Look before you leap if planning to diversify
With farm diversification a reignited discussion point for many amid the uncertainty of Brexit, there are hidden considerations that are often overlooked when it comes to diversifying the farm business.
Diversification is nothing new. Farmers have been looking for ways to add value to their farm business and secure a secondary income for decades. But recently we’ve seen more people considering diversifying, with the potential loss of subsidy payments one of several driving forces behind this.
However, a word of caution - resist the temptation of pursuing a ‘quick-win’ diversification without thoroughly researching it first.
The first point of call before even embarking on a new business venture should be to examine your existing farm business and consider areas for improvement.
This could be achieved by benchmarking against similar businesses, scrutinising variable and overhead costs and analysing individual enterprise accounts. You would be surprised how several small changes could result in incremental differences.
This exercise will help determine whether it may be more cost effective to focus your efforts on adapting the existing business or if there is scope to enter into a new venture.
If diversification is the right route, then background research is paramount to making a success of it. Ideally you want to start small with a venture that doesn’t take a lot of capital or so much of your time that you take your eye off the ball with regards to your farming endeavours.
Your new business idea doesn’t necessarily have to be the next best thing. The vast majority of farm diversifications reproduce what others have done, just in a different place or a different way. Therefore, visit as many farm-based enterprises as you can to soak up ideas and spend time looking at how others do things, well or badly. This is time well spent even if it means your venture gets off the ground later than you would like.
Equally, don’t underestimate the level of commitment needed both physically and financially to set up and run a business. All new enterprises will demand your time and effort but some more than others. If your time is limited, it may be worth pursuing a project that requires a low level of long-term commitment.
Then there are factors to consider such as funding, tax planning, staffing and planning permission. These are just some of the considerations to take into account before committing to a new venture, and thus the research phase is not an element of your business journey that should be overlooked.
For more information, visit www.thebusinessbarn.co.uk.
Hannah Moule is founder of The Business Barn
