Ali Gray from our Farming department gives advice on diversifying a farm.

Farmers in the UK have to continually struggle against the odds, with falling crop and livestock prices, increasing burden and costs through new rules and regulations – not to mention the never-ending challenge of the British weather.

A recent Defra survey on farm household income, published at the end of August, reveals the average household income of the principal farmer was £52,000 before tax last year – 17% lower than the year before – caused by a fall in farm business income. This has led many farming families to look for other ways to earn money, with 91% of farm households now having an off-farm income. The research also shows a stark contrast between income and assets. For example, 25% of farming households now have an income of below £17,500 but the average net worth of this group is £537,000.

If like many farmers, you are asset-rich but cash-poor, you may want to consider diversifying your farm to create another business. We look at how to go about it and get tips from one farmer’s success story.

What is diversification?

Diversification is when a farm branches out from traditional farming into other ways of generating money. This could be in many different forms; either by taking a part time job off the farm in the same or a totally different sector, or by creating a new enterprise on the farm such as a horse livery stable, a B&B, a farm shop, food processing and marketing, or a tourist attraction.

If you’re thinking about setting up a new business to run alongside your farm, it’s important to come up with a detailed business plan beforehand. There are a number of things to consider, the most important ones being location, market opportunity and high quality standards.

Location, Market & High Standards

You’ll have to spend a lot of time planning and running your new business, so it must be something that you're passionate about and have a keen interest in. Location is also key; businesses which rely on a significant footfall need to be somewhere where there is a market opportunity, not already being serviced by an existing business, and convenient for visitors to get to easily.

Despite great new business ideas, farms in remote locations may find it harder to succeed. However, a farm business in a remote location can still thrive if there is an existing pull to the area; for instance there are many service and accommodation businesses provided by farmers along the Hadrian’s Wall, which are good examples of this and many others in or around the Northumberland National Park. When in a remote or seasonal situation, it is important to have some appeal to the local community that will help sustain the business in the quieter winter months, which can be a difficult time.

A reputation of consistent quality is now more important than ever, especially with tourism/visitor businesses. Customers expect a higher standard than they get at home, as a bare minimum and the power of social media can expose the smallest of cracks quickly.

The Barn at Beal

I was involved in helping farmer Rod Smith with his business; The Barn at Beal in Lindisfarne, Northumberland – a visitor centre with a café and restaurant, as well as a campsite.

Rod’s farm is situated on the main road from the A1 which leads to the causeway at Holy Island. This location was ideal to attract tourists waiting for the tides to recede so that they can cross the causeway to the island.

Rod agrees that research and location are the two key things to consider in order to run a successful diversification business. He adds that employing reliable and trustworthy staff is also extremely important.

But diversification is not an easy fix. It is hard work and can be more trying than traditional farming. However, Rod says that from a family point of view, the Barn at Beal will provide his young children with the option of joining the business when they get older.

“For the first five years the farm supported the business,” he says. “You have to be prepared to not make a profit at first.”

“You also have to learn to deal with criticism,” he adds. “Farmers aren’t very good at that! But if you run a tourist attraction you need to get used to responding to it, especially through social media.”

Next steps

Once you’ve identified your business idea and researched the local market, the next steps to take are:
• Create a business plan. Financial planning is essential and a good business plan will be vital to get financial support.
• Research financial grants. Find out what support is available to you.
• Marketing. You’ll need to attract customers so learning about effective marketing will help you sell your business.
• Training. If you need to learn new skills to make a success of your business, there are a number of courses available at local colleges and online.

For further information see the Government website on diversification advice. https://www.gov.uk/diversifying-farming-businesses