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What Is Sweat Equity Worth?

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When multiple generations work together on a family ranch, unclear expectations can create unnecessary challenges. 

Even though it’s bitter cold in some areas of the country right now, it doesn’t mean ranchers aren’t working hard outside and breaking a sweat. With hay to be fed, frozen waterers to thaw, bedding to lay and preparations for calving season underway, there’s a lot of work to be done when others might be taking a snow day.

Ranching is certainly a work-intensive career. For aging ranchers who aren’t as spry as they used to be, having the younger generation around to put in some “sweat equity” can be a welcome and valuable thing.

Sweat equity can be equally rewarding for the younger generation. Particularly with today’s prices for cattle and land, the capital requirements of getting started in ranching can be overwhelming and nearly impossible to attain. That’s why partnering up with the older generation can be a wise investment for younger folks, even if it means being the designated slave labor for years.

 

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By definition, sweat equity is an interest in increasing the value in a property earned from labor toward upkeep or restoration. The term is used to describe the value added to real estate by owners who make improvements by their own toil. The more labor applied to the home, and the greater the resultant increase in value, the more sweat equity that has been gained. What applies to real estate also applies to a ranch. The more upkeep and improvement that’s put into the ranching enterprise, the more it is worth in the long haul.

My folks got into the cattle business by taking cattle on shares with my dad’s dad. My dad took my grandpa’s commercial operation and made it into a successful purebred business, adding value to the ranch by bringing in higher-value cattle to sell to commercial operators in the area.

My husband and I invested in the business when we moved back to my family’s operation and started doing some of the heavy lifting around the place. Instead of taking a market share of my dad’s customers, we have had to find ways to diversify by bringing in another breed and investing more in the marketing to expand the business instead of dividing up the existing shares.

In turn, my folks have been generous by co-signing on some loans, offering equipment for us to use instead of having to invest in our own. Just as valuable is their wisdom and advice as we stumble around in our youthful years of getting established in the business.

As a young person, sweat equity can only work if both parties clearly understand each other’s expectations. It would be heart-breaking to put in decades of sweat equity into an operation, only to discover the older generation never had any intention of passing it along or making it possible for that individual to invest once the owner hits retirement age. Equally challenging for the current operator can be making an immediate commitment to that younger generation. However, this gap in expectations and understanding can be solved with a little communication. Nonetheless, the arrangement can be a difficult situation to navigate, and each family operation has its own unique set of challenges.

I bring this up today because I would like to hear from all of you on this subject. If you’re in the position of putting in years of sweat equity, what is your incentive to stick around? Does your operation have a road map that lays out what to expect in the decades to come?

And, if you’re the current owner and operator, how heavily do you rely on a younger family member to work on your ranch? What is sweat equity worth to you? Does it come with any guarantees on your part? Share your stories, advice and experiences in the comments section below.

 

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Discuss this Blog Entry 5

anonymous (not verified)
on Jan 8, 2014

"It would be heart-breaking to put in decades of sweat equity into an operation, only to discover the older generation never had any intention of passing it along or making it possible for that individual to invest once the owner hits retirement age."
My husband has worked for several years on the family ranch and we're just now realizing this is the case for us. He spent 12 years doing off farm work before coming "home" to work. It's completely heartbreaking and unfortunate.

Anonymous (not verified)
on Jan 8, 2014

It truly is a wind out of your sale moment to know that your 30+ years of sweat equity was washed away as the older generation forgot that you have been the workhorse all along and wanted all the kids to benefit. Now the place can go to hell, I want my 30 years back!

Anonymous (not verified)
on Jan 8, 2014

Tell the older generation to lay all the cards on the table. Some family members won't be happy. No matter how the parents wanted it to go won't always happen that way. You always have bottom feeders that wait till the last one goes. Then they hire a lawyer and sue you. It cost me thousands of dollars and I have the farm. The lawyers made the most it. You have to stand up, tell them ( the older generation) what you want, if they don't like it leave and don't look back.

Anonymous (not verified)
on Jan 8, 2014

When your parents a real chauvinists, and you have had to buy your house/ranch twice, and this is after thousands of hours of free labor, you realize you no longer even want a relationship with them. Maybe they thought it would equalize out if when they bought brother, who did little, two houses.

Anonymous (not verified)
on Jan 15, 2014

Speaking for the younger generation: I think you hit the nail on the head when you talk about the communication aspect between the generations. In my situation growing up the wages weren't great and the hours were long, but I was always compensated for working on the farm. I think it prevented any thought of entitlement on my behalf. As I have moved on and started my own farm my dad and I still help each other out he cuts me breaks on use of equipment but no free rides either way, which could cause hard feelings if someone feels like they have been taken advantage of. I have two siblings that are not involved in the farm and I always knew they were going to get a share. But does that mean a share of the farm? Dad recently mentioned putting the farm in a trust for all of us to own it jointly. I was honest with him. I told him I didn't have any interest in having to dealing with my sisters when I want to make a farming decision. I don't think he had considered that when he had thought of putting it in a trust. I have also talked to dad about my aspirations. Most farmers work their entire life preserving and improving what they own, and they want that to continue. I proposed that I will get my third of the land, and the rest will have to be purchased at appraised value. My sisters get the money, if they want land they can go buy it with the money. He knows his land will continue to produce and be taken care of and will stay in the family for another generation. This may not happen, but waiting until someone is gone to find out what is going to happen is not me . I want to know where I stand and the papers to be signed.

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BEEF Daily Blog is produced by rancher Amanda Radke, one of the U.S. beef industry’s top social media “agvocates.”

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Amanda Radke

A fifth-generation rancher from Mitchell, SD, Amanda grew up on a purebred Limousin cattle operation in which she and husband Tyler are active. She graduated with a degree in agriculture journalism...

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