(1) I find the balance suits a steady expansion. Depending on your bets* you can expand faster or more steadily. Yes, of course, drop horses that won't pay their way ever. But, I was once the #2 trainer in the early seasons with no Group/Graded wins at all. My claimers/low-handicappers paid their way just fine, My win% was quite high compared to AI.
(2) To depress the rating, intentionally run them at the wrong distance or pace. Or both. Mismanage them.
But buy the turn-out field first, esp. if any have low confidence bars. If the horse has a good distance adaptability bar, also make the pace off. So take an even pace miler and drop it in a 12 furlong race of the right class, and tell it to lead the pack and start for home late. Don't take that miler and take it 7f tell it handy/early if it has a good distance bar (as that might work fine!). You may only need to do that once for a horse with low confidence, it will run badly then until it gets a turnout, usually at least a month in the field. Keep running the confident ones at off distances/paces. Be careful if you do it too long, there is a non-tryer fine in game and a "horse's form improved too much" fine. Had one in SO6 that hated right-hand courses, always got fined when he found a perfect race to the left.
* good betting opportunities when you run them back at form
(3) Grab some seller/claimer mares to start. The good news is they have at least the quality to win a start. Also, check the sales of breeding mares by the AI. Look for some with no/little race records, but that have either produced some, at least average, runners or have parents who did. Sometimes one of those, in their teens can be cheap. Before you retire your stud, breed them to studs that look the same (cheap, but good family or runners) for some cash and maybe you get a lucky roll on the breeding. If not sell those foals, preferable as 2yos, but sell them as yearlings if you need quick cash too. Then when you retire your stud, you have something in the barn to prove he is at least fertile. The AI cares.
(4) When he no longer wins high purse races. You can also breed him when there aren't races to suit, and pop him back out and train him for a couple races that are perfect. The game lets you "unretire" at will, just give yourself enough lead time to get him fit. So don't worry if you notice one race you think he could still grab but you retired him. You don't need the stud barn right away. You can retire a stud to breed just to your own mares into the "mare barn". You won't get outside offers. But then again, you probably wouldn't get any anyway until after he has foals to race. So may as well sell his crosses with the claimer mares them to buy first the better mares, and then stud barn.