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Thinking of diversifying on-farm? All your questions answered...

Rural surveyor and founder of The Business Barn, Hannah Moule, answers the common questions asked by farmers when it comes to diversifying. 

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All your diversification questions answered

With the latest Defra Farm Business Survey revealing 64 per cent of farms in England have already diversified into non-agricultural business, there is no denying farmers and landowners are actively seeking alternative ways to stabilise volatile farm incomes.

 

However, for some, the idea of shifting the attention from the core farm business to another enterprise can be daunting and add risk. Equally, there are others who are itching to bring in an additional farm income but are unsure about how to go about it or what their options are.


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  • Q: Is diversification my only option to stabilise my annual farm income?

 

A: The simple answer is no. With Brexit around the corner no-one is quite sure of the impact this will have on the UK agricultural industry, but this does not mean everyone has to panic and forge ahead with ‘quick-win’ diversifications that may not be right.

 

As the first point of call think about your farm business – are you being as efficient as you could be? Are their small changes you could implement to improve farm performance? Are there ways you could increase revenue or reduce costs with your existing set-up?

 

Take the time to look at each enterprise and understand your performance figures, then consider where small changes could be implemented to make way for incremental improvements. Talk this through with family, partners, your vet, farm consultant or your agronomist and put in place an action plan to see it through.

 

You may be surprised to find that the answer to a more stable income is readily available to you.

  • Q: What are my options when it comes to diversification?

 

A: You only have to look at the entrants of the British Farming Awards diversification category to realise there are so many opportunities for farmers to diversify if this is the direction you want to go down.

 

There are those who come up with the next best business idea, but you don’t have to reinvent the wheel each time.

 

Look at the assets you already have on-farm and how these could be put to good use. Rental opportunities are often forgotten about but have the potential for being some of the biggest earners with very little involvement needed.

 

Equally, look at your location, does this play well into making more of the local tourism industry?

 

Consider the skills of your workforce or your family, could you offer a professional service or could you replicate a business model online?

 

The smart approach is 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 regard to your farming endeavours.

  • Q: How do I know which diversification is right?

 

A: Research, research, research. If you are certain you want to diversify, undertaking market research before you get stuck into a project is vital. This process is all about getting as much honest feedback about your idea, product or service prior to investing.

 

For absolute start-up businesses, make use of the information that is already available to you most of which can be found online or through your personal contacts. To start with you should ideally be researching:

 

  • Similar businesses.
  • Competitors.
  • The industry and general market statistics.
  • Your target audience.
  • How other people are selling their product or service? For example, pricing, marketing and sales.
  • Relevant trade organisations and networking events.

 

Having carried out your ‘desk-based’ research, you should be in a stronger position to gather your own information through the likes of surveys, online forums and taste testing. The research you conduct should help confirm whether your business idea has ‘legs’.

  • Q: What are my options to finance a project?

 

A: Historically, the bank has been the first point of call when people are looking to finance a new project. But there are numerous other options now available that are worth considering.

 

Grant funding


When it comes to grant funding it is worth doing your research. There are often several government grants available for rural and small businesses but some are only accessible at a very local level.

 

Currently, the Rural Development Programme for England Growth Programme and LEADER funding provide significant funding opportunities for projects across England that meet certain criteria and are worth investigating. Your local growth hub and local action group will be able to help further.

 

The Princes Countryside Trust Fund also provide grant funding to improve the viability of family farm businesses and sustain rural communities, and there are often local trusts and pots of money benevolent people, charities or organisations have made available.

 

Peer-to-peer lending


This is a relatively new type of finance option which matches borrowers and lenders directly and aims to give bother investors and borrows a fair rate of return.

 

There are a growing number of websites which offer this type of lending, but equally there are companies such as Folk2Folk which offer local, secure peer-to-peer lending.

 

This type of company will only help to provide finance to business owners that want to grow, diversify or refinance with an aim of creating financially and socially sustainable communities.

 

Agricultural finance brokers


Similar to other brokerage services, agricultural brokers offer a specialist service, hunting out the best options and deals around for the particular situation or request. Many brokers will have a number of funders they can approach to help finance specific projects such as the investment into a diversification.

 

Crowdfunding

 

This is a way of funding a project by raising small amounts of money from many people. It is a popular method now, but the market is crowded and it is often the case that you need to attract a lot of investors to make it work.

 

Private investors


Private investing is growing in popularity in the UK and sees the investment of personal money generally into early stage businesses. With this method of finance, you are likely to not just benefit from capital investment but also the knowledge, mentorship and assistance from the investor.

 

Funds will be available for the right businesses with the right propositions, but it is vital you plan any start-up or investment project properly before approaching lenders and seek advice from your accountant or financial consultant before embarking on any borrowing.

 

*Please note this not an exhaustive list of funding options

 

  • Q: What do I need to know when it comes to planning permission?

 

A On the whole, whenever you undertake operational development, for example building works, you will need to demonstrate you either have permitted development rights or will need planning consent.

 

You can generally change the use of land from agriculture to ‘something else’ for up to 28 days per year without the need to make a planning application through permitted development rights. However, anything that occurs for more than 28 days in a year will generally require permission, even if it is only seasonal.

 

Depending on your project there may be exemptions in place. For example, for camping and caravanning sites with the correct certification, it is possible to have up to five pitches without the need for planning permission.

 

Generally speaking, if you are looking to build permanent structures, restore buildings or change the use of a building, planning consent will be needed.

  • Q: What are the main factors considered in a planning application?

 

A: There are two planning issues that can be ‘deal breakers’. Firstly, if the development includes a substantial new build element and the proposed site is located in the greenbelt this may be difficult to achieve. However, conversions and change of use are more likely to be accepted in the greenbelt.

 

Secondly, if the site cannot achieve good enough access off a highway then this may be a factor that cannot be overcome by the planning authorities.

 

Other factors considered in planning applications include: siting, design, scale, use, residential amenity, visual impact, landscape impact and water management/drainage.

 

If you can overcome and clearly show how your application deals with or meets all the above, and any local criteria, then generally local authorities are supportive of planning applications that support rural businesses, create jobs and support farm incomes.

  • Q: Are there any tax implications when it comes to diversification?

 

A: Farming has favourable and generous tax treatment compared to other UK businesses including Income Tax Relief and Agricultural Property Relief (Inheritance Tax). But, diversification risks losing these hugely valuable reliefs.

 

In this instance careful planning is needed and professional advice should be sought before embarking on a new business venture.

 

 

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