The other night, I was watching a documentary about the current economy and the stock market.  They used some statistics from world champion poker players to make a point about making good decisions about investments. 

The most profitable players (and we are talking about players with lifetime winnings of 5 - 7 million dollars) were the ones who used a mathematically favorable process for making decisions.  Each game, their goal was to stay true to their process. They expected to have losses and losing a hand did not make them change their strategy. They did not react emotionally to losing or winning, instead, they stayed committed to a strategy that they knew made them mathematically favored.

On the other hand, there was another kind of  player that was far more common. These players, who sometimes won the biggest hands, also tended to lose more money. Rather than sticking to a strategic facts based process, they were influenced by emotions and altered their process to win a big hand (an emotions based strategy.) While sometimes this resulted in a big win, it also resulted in major losses.

As I watched, I began to think about the similarities between horse business owners and poker players. 

Many horse business owners use an emotions based strategy for running their business.  Instead of examining the facts, they judge how well their business is doing based on how they feel. If they get a new client in, they feel great, even if that client is totally wrong for their business.  If they get a high price on a horse sale, they feel they have profited, even if in reality they held on to the horse so long that they actually lost money. Others may decide to compromise their integrity for a short term gain, only to find that the damage to their reputation cost them a hundred fold.

Most horse professionals (and people in general) are ill prepared to take losses. They view losses as failure, instead of just being part of the game. Because of this, they tend to hold on to things that don't serve their business well - i.e. an un profitable service, an advertisement that has never delivered,  a client who bad-mouths them or a good horse that continues to be difficult to sell. They hold on because they "feel" like the only way to vindicate their decision is to force it to win. Their ego and emotions have become too involved in their decision making process. Rather than accepting losses as part of the winning process, they try to avoid them literally at all costs.

There are very few extremely profitable poker players.  There are also very few extremely profitable horse business owners.

But it doesn't have to be this way.  Profitable horse business owners - from boarding stables, horse trainers and instructors to professional riders - all do the same thing that profitable poker players do. They use a mathematically favorable process for making decisions for their horse business.

They know and understand the numbers that count and they stay on top of them. They are collectors of facts and they know which facts are relevant to their decision making process.

They have developed a process that enables them to:

1. React quickly to unfavorable financial situations. 
2. Systematically recognize and take advantage of financially favorable opportunities.
3. Strategically build their careers and identify which clients are a good match for their business. 
4. Have realistic expectations and know when they should raise their investment in a particular horse, marketing strategy or barn improvement.
5. Know when they should cut their losses and have the confidence to do so far more quickly than the average horse business owner.

I've never considered myself to be a lucky person and I've never been very good at poker. I used to think that people who said "poker is more about skill than gambling" were full of hot air. It never occurred to me that a person could actually learn the skills necessary to develop a process that enabled them to make a good living as a professional poker player.

As I pondered this I realized that profitability in poker, like the horse business, is far less of a gamble than at first it may appear. Profitability is a process that can be learned, both in poker and the horse business - still, I think I'll stick to the game I know. 
 

Elisabeth McMillan is an equine business consultant, public speaker and the owner/editor of EquestrianProfessional.com, a website that provides business education and career support to horse professionals.  For more information please visit www.EquestrianProfessional.com or you  may email her at lizzy@equestrianprofessional.com.