Equity & Compensation
Farmers and ranchers running their own business are in control of the finances, paying themselves when and how they like. But when adding another family member to the operation, compensation takes on a whole new meaning. Alan Hojer, director and legacy consultant with Keep Farmers Farming, explains collective wealth comes from growing the business. But at the same time, individual wealth, or compensation, needs to be recognized and fueled.
We have to recognize the compensation side of the business of the people. In other words, ownership interest, shares, that type of thing is equity. And compensation, those are two different things, but they're not one and the same. And if we get that concept right, now we'll be taking care of both the group, which is equity, and the individual, which is income.
Typically, differing life stages of family members impacts compensation needs. Hojer believes sweat equity should not be part of the compensation package, but housing, insurance, and other benefits need to be included.
We have tools to work with, but the first is understanding that people are different both in stage of life, but also in family makeup and needs.
The Keep Farmers Farming Program can offer guidance on creating a business structure which addresses the capacity of the business while providing cash income for all parties.
This is all about taking the operation and putting that operation on offense because we have people focus on the right things instead of worrying about the wrong things.