Generational Transition Program

My Sweat, Your Equity

Is Compensation Needed?

published: Monday, August 19, 2019

My Sweat, Your Equity

If you watch the do-it-yourself channel, the television shows feature brave souls buying fixer upper homes, and, with “sweat equity” try to turn a profit when they sell the home.  The homeowners invest their time, labor, and skills into the home, rather than paying an outsider to do the jobs.  Most of the jobs are backbreaking and dirty, but paying a professional would increase their expenses, so the homeowners do these jobs themselves.

In the ranching world, we often put our sweat, labor, and skills into the ranch’s infrastructure and livestock.  Many ranchers fix their own fence, do their own dirt work, clean out their own barns, trim their own horses’ feet, vaccinate and doctor their own cattle, and climb to the tops of windmills to service them.  Could we pay someone else to do these jobs?  The answer is “yes, but I can do it myself and save myself a pretty penny!”

When I was a younger producer (before arthritis and creaky joints), I was all about sweat equity.  Digging postholes (by hand), tearing down sagging barns, pulling wire from old corrals, and even AIing cows to improve genetics was something my youthful, energetic self could do.  Fast forward a few decades, and those physical jobs that were once fun (and didn’t hurt the next day), don’t seem as exciting for me.

When those physical jobs become a burden, ranchers may look to add the next generation to the operation.  Their enthusiastic energy is welcomed and needed to keep the ranch up and running. 

However, are these young folks being compensated for “their sweat” when it is “your equity”?

Do you think the homeowners flipping houses would invest their time and labor for free into someone else’s home?  No, I think not.  Why do we expect our returning ranchers to invest their labor for free (or almost free) on the ranch? 

Do we give the youth empty promises like “someday son this will all be yours” and they believe it?  If you are lucky to have the next generation back to help you, find a way to compensate them for improvements and increased value of the ranch due to their labor.  Can you afford to pay them for the services?  Could you offer a long-term lease?  Could you offer a percentage of the ranch entity?  Could you offer a purchase agreement on a parcel of land at a reduced price?  Ranchers never lack for thinking outside-the-box, and there are many other ways to make it work for both generations.

Invest sweat equity if “your equity” is receiving “your sweat.”  Otherwise, figure out how to compensate labor and skills that have increased the value of your ranching operation.

     by Bethany Johnston, NGLC Ranch Transition Task Manager

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