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the challenge

Pablo Alvarez of Aqua Greens at the company’s facility in Mississauga, Ont.Kathleen Caulderwood/The Globe and Mail

Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.

Pablo Alvarez envisions a day when Torontonians will wander his Aqua Greens aquaponics farm in the city centre, choosing bunches of arugula, basil and chives as well as a couple of the tilapia swimming below the plants.

Customers will be able to buy fish and local, organic greens any time of year, says Mr. Alvarez, an entrepreneur and long-time waiter who wants to connect people with their food.

But for now his aquaponics farm – a self-contained ecosystem in which fish swimming in huge vats provide nutrients for plants floating above on foam pads, which in turn clean the water for the tilapia – is relegated to a 3,000-square-foot industrial park near Pearson International Airport.

Before they set up their current location in September of 2014, Mr. Alvarez and partner Craig Petten were denied permission to launch in Toronto proper, given that the city's zoning bylaws don't allow agricultural operations. It's a pain point for the small business, which supplies produce – the tilapia aren't for sale yet – to multiple restaurants in the downtown core.

The bootstrapped startup is at full capacity, producing about 12,000 plants a month with 5,000 tilapia. The guys behind Aqua Greens say the business will make its way into the black in the coming months, more than a year after the first harvest.

The founders haven't paid themselves yet, but they say a more pressing challenge is finding a way to compensate the six or seven volunteers, mostly students of environmental science or zoology, who also pitch in. They help with the harvest, clean the systems and brainstorm how to make Aqua Greens more efficient.

Click here to see pictures of Aqua Greens' operations

"They're here because they want to help, they want to learn," Mr. Alvarez says. "But at some point, they're eventually going to want to get paid. Some of them have been with us for six months."

The co-founders make frequent trips to Detroit to visit aquaponics farms for inspiration, and they have talked about bringing volunteers along as a way to reward them.

But Mr. Alvarez says he knows the current arrangement is unsustainable. "We're going to have to compensate these guys eventually."

The Challenge: How can Aqua Greens compensate volunteers despite its bootstrapped budget?

THE EXPERTS WEIGH IN

Lisa Kay, president and lead consultant, Peak Performance Human Resources Corp, Toronto

Obviously compensation can be defined in a number of ways. The company could offer dining certificates, gas cards or Visa gift cards, which would be an expense for the company but not payroll. They could set it up so once a week or on completion of a project they could compensate their volunteers through some type of award system that will help pay the volunteer's expenses.

They could also approach a school or partner with one of the universities to get co-op students who are earning credits by volunteering. They could create partnerships to make the relationship official and find a way to make it a win-win so that the students are getting something out of it as well. Hopefully Aqua Greens will start getting profitable and can eventually hire on some of the students.

Christie Young, executive director of FarmStart, a charity focused on helping new and second-career farmers, Guelph, Ont.

Labour is the critical and most challenging piece of any food and farm operation. It's gruelling, repetitive work and most people don't want to do it all the time. If people are coming for a day, a week or just harvesting and it's necessary to have these people, then they're going to have to figure out a way to work it into their business plan. Most entrepreneurs don't pay themselves, they pay their labourers.

Farms that run internships, if it's a really serious farm, stop running those internships after a few years and start hiring offshore labourers as a way to get high quality, consistent labour.

I'm going to be blunt: People think that free labour is inexpensive, but it's not. It costs you time setting them up, supervising, making sure that what they've done is quality and consistent enough that you can send it to customers. I would suggest they dump this free labour thing and maybe apply for some summer job stipends – there are a couple of programs out there – to pay somebody. If you get lost in all these other things then your consistency and your quality goes down and that's when you lose customers.

Frank Li, compensation expert and assistant professor of finance at Ivey Business School, University of Western Ontario, London, Ont.

They should consider compensating employees – especially the key personnel – with "shares." All the employees share a portion of the profit. The exact portion depends on the valuation of the business and contribution of the employee. The best way is to estimate total profit and determine how much they want to pay any specific worker. They can offer it to all workers, with different portions – say, a key person gets 5 per cent of the total profit while others get 3 per cent each.

This bonds the employees closely with the business. With this strong incentive in place they will work harder and better. It's also cheap; there is no out-of-pocket cash for the owners. It diversifies the risk, and if the business goes bad, the owners don't need to pay. It's sustainable as well. When the business grows bigger, they have more shares to distribute. In some sense it is unlimited resources.

THREE THINGS THE COMPANY COULD DO NOW

Use gift cards

Reward achievements and milestones with gift cards, which are classified as expenses as opposed to payroll.

Apply for grants or partnerships

Set up partnerships with schools or apply for stipend grants.

Set up profit sharing

Offer shares of the company to workers.

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Interviews have been edited and condensed.