Mind Your Farm Business — Ep. 34: The sweat equity trap


Capital assets don’t buy groceries.

If this statement makes you scratch your head a little, you’re likely the older generation on the farm. If you read it and think, “Don’t I know it” you might be the in-coming generation, and very likely frustrated by the lack of clarity on how the farm’s equity and income is being distributed now and will be into the foreseeable future.

It could be that you’ve fallen in to the sweat equity trap — where years of effort, sweat, and toil amount to a “Some day this will all be yours!” merry-go-round and that ‘someday’ gets further away every year.

In this episode of Mind Your Farm Business, farm coach Elaine Froese joins Shaun Haney to talk about sweat equity: why it matters, how to account for it, and the always important, why families avoid the topic or fight over it.

Too often, Froese says, the horse is already out of the barn. “This conversation should really start when that young man or young woman comes home from college to work on the farm,” she says. She uses the acronym FAIR to tackle the tough conversation over how the farm must run as a business, and how all those working within the business will be compensated for their time. FAIR stands for: Financial transparency, attitude towards money, intent, and, roles. Froese walks us through how each of these terms adds to the conversation that has to happen.

What’s more, Froese has some tough love for parents and grandparents well into their farm transition years: the farm is not a golden egg for the entire family. As a business owner and a share holder, you have to make financial decisions based on what’s best for the farm business (if it is to continue), your own retirement, and for the eventual business successor.

Listen for more Mind Your Farm Business episodes, here.

Disclaimer: Royal Bank of Canada and its subsidiaries are not responsible for the information provided in this podcast, and this information does not necessarily reflect the views of Royal Bank of Canada or any of its subsidiaries. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its subsidiaries.

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