DECEMBER 6, 2016 grainews.ca /
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Home Quarter Farm Life SEEDS OF ENCOURAGEMENT
Ready to share your wealth with employees? An Employee Share Ownership Plan may be a good option for your farm Elaine Froese
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s Christmas approaches, you may be feeling like Ebenezer Scrooge if you’ve had a tough year with poor crops and low prices, but regardless of how the farm year turns out, you need labour support to get the job done. One of the biggest fears of founders that I coach is the fact that they may lose loyal, hard-working employees after the transfer of the farm to the next generation. It doesn’t have to be that way. Dan Ohler of ESOP Builders (dan@esopbuilders.com) recently gave a webinar on how Employee Share Ownership Plans (ESOPs) work. We’ve been thinking about this on our farm as we have a fabulous young mechanic whom we would like to keep for the next 30 years. According to Ohler’s statistics, 51 per cent of business owners in Canada have no succession plan, and only nine per cent have a formal succession plan. Would your business be in a pickle if you lost a key employee? It may seem difficult to talk about your finances and personal goals for the future, but I suspect your biggest
barrier is that you are afraid of what life might look like after the business is transferred. Ohler suggested that 75 per cent of owners regret the sale of the business 12 months later because they were not emotionally ready to let go, they paid too much tax, and they didn’t take enough time to plan their retirement. That is why I suggest that farmers use the concept of “reinvention” and test out some of the things they would like to do, and still have a semi-active role in the farm business. Their transition is a role change, not a total “goodbye” to the farm. ESOPs would allow my key employee to have long-term value growth and purchase part of an ownership interest in the farm he works hard at. What are the benefits of an ESOP? • The founder can exit on his or her own time. It can be planned out in stages of letting go. • There may be instant liquidity with a potential for increased growth and profitability as your employees purchase shares and are now part owners and committed to the long-term success of the farm. • As co-owners, employees share the risks and rewards of the business, and they also become clearer about the financial transparency that impacts their work. • You’re not Scrooge; you are ena-
An easy knitted bag pattern by DEBBIE CHIKOUSKY
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ver the past couple of months I have had the opportunity to knit projects for other people. This hasn’t happened in many years and it is always enjoyable. Usually it involved knitting a pattern that someone had chosen but want changed, but this time I just had to make one up. They wanted small bags of a certain size, shape and absolutely needed to have pompoms that matched and a drawstring. The pattern for these little bags turned out to be very simple and quick to knit. They are so versatile and a fun way to use up bits of yarns that all crafters seem to accumulate.
Gift Bag Pattern Bag supplies: 16 in. 5 mm circular needle 16 in. 6.5 mm circular needle 30 grams of yarn (I used a combination of “A” green and “B” variegated Christmas-coloured sparkle yarn) Scissors Tapestry needle 6 mm crochet hook Pompom supplies: 1 fork of desired width of finished pompom Scissors Co-ordinating yarn Bag instructions: Using “A” cast on 40 stitches with the 5 mm circular needle
bled by your ESOP to share success with your valued employees. The process is done through one, or a combination of the following alternatives: selling equity shares, selling equity value units (treated like a share), and share options (the employee is given a right to buy shares in the future at today’s price). ESOP Builders uses a transformational two-stage model — a three- to four-week feasibility study followed by a three- to six-month design, training and implementation. This ensures the ESOP is designed specifically for your unique operation and based on your goals and desires. Ohler says that “communication and culture are critical” to the process of share transfer, so the transition is successful. The leadership team must be keen about the process. There also needs to be an independent valuation of the company or farm by an outside person. This builds trust and establishes benchmarks for the future. “People support what they help to create,” says Ohler. On our farm, we have worked hard to create a culture of collaborative decisionmaking, where every employee and shareholder has a voice in the way things are done. It would be even more powerful if the non-family employees felt like the harder they worked, the better the financial gain
Row 1: K nit making sure to join into a circle Row 2: Knit Row 3: Knit Row 4: Knit Row 5: Knit Row 6: Change to the larger needle and colour “B.” Continue knitting five rows for each stripe for six full repeats. Then on the last stripe, same colour as what the bag started with, knit one row. Then change to the smaller needle and knit three rows, next row knit 2 together for the row. Next row feed a threaded tapestry needle through the stitches on the circular needle. Remove the circular needle, leaving the stitches on the yarn that was pulled through with the tapestry needle and pull the circle closed. Knot off and weave the ends in as desired.
for their family as they would have “skin in the game,” so to speak. Companies that have ESOP plans have: • An engaged workforce and increased recruiting power. What would that look like for your farm labour force to be really attractive to new labour? • More productivity, possibly 20 per cent higher, according to Ohler’s research. • Decreased turnover. High turnover is costly and stressful. I see this in farm families where the culture of conflict drives great employees away. • Increased innovation and creativity as all the owners are open to new and better ways of accomplishing the farm’s goals. When employees are part owners they take pride in their work, and have a voice for creating change. • Increased job satisfaction. We all want to get out of bed for a vocation that gives us meaning and purpose. When you do your job well and reap the benefits of growth, it is a win/win. But Ohler is also clear that you need to recognize the risks of using an employee ownership plan: • It could fail, but Ohler shared research indicating ESOPs have an 80 per cent success rate. • There is a limited market for selling shares. Ohler says an annual internal “mini-market”
Drawstring instructions: Chain a 21-inch string with colour of choice leaving a 2-inch tail to assist in knotting the pompom on. Using the crochet hook weave the drawstring through the top of the bag. Pompom instructions: Wrap yarn 55 times around the tines of fork. Feed a piece of yarn about 6 inches long between the tines of the fork, centred, and tie tightly. Slip the pompom off the fork and using scissors cut the loops. Trim as needed. Thread the ends through the tapestry needle and then sew them through the bottom loop of the drawstring. Tie the ends of the pompom with the end of the drawstring, knot, cut. The size of the pompom can be smaller or bigger depending on the size of the fork.
Elaine Froese wishes all of her readers joy and peace in their homes. Visit www. elainefroese.com or @elainefroese, Like “Farm Family Coach“ on Facebook.
This project took about two hours from start to finish and could be used in many ways. A shoulder strap could be added and it would make a very cute purse for a little girl. Lined with a freezer bag they could be used for colourful plant pot covers to cheer up a winter room. By simply adding more rows these bags would also make reusable hostess gift bags for wine to take along to a dinner party. This was an easy project to knit with these circular needles, perfect for a Sunday afternoon. I learned a new skill — knitting with circular needles — and it gave me the confidence to attempt socks. Now to patiently wait for the mill to call and tell me our own sheep’s wool is ready to come home and be made into socks! † Debbie Chikousky farms at Narcisse, Manitoba
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provides some liquidity. And shares can also be sold back to the company. • You have to comply with tax laws, which do change occasionally. • Share dilution can occur. If more people join the plan, there could be a dilution of the percentage or value of the shares an employee owns. • The administrator may terminate the plan. • Unforeseen economic changes may put pressure on the plan. I know that when our successor son started to own assets, he became highly attuned to the risks he needed to manage. Ownership creates accountability and desire to protect assets and creates more growth opportunities. Please take the time to check out if Employee Share Ownership Plans are a good fit for your farm. December is usually a time of taking stock and seeing if there is room for “bonuses” to employees as a gift at year-end. Perhaps this year you can start the conversation about a lasting way to engage your key employees for life. That concept will scare the Scrooges away. (See more at www.successionmatching.com and www.esopbuilders.com.) †
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