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Farm diversification ranges from small scale methods to reduce fixed farm costs, to large scale enterprises that make half of the business income. However, the umbrella that is farm diversification can seem like a mine field when it comes to deciding what will fit in best with your farm business.
There are four main areas that should be considered when choosing the best diversification option for your business:
Preliminary expenses are inevitable when it comes to the start-up of any business, often the scale of the intended start-up is a major contributing factor to these costs. Starting on a smaller scale and adding value to the project is an ideal way to develop. Each year, there are various grants and funding available to support farm diversification projects, both nationally and on a local authority scale, reducing the likelihood that start-up expenses will inhibit the creation of a diversification proposal (grants and schemes vary between business sectors, location, and application dates).
Labour and staffing is another important factor that varies drastically between non-farm income sources – whether the project is going to be run with the current workforce, will require an increase in employees, or whether the diversification will require very minimal management. This aspect is very likely to impact the variable costs in the gross margins of the new business.
Location should of course be a key consideration. It is not only a contributing factor in terms of the consumer market that your diversification project is going to target. Location can also refer to the ability to connect to the national grid if you are turning towards the renewable energy sector, or, the likelihood of having planning permission granted based on proximity to neighbours or designations of the land such as areas of outstanding natural beauty or green belt.
Statutory requirements including planning permission, licences, compulsory certificates and insurance should be considered. While it can be temping to begin projects without considering this, it is important to factor in the legal requirements, which will lead to the long term stability of your business. For example, food hygiene certification, planning permission if your changing land use from agricultural, and insurance to protect yourself and business which your current insurance policies may not cover.
While it is clear there is a lot to think about in terms of choosing the right diversification project for your farm, there is a lot of support available in terms of knowledge, grants and funding to get you started. A full, and detailed feasibility study will help you create a thorough business plan.
On-farm diversification can be a feasible option for many farmers and help to increase profitability and reduce risk.
It is important to conduct a thorough analysis of the market, available resources, skills and expertise, regulatory requirements, financial viability, and potential risks and challenges before making a decision.
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