Never Pay Managers With Equity

This is Frank Rolf of the RV Park Mastery Podcast. We're going to talk about what to do when people want more money and most specifically why you should not try and pay them using equity in your RV park. So let's first start by talking for a moment what's going on in America. You have a workforce that ever since COVID has become of this new mindset that working is kind of optional.

So you have people who are just kind of giving up on work. I don't know what they're doing, living with relatives or working uh in i in the gig economy of driving for Uber occasionally. I'm not really sure. But the bottom line is suddenly you've got fewer people wanting to work, and as the economy reopened coming out of COVID, people needed workers, but yet many weren't ready to go back to work. They decided they were just gonna sit this lifetime out and and not do it anymore.

And at the same time you've got all kinds of labor unions out there rabble rousing that they can get people ridiculous sums of money, case in point, UPS drivers who are now making a hundred and seventy thousand a year, it is rumored. And even the UAW who who then campaigned, the head of the UAW campaigned that he could deliver to all those auto working folks the same package the UPS was getting, and he failed miserably.

But this very attitude has gotten strange. Millennials right now claim that the minimum amount they would have to get in job to make it worthwhile for them to get up and go to work is eighty thousand dollars a year. So against that insane backdrop of American labor market comes the very reality you've got to have a manager in your RV park and you have limitations on what you can pay them.

So when someone comes to you and they say, look, I need more money, I want more money. If you don't give me more money, I'm going to go get a job over there at Taco Bell, you have to respond with some kind of plan. And one mistake some RV park owners make

is that they think, well, okay, here's what I'll do. I'll give them equity in the business. That therefore the people will show up, they'll do a great job because they are a part owner. They're no longer just an employee. They're a they're a partner in the enterprise. And that has always proven historically to be an extremely bad idea. Now, why is that not a good thing to do? Well, the first thing is you typically burn through managers on a consistent basis.

Because being an RV park manager is not something that everyone is cut out for. You have to wear a lot of hats, you have to have a lot of skills. You have to be part of the day a people person, part of the day a doing things with your hands person, uh a part of the day a numbers person. And not everyone is that well rounded. And the problem is if you pay people in equity, what do you do when you lose them?

That's the first big roadblock is okay, you could give them equity in the R V park, but then what happens when you fire them? What happens when you catch them in Baseline or whatever? So you say, Oh, okay, well You're out the door, but yet they still have the equity in your business. So the simple fact that you turn people over on a regular basis pretty much precludes this concept of giving them equity. But there's even bigger problems.

So most of your RV park managers, they don't think like you do. You put together the deal to buy the RV park, you contributed the capital that you earned fair and square. You got the loan together, you've got you've got the whole big picture going on, but that's not them. They're just worker bees. They just w like to work, but they're not entrepreneurial by nature. And as a result, they don't think long term.

So you may buy the R V park, you may do all these wonderful things with it, because you know you'd love to build a business that you can leave to future generations. You love to build equity and wealth in that business, but they just think short term.

They just think today. They think about this coming weekend. And when you trade people equity instead of current wages, what you're basically doing is you're only going to appeal to those who have a really long-term interest in the business. And most people just don't.

So you're thinking it's important to them because it's important to you. But in fact, it's not really important to them at all. So they would trade, you know, a mountain of money years into the future for a tiny, tiny amount right now up front in cash. So it's not a very good motivating factor is the problem. It is to you, you think it's highly motivating, but to them it's no big deal. So as a result, it's not really going to work well long term.

Also, you invite a whole new wave of litigation when you start giving equity to an RV park manager. Because now you have to worry about not only litigation from your customers, litigation potentially from a manager, but now the litigation from a partner, someone internal to your group.

They could sue you for any number of reasons, claiming you did a bad job, claiming that they could have done better, claiming you bad actions damaged their future value in the RV park. Any number of things they could trump up. Remember that we live in a nation that has more attorneys than all the rest of the world combined. We are a one-stop litigation machine. So as a result, you can't be creating your own landmines by creating your own new avenues of litigation.

Finally, managers are not so valuable to your RV park that they're even worthy of having equity. Think for a minute of why you have all the equity in the RV park. That's because you raised the money for the down payment, you put the loan together, you found the deal, you negotiated it, and then upon closing, you've turned it around, you're operating it, you've done all those things. What's the manager done?

Let's compare that. The manager may answer the phone, interact with the customer. Is that the same? Is that on the same level? Do you really need the manager for that business to succeed? I can tell you right now the answer is no.

RV park managers can go through cycles of having weak managers and yet they still persevere, they still survive, they just replace that bad manager and replace them with a better one. The business doesn't fold, it doesn't collapse. If you look at a restaurant, for example, the manager is key.

If the manager doesn't buy good quality food ingredients and if they don't manage uh the the cooks and the service personnel, they keep the restaurant tidy and are able to survive the inspector who comes by doing the the health and safety violation checks.

Then the business could go completely out almost immediately. It happens in America everyday restaurants have the highest failure rate of any business. And that's because it's so hard to survive with a bad employee. They can literally tank your entire business. But that's not the case with an RV park. People come to your RV park most importantly because they're there to park their RV in that location.

That's the big thing. Now the minor things are important. It could lead to negative social media reviews. It could make that customer leave earlier and never come back if such things as it's not clean and maintenance and just a general attitude when they check in, but it's not to say that the manager can destroy it all because they're not there for the manager.

The manager is just a sidebar item. It's not by any means the main part of your business. The main part of your business you put together because you chose the right location with the right infrastructure and all the right physical plant attributes for the business to flourish.

Not because of them. If you had an NFL team and you have a great quarterback like the Kansas City Chiefs have right now in Mahomes, that's worth it. They pay Mahomes a huge amount of money because without him, the team can't go anywhere. And they know it. But the RV park manager has none of those characteristics. So because they're not, by any stretch of the imagination, the most vital part of your business, they're just not worthy of equity. It just doesn't make any sense.

Now I could tell you endless number of horror stories from people who did give equity to managers. It never has a good ending that I've ever seen. But I cannot give you even one example of it ever working. And to me, that's a very troubling trend. I wouldn't want to do something that all of the other RV park owners before me had tried and failed with. I wouldn't want to repeat what they did.

As a result, when it comes to compensating your RV park manager, go with money, give them a healthy amount, give them an attractive bonus if they can take actions that benefit the business. But leave equity off the table. This is Frank Roth, the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.