This has been a fascinating thread overall. I’ve always wondered how ownership v. syndication works out.
As I understand, the traditional model has been ownership: one person (or family) owns one horse and pays for costs associated with that horse as worked out with a specific rider. Will Coleman said in his article this used to cost about $25,000 per year but costs have been going up; he estimated that it would be closer to double that each year today and it will certainly reach that number soon if it hasn’t already.
From what I understand about the way costs are deducted, an owner can choose to create an LLC or another type of small business that is technically what owns the horse; that way the horse’s costs can be considered business expenses (mostly losses, right?) and at least some of them are deductible. (This is how Mitt Romney and his wife own Rafalca, right?)
The new model is then syndication - a group of owners band together, put down an initial investment price (something like the 1/10 equivalent to purchasing the horse), and then pay X amount each year in upkeep. If they choose to leave the syndicate they can sell their “share” of the horse to a new syndicate member, who will agree to the X amount per year on top of the share price.
In both of those models, the benefits to the owner are mostly intangible ones: they help out the sport; they have the prestige/pride/satisfaction of owning a going upper level horse; they have personal access to and a personal relationship with the rider; they presumably receive perks such as VIP tent access at events. Some people have also mentioned additional organizational perks through PRO or the USEA, both of which obviously have a vested interest in supporting major financial backers.
The suggestion of syndicating B shares is then that the shares themselves would be much less expensive than the $2.5k a year I saw suggested for a 1/10 or 1/15 syndicate owner, but the perks would also be much less. Specifically, there would be no actual ownership involved - it would be purely a supporting agreement. So it’s really more like a donation to a rider - like a public radio pledge drive that you’ve agreed to for multiple years.
So that puts it much more in line with the funding model for nonprofits, which is something I actually know a fair bit about. Most halfway competent development directors can raise $30k a year from contributions, sponsors, and some grants. In that case nonprofits are trading goodwill and content for the support of their members/donors.
In which case, maybe a few suggestions, based on the nonprofit model, some of which have already been mentioned:
- Work out a sponsorship system, with levels, benefits, and agreements and make it clear and comprehensible so that those who give money know what they are receiving in return
- Communicate early and often, and this is where you can maybe offer some of that content in return. What can you offer for in-person sponsors? What can you offer via the internet? Can you set up a website with a membership system so that people can log in and see a daily video, photograph, training report, event review, or really any kind of small update? The trick here is that you’re selling yourself and your horse: be engaging and charming without being too personal, and make people want to have access to that behind the scenes information. Be consistent and concise and responsive.
- Find a way to make it tax deductible. It sounds like the USEF already has a model for this.
- Give people a sense of belonging - don’t just take their money and invest it in the horse. Maintain a relationship and give back to them occasionally, maybe by blogging and featuring some of your sponsors, doing giveaways of event swag, finding a way for people to buy team hats, shirts, etc. and giving them membership cards.
The catch is that all of this takes time. Doing it well will take a lot of time. There will also be trial and error. It might be an interesting puzzle for a working student with a business or nonprofit management background to solve and work on to get the first groundwork done, and then you can maintain it afterwards.
Sorry to be so wordy, but I find this fascinating and I’m curious to see where the next steps will go if traditional ownership is vanishing.
Thanks![/QUOTE]
