Define Owner Value

The ranch shouldn’t just be an asset to pass on when you die.  It ought to be a thriving business providing value for all of the owners before and after that fateful day.   Delivering owner value begins with defining it. The formula is simple:

Owner Value = Investment + Return

Our investment includes the money, time, energy, emotion and sacrifices we’ve made for  the business.  Foregoing college or another career to come back to the ranch because you were needed, constitutes a large investment. 

The return often involves more than money too. For some people the return can be negative. Just ask a ranch wife I met, who tolerates barbs from her mother-in-law on a daily basis, about negative returns.

It is important to get specific on these issues.  For example, we might all agree that profit is important, but is that profit to invest back in the business or to pay shareholders dividends?  The strategy to produce one may be very different than the strategy to produce the other. 

Defining owner value is a critical step in creating your estate plan.  We recommend preparing for this discussion by asking each stakeholder to list their investments (past and current) and the value of their returns (also past and current).  Sensitive and emotional issues are likely to emerge and sometimes it is best to bring in a competent facilitator to manage the conversation.  While difficult, this is an essential discussion if you don’t want your ranch to die with you.

   http://blog.ranchmanagement.com/2013/09/10/define-owner-value.aspx