Find the Problem, Fix the Root, Break the Cycle, and Ride Forward in Your Equestrian Business

Equestrian Bookkeeping

October 29, 2024

Running an equestrian business comes with challenges—clients not rebooking, tight cash flow, or rising operational expenses – all while the same expensive bills keep rolling in. When the same problems keep showing up, it’s time to dig deeper and find the root cause.

What is Root Cause Analysis (RCA)?

RCA is a method for identifying the true cause behind persistent challenges. It’s like checking a horse’s hooves—rather than just brushing off dirt, you look for signs of deeper issues that need treatment to prevent bigger problems. Similarly, RCA addresses the root cause of business issues rather than just their symptoms.

How to Apply RCA in Your Equestrian Business: Step-by-Step

Step 1: Identify the Problem

Get clear and specific about the issue. Define it in a way that is measurable and actionable. It’s ok the only person who will know is yourself – you can be honest.

Examples:

Cash Flow Issue: “There isn’t enough money to pay all the bills this month.”
Client Retention Issue: “Clients aren’t rebooking after their first appointment.”

Step 2: Collect and Organize Data

Gather information related to the problem—review financial reports, client feedback, or your team’s schedule. Look for patterns:

Are certain clients not returning?
Are invoices going unpaid for too long?
Are operational costs higher than usual?

This step will help you pinpoint which areas are recurring problems.

Step 3: Use RCA Techniques to Identify the Root Cause

Technique 1: The 5 Whys

The 5 Whys Technique helps you peel back the layers to reveal the true root of the problem. Keep asking “Why?” until you identify the underlying cause.

Example 1: Clients Aren’t Rebooking

Why? They didn’t see the expected results.
Why? They didn’t follow the aftercare plan.
Why? They weren’t given clear aftercare instructions.
Why? There’s no follow-up system in place.
Why? There isn’t a standard process for post-appointment communication.

Solution: Set up an automated follow-up system with reminders and aftercare plans.

Example 2: Not Enough Cash to Pay Bills

Why? Sales are good, but cash flow is tight.
Why? Clients are paying invoices late.
Why? There isn’t a follow-up process for overdue payments.
Why? Payment terms weren’t communicated clearly.
Why? Terms don’t align with operational expenses.

Solution: Adjust your payment terms to require deposits and shorten payment cycles. Use automated reminders for overdue invoices.

Technique 2: Pareto Analysis (80/20 Rule)

When multiple causes are contributing to a problem, Pareto Analysis helps you prioritize. It suggests that 80% of problems often come from 20% of causes—meaning focusing on the top issues will have the biggest impact.

How to Perform Pareto Analysis:

List potential causes related to the problem.
Assign a frequency or score to each cause based on how often it occurs or how much it contributes to the issue.
Focus on the top 20% of causes that generate 80% of the problem.

Example for Cash Flow Issues:

Late client payments: 40%
Rising operational costs: 30%
Lack of savings: 15%
Low profit margins: 10%
Other small causes: 5%

In this case, late payments and operational costs are your priority, as they make up the majority of the issue. Start by addressing these for the biggest impact.

Technique 3: Fishbone Diagram (Ishikawa Diagram)

A Fishbone Diagram helps you visually map out all potential causes of a problem. It’s useful when multiple factors are involved and you need to see the full picture.

How to Create a Fishbone Diagram:

Draw the Head of the Fish: Write the problem at the right side of the diagram (the head).
Example: “Not enough cash to pay bills.”
Add the Main Bones (Categories): Draw lines branching off the main line for each relevant category. Examples:
- Operational Expenses
- Sales and Marketing
- Cash Flow Management
- Customer Retention
Add Sub-Causes: Branch smaller lines off each category with specific causes.
- Operational Expenses: Rising hay prices, aging school horses, increased insurnace
- Sales and Marketing: Too many discounts, low margins, inconsistent and unaligned
- Cash Flow Management: Late payments, no savings, bills due before invoices
- Customer Retention: Poor follow-up, lost repeat business
Analyze Patterns: Look for areas where multiple categories point to a shared issue—like follow-up problems affecting both client retention and cash flow.

Step 4: Implement Solutions and Monitor Progress

Once the root cause is identified, develop a plan to address it directly. Ensure the solution is practical, measurable, and aligned with your equestrian or equine business goals – both short and long term.

Examples:

Cash Flow Issue: Revise payment terms and automate invoice reminders.
Client Retention Issue: Set up follow-up systems with clear aftercare instructions.

After implementing the solution, monitor the results to ensure the issue doesn’t resurface. If new problems arise, revisit the RCA process and adjust your approach.

Key Benefits of Root Cause Analysis (RCA)

Identifies the Source of Problems: Helps you address the actual issue, not just the symptoms.
Prevents Recurring Issues: By solving the root cause, you stop the same problems from coming back.
Improves Decision-Making: RCA provides clarity, so you can make informed, effective business decisions.
Increases Efficiency: You spend less time firefighting and more time growing your business.
Supports Long-Term Success: RCA helps create sustainable systems and processes by targeting root issues.

This type of decision process supports stable profit and sustainable operations that allow you to continue chasing after your equestrian entrepreneur dreams and paying your bills.