SPREADING RISK through diversification is giving many farmers new opportunities, and total income from diversified activities is increasing year-on-year – but some advisers have cautioned farmers against a 'rush' into projects that might require more time and effort than expected. Instead, they should start with ‘passive’ diversification options.
“Don’t rush into diversifying if it is covering up cracks elsewhere," said Hannah Moule, planning consultant at Moule and Co. "Really concentrate on getting your core farming business as good, as efficient and profitable as possible before adding a new enterprise into the mix.
“Consider ‘passive’ options first – things that don’t need much time spent on them, e.g. renting out buildings, renewables. Unless it is a passive income, you will be having to put a heap of time, energy and brain power into a successful new business. Don’t think they are easy things to do ‘on the side’ – make sure you are in a position, financially and time wise, to invest in your new business,” she explained.
“Then consider how much risk and capital you are prepared to invest, this will be determined by your current financial and business position, and what is your motivation to diversifying. Are you prepared to spend £10,000 or £100,000? This will help determine what type of businesses you should invest in."
Ms Moule, who will be speaking at Energy and Rural Business Show on March 3 and 4, at the East of England Arena, in Peterborough, continued: "Consider your location – when you are diversifying, you may potentially be selling to people. You aren’t producing a commodity in grain or beef; your customer is now a human being! Then consider your assets, consider your skills and interests and help narrow down what it is that is suitable for you."
Also speaking at the Energy and Rural Business event will be Mark Russell, partner at land agent and national property consultancy, Carter Jonas, offering advice for diversification planning.
“Our advice is to keep it simple and play to your strengths or those of your trusted contacts," said Mr Ruseell. "To grow a new crop, make sure you have support from someone who understands that crop. Converting a building for your own diversification is great if you are keen and understand the business. If not, let your local market dictate the building’s use.
“Think laterally – where you own a property, use it as an asset base; many successful farming families have non-farming or off-farm income in the pot,” he said.
“Step back with the next generation and think strategically about what you are and why you are doing it – this may seriously change the direction for your business,” he added.
The Peterborough event will showcase the latest business diversification options, renewable energy opportunities, energy and environmental management and advances in low emission vehicles for agriculture. Expert speakers will participate in ‘How-To’ workshops over the two days of the event, offering practical guidance on everything from ideas for alternative land and building use, to growing hemp, and general diversification tax guidance, as well as an exhibition including innovative farm diversification options and advice.
Energy and Rural Business Show is run in association with the CLA and NFU Energy, and is free to attend. Places can be booked at www.energyandruralbusiness.co.uk
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