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Diversifying Farming Businesses

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12:01am 24th May 2015

This guide is for farmers who are thinking of diversifying...

...by adding new business activities to traditional farming. Farm diversification is not guaranteed to boost your farming business and can be a complex process, but can also be very rewarding. If you are wondering whether to diversify, and how you might do so, you are advised to seek independent advice. Commercial business consultants offer analysis and advice on diversification planning for a fee. You can also receive professional advice from a government adviser, your accountant and bank.

This guide identifies key issues to discuss with government and other professional advisers. These include basic questions about your short- to medium-term business intentions and motivations, and how to work out if diversification is right for your farm.

It outlines various possibilities for diversified farm businesses and the need to consider the implications for your core farm business, especially around tax planning. It explains how you can plan, prepare and develop new skills and access funding for diversification.

Deciding if diversification is right for you

When you meet your professional adviser, you need to be aware that diversification will not work for every farm business. To find out if diversification is the right choice for you, you should be ready to discuss:

  • why you want to diversify
  • the implications on your time, your core farm business activities, cashflow, staffing, potential liabilities etc
  • information about skills, resources and market conditions that you have gained from other local farmers who have diversified
  • how much the diversified business will cost to set up
  • how you will finance it
  • how profitable it will be
  • how to market it
  • legal requirements, tax and national insurance issues

Be sure to give realistic answers to these questions. If you reach a positive conclusion, you will be in a position to prepare a business plan for your diversification from these answers. You will then be able to see if it is possible to fund your start-up

If, after considering all these questions, it becomes apparent that diversification is not for you, you will be in a better position to think realistically about the choices you need to make in your existing farm business.

Planning for farm diversification

About half of all UK farms use some form of diversified activity in their farming business and these bring an average of £10,400 extra revenue per farm. Other benefits of diversifying your farm include:

  • making better use of your farm’s physical resources and characteristics
  • finding new uses for your existing skills
  • integrating your farm with - and recycling money within - the rural economy

You will need to decide from the start what benefits you hope diversification will bring.

There are few limits on the kind of businesses you can diversify into. They can be either agricultural or non-agricultural, such as:

  • livestock products - eg producing and selling sheep cheese, llama farms, goat dairying
  • crop products - eg growing and selling speciality flowers, energy crops
  • retail outlets and catering - eg opening a farm shop
  • training and promotion of rural crafts - eg offering dry stone walling workshops
  • opening facilities for craft making and retailing
  • tourism - eg opening land up for camping or a bed and breakfast
Diversification out of agriculture

You could consider opening a non-agricultural business on your farm, such as:

  • tourist accommodation - eg bed and breakfast
  • retail outlets and catering - eg a farm shop and tea rooms
  • rural tourism - eg farm attractions
  • converting redundant buildings to other uses - eg offices
  • making and selling non-agricultural products - eg cakes and beer
  • training and promotion of rural crafts and arts - eg dry stone walling workshops
  • adding value - eg smoked-food products, cheese and ice-cream
  • energy markets - eg woodfuel projects

The pointers above are taken from https://www.gov.uk/diversifying-farming-businesses - click to find out more.

 

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