving and investing a portion of your business profits. By starting now, you can build a financial foundation that ensures you’ll be able to enjoy retirement, whether your career spans decades or just a few years. Don’t wait for the perfect buyer or hope for a windfall—take control of your retirement today.

With the right plan in place, you can achieve financial independence and enjoy a comfortable retirement, regardless of the unpredictable nature of the horse industry. Start planning today to ensure a stable and rewarding future.