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Is Diversification the answer?
The countryside is covered with examples of farm diversification projects- some of which are hugely successful; the vineyards and visitor centres of Cornwall, or closer to home, the caravan storage or corporate events companies in Husbands Bosworth. However, there are a large number of less successful, costly, niche producers who have tried to diversify and lost a lot of money.
There is absolutely opportunity to create alternative income streams on working farms; letting cottages or creating products from farm produce; Heck Sausages for example. But successful diversification businesses are almost always offshoots of profitable farming businesses, not a plaster cast to fix the broken bones of a failing farm.
Diversification should be considered as a long-term entity for a farm. The business plan created ahead of diversification should not follow fashion or fads- you would need to sell a huge amount of organic hand milled flour at farmers’ markets to break even, as well as being the course of least resistance. For example, it would arguably be more cost effective and profitable to rent cottages out to long-term tenants rather than turn beds twice a week on holiday lets. A regular rent pays the bills more regularly than the “ifs buts and maybes” of the “staycation” market.
We do, however, wholeheartedly support diversification, when a few steps are followed in planning and preparation;
- Step One: Start with the end in mind. What is your reason for diversification? What do you want to achieve and how does the journey fit with your existing business?
- Step two: Play to your strengths. Be sure that the existing farm is working to the best of its capabilities. Ensure the staff are engaged, focused and can continue to run the farm and production whilst you are busy starting the new venture. Making money in your diversification will only be damaged if the existing business loses as much as the new makes.
- Step three: If the shoe fits… Be sure that your new project fits with your existing landscape, and adds to it, rather than taking away from or suffocating the breadwinner. Always take the option of least resistance and minimal outlay to develop slowly rather than a boom-and-bust curve-ball change of direction.
- Step four: Right people, right place, right time. Make sure you have people focused on all sections of the business. Be sure not to strip the existing business too lean of people, resources, care and attention, whilst your focus is on the new diversification income streams.
- Step five: Keep the balance. Back to point one- starting with the end in mind; if diversification of the farm is to improve your work-life balance, bringing in more income for less heavy lifting, be sure that you are enjoying the journey and don’t end up working yourself into the ground trying to manage two businesses. Of course, starting a new venture takes time and effort, but if that outweighs the positives, consider putting the effort into developing the existing business rather than the diversification.
your journey, in the first instance, please contact Harry Epsom on 01858 411539 or by emailing email@example.com