Do you know what your return to management, also known as family living costs in some business structures, are on a per unit basis? You should. According to Chris Barron a consultant with AgView Solutions, return to management, overhead and family living costs should be line items in your budget and they should include: healthcare costs, labor, payroll, owner draws, deferred taxes, current taxes, home/building improvements, personal items that get purchased throughout the year, vehicles, kids in college, vacations, and toys.
“I like to say I accidentally bought a boat,” Barron says. “When that happens you have a principle and interest payment on that toy and it starts to eat away at the bottom line.”
Barron says for his clients this line item on the budget often ranges from $0.20 to almost $1 per bu. on corn. For many producers it’s a hard category to reduce.
“We work hard, and we emotionally and physically and truly deserve compensation for what we do,” Barron explains, “but, it is part of our cost of production if we’re pulling that revenue out. It’s an area we can look at and say ‘are we prudent?’ Some people are and some people really aren’t.”