Tag Archives: family

What Is Sweat Worth?

What Is Sweat Worth?  By Dave Pratt, owner of Ranch Management Consultants

 

What is Sweat Worth?

by Dave Pratt

Most family ranches are subsidized with free, or underpaid, family labor. Sometimes the difference between what family members get and what it would cost to hire someone else to do the work they do is made up with the promise or expectation of sweat equity. But sweat is not a recognized form of currency and people counting on sweat equity usually have a grossly exaggerated idea of what their sweat is worth. This often leads to serious disagreement and disappointment.

If you are going to count on sweat equity and want to avoid the inevitable misunderstandings that happen when it comes time to cash in on your sweat, then you’d better start actually counting it. How many hours? For how many years? At what rate of pay? With what interest on the unpaid balance?

I mentioned the perils of relying on sweat equity in a workshop recently. I suggested we stop using the term sweat equity and call it what it really is, “deferred wages.” My comments apparently struck a nerve with one 30-something rancher. He approached me after the program and asked if I could help him calculate what his sweat was actually worth. He said that he’d come back to the family ranch after college 10 years earlier. He’d been drawing a low wage and banking on sweat equity. As is usually the case in family ranches, there was no formal agreement documenting exactly what his sweat was worth.

He was being paid $25,000 a year, but his compensation package included a nice home, a vehicle and insurance for his family. All-in-all a compensation package worth well over $50,000. “Maybe I’m not as underpaid a I thought I was,” he said.

I suspect that he was probably being underpaid somewhere between $10,000 to $20,000 a year. I showed him that for every $10,000 he’d been underpaid, he earned 0.1% equity in his family’s $10,000,000 ranch.

($10,000 ÷ $10,000,000) x 100 = 0.1%

I showed him that over the previous 10 years, compounding interest at a rate of 3.5%, he’d earned a whopping 1.2% equity stake in the ranch. Like a lot of young ranchers returning home, he hadn’t ever thought about how much his sweat was worth but had assumed that it would add up to a lot more than that.

Sometimes sweat equity isn’t just about compensating someone for the work they do. It’s about acknowledging the sacrifices someone may have made, foregoing other opportunities to come back to the ranch to support the family. If there are several kids in your family, but only one has invested time and energy working on the place and has shown a desire to continue the business, it may be fair to give them an equity position.  After-all, as succession planning advisor Don Jonovic points out, fair doesn’t necessarily mean equal.

But whether sweat equity is a substitute for a paycheck or acknowledging a sacrifice, we need to be clear about what we are compensating and its value. We need to convert assumptions and expectations into agreements. We need to figure out what our labor is worth (the topic of the last ProfitTips column). We need to document the value of our sweat while we are still sweating.

For more on documenting the value of sweat equity watch the video below:

What is Sweat Worth? youtube video

Favorite Recipe Plugin on Wordpress?

Just throwing out this question to my foodie bloggers and others who print them off to use.  I don’t make any money with my blog, but enjoy jotting down favourite family recipes which others seem to like.  So, not looking to spend a lot of money on a recipe function, but still something user-friendly and print off nicely.  What are ya’ll using that you like?

Thanks in advance for any and all help!

Cheers!

tauna

 

Jim Gerrish on Making Change

Another great article by Jim Gerrish, consultant and owner of American Grazing Lands, published in The Stockman Grass Farmer.

Published as “Grassroots of Grazing” Jim’s regular column provides “Making Change is about Creating a New Comfort Zone” in the December 2017 issue which offers his observations about how people in the grazing/farming/ranching world accept or reject change often needed for the business to survive, or more importantly, thrive so that the next generation will be willing to be involved.

His closing comments of the article:  (you’ll have to buy a back issue for Jim’s full article as well as great articles by other authors)

“I had already come to understand people were not going to change just because something made biological and economic sense.  We all have to be comfortable with the idea of change before we will be willing to even consider change no matter how much empirical evidence is thrown at us supporting that change.

For many of us that comfort level is based on acceptance by our family and community.

I have found it is much easier to sell the ideas of MiG (management-intensive grazing), soil health, grassfed beef, summer calving, and a myriad of other atypical management concepts to someone who has no background at all in ranching and no tie to the local community than it is to get someone with 40 years of experience on a family ranch to change.  The lifelong rancher may grudgingly agree that those ideas make sense, but the most common retort is still, “but I can’t see how we can make that work here.”

That individual is absolutely correct, until you can see that it will work here, it probably won’t.  The biggest part of that “will it work here” question is how the rest of the family sees it.  The better a family knows itself, the easier it is for that one rabble-rouse to make a difference.  If the lines of communication are broken, the more likely it is that things will continue to operate the way they always have.

Then we are back to that sad situation so common in multi-generational agriculture:  We advance one funeral at a time.”

Jim Gerrish is an independent grazing lands consultant providing service to farmers and ranchers on both private and public lands across the USA and internationally.  He can be contacted through www.americangrazinglands.com

American Grazing Lands, LLC on Facebook

When to Graze video

 

 

 

Bud Williams on Science

Reprinted from Bud Williams’ Musings.  Sign up for access to reflections on life and livestock (marketing and stockmanship) at stockmanship.com.

Science?

Posted December 8th, 2012 — Written by: — Filed in Bud’s Musings, Marketing

This is a direct quote from an article I read awhile back.

“The name of an article in a non-farm magazine was “Gulf hypoxia thought to be caused by agricultural run off.” Yet this year it was 33% the predicted size and no one knows why science failed to be right.”

No, it was not that science failed to be right, it was that they guessed wrong, and that is not science. Guessing is what people who have an agenda “call” science. Science is when something is studied until they know that it is right and it can be proved.  There is so much guessing about things in the future that to try and make the guessing legitimate they call it science, and then try to have it accepted as proven.

This is much like the livestock markets.  Most people want to guess what the prices will be in the future. These guesses often fail to be right then it is blamed on something else. Always deal with real things not guesses or hopes.  The things that are real are today’s prices not what they may be in the future. There is one thing about today’s prices, they are easy to prove.  That must be very scientific. It will be very hard to prove that prices in the future are right until we get there, that must not be very scientific.

 

Bud Williams died a few years ago, but his thoughts, videos,  and stockmanship teachings are kept available by his wife and daughter at stockmanship.com.  There is a massive amount of information necessary for becoming competent and improving at developing relationships with animals and people.

 

Cheers!

tauna

A Great Place To Raise A Family by Dave Pratt

Dave Pratt, owner of Ranch Management Consultants (formerly known as Ranching for Profit) hits it on the head again with another great blog entry.  Although his niche is specifically ranching, the ideas he shares are often for any business.

 

Home > A Great Place To Raise A Family

A Great Place To Raise A Family

I occasionally lead workshops I call Hard Work and Harmony: Effective Relationships In Family Businesses. In it I like to ask participants to explain to the person next to them why they ranch.  Some say they love being their own boss, or love working outdoors and with livestock. Almost all of them say something about loving the lifestyle. Near the top of most people’s lists is, “It’s a great place to raise a family.”

I agree. I grew up on a small place. The biology lessons I learned from tending livestock were more influential than any I ever had in a classroom.  I learned other lessons too. I learned how to work hard and how to be resourceful. But it wasn’t just about work. Our place was a great setting for any adventure my imagination could conjure up. My mom sold it when I was in college and it just about broke my heart.

A ranch can be a great place to raise a family, but it isn’t always. I worked with a rancher shortly after my son, Jack, was born.  When we broke for lunch he asked about my new baby. I told him that when they placed Jack in Kathy’s arms for the first time, I could hardly see him for the tears of joy streaming down my face.  Tears welled up in his eyes too, but they weren’t tears of joy. Trying to hold back a flood of emotion, he told me how he had worked sun up to sun down to build a place “for the generations to come.”  He said that he hadn’t been as involved in his children’s lives as he should have been. As we sat on the hill, he told me that now he rarely hears from his adult children, who want no part of the ranch. A ranch can be a great place to raise a family, but it is not a substitute for our active involvement in family life.

Many ranchers are addicted to work. I’ll bet you’ve even heard some of your colleagues brag about how long and hard they work, proudly proclaiming things like, “I haven’t taken a vacation in 20 years.” They say it as though it is something to be proud of.  When I hear things like that I shake my head wondering, “Are things that bad?” You can’t run a sustainable business on unsustainable effort.

Intentional or not, work can become an excuse to avoid working through the issues every healthy family faces at one point or another.  When work consistently takes precedence over family needs, we set ourselves and our families up for trouble. Engaging in what may be uncomfortable conversations when issues first come up can keep them from growing into big problems.

In the last few months I’ve met a number of people who are learning that lesson the hard way. After decades of avoiding uncomfortable family issues they are facing extremely difficult challenges regarding succession.  Now, without any experience working with one another to resolve small issues, they are hoping to work through the most difficult challenges many of us will ever face. The conversations are made even more difficult because of the hurts that have gone untended and the resentments that have grown from not taking care of the family in the family business.   It’s a tough way to learn that success has more to do with healthy relationships than with conception rates and balance sheets.

I don’t mean to suggest that the physically demanding work that ranches require can be ignored, but it doesn’t have to be all consuming. Many Ranching For Profit School alumni have discovered that the ranch was all consuming only because they allowed it to be that way. After the school they restructured the business to increase profit and liberate their time to put more life in their work/life balance. They still work as hard as anyone, just not as long. Their ranches are great places to raise their families, andthey actually take the time and make the effort to be directly involved in raising them.

To hear how one RFP alumnus decreased the work required to run their ranch while increasing profit and improving their quality of life, click here.

Farm Finance

Every business or family finances have some unique components that you must determine to help your business or home run smoothly.  However, there are some very basic tools that apply to all.

  1. Bookkeeping-every family and small business should employ bookkeeping principles.  These will include records by account, labor costs, profit and loss (income statement), working capital, balance sheet, debt-to-asset ratios.
  2. Use a double-entry system to keep track of where your money is spent.
  3. Set up basic accounts, these may need sub accounts depending on your company, but here are 10 basic ones:  sales, expenses, payroll, and retained earnings for your income statement and cash, accounts payable, accounts receivable, notes payable, inventory, and owner’s equity for your balance sheet.

 

Most of us have taken basic bookkeeping in high school and so already have the foundation for setting up appicable accounts for our own families and businesses.  The stumbling block is actually doing it!  If you wonder where all your money is at the end of the month or year or complain about the lack of funds, then it’s time to make a resolution and commitment to keeping track of where your money goes. This especially includes all those little cash purchases; coffee, candy bar, water bottle, etc.  Remember, too, you don’t have to buy software to do this.  For millenia, record keeping has been done with pen and paper.  However,  if computer software will encourage you to move forward, I think there are some very reasonably priced packages out there.  Many you may be able to try out for free for a short time.

Here’s a budget helper that seems to be free, but i don’t know anything about is.  It is Dave Ramsey’s EveryDollar free budgeting tool.  Plus Dave Ramsey has a bunch of free tools available.

Whether you choose computer software or a pencil and notebook, start this year taking control of your finances.

Cheers!

tauna