Diversification: Maximising Opportunities for Your Farming Future
Diversified businesses may want to consider entering the Diversified Farm of the Year Award.
Diversification continues to be a key contributor supporting farm business income and is likely to play a crucial role in the future sustainability of Scottish agriculture. The most recent Data from the Scottish Farm Business Survey shows that farms with no diversified activity generated an average of £24,200 less income in the 2021-22 year (2021 crop year), and 58% of farms surveyed had at least one diversified activity.
Diversification provides an alternative, additional income stream to your core farming business while allowing you to maximise your physical assets, such as land and machinery, natural assets such as views and location, as well as personal knowledge and skillsets.
Starting a new diversified enterprise can create employment opportunities for family members which can help facilitate succession planning in agriculture. Succession in many farming businesses is often left too late and can hold successors back from making changes to the business or driving new ideas forward. Understandably, striking up a conversation about the inevitable death of a loved one and future of the farm is never going to be an easy one, particularly if there are multi-generations and non-farming family members involved.
A conversation about diversification though is generally an easier one to tackle and can unlock a wider discussion about succession in future. Diversification enterprises shouldn’t detract from the core farming business – the very thing the ‘older’ generation don’t want to let go of. Diversification activities should ideally complement the wider farming business, add value to existing assets, infrastructure, and skillsets. Crucially, diversifying can allow potential successors to take a lead on an enterprise, giving them empowerment to start making decisions, whilst continuing to involve parents, or other family members, through a holistic approach.
We have seen this work quite well where the next generation returning from college or university looking for an active role in the farming business are given the opportunity to start a new complimentary enterprise, make decisions under supervision, and start to develop their own farming career. It does take trust, willingness to communicate openly, and teamwork, but results in both the older and younger generation feeling empowered and valued in the farming business.
Many farmers consider the term diversification to be a consumer-facing endeavour, such as creating a tourism enterprise or farm retail. Whilst it could be focused on consumers, there are lots of other options to consider, as working with the public may not necessarily be for you.
Diversification should be seen as increasing diversity to the number of income steams within your business and could simply be a natural extension to your core farming business. For example, those with a strong interest in livestock could offer grass for summer grazing or hogg wintering; or if you have shed space, you could go down the route of bed and breakfasting cattle.
For others, consumer-facing diversification may be the best route which fulfils personal interests and ambitions. Direct marketing your own farm produce, hosting farm tours, lambing experiences, farm-based activities, or setting up agritourism enterprises can be both personally and financially rewarding.
The key is doing something that you are truly interested in, which is unique to you, your farm, and family business. As farmers, we are often influenced by others; we look over the hedge at our neighbour combining, or our friend who is onto their 3rd cut of silage and say… “maybe we should try and squeeze in another cut!”. We’ve all done it. The same principle can be applied to diversification, which may partly explain the rapid increase in glamping enterprises on Scottish farms in recent years. While glamping may be a good option for you, careful consideration should be given to differentiation in what’s becoming, if not already, a saturated marketplace.
Choose an enterprise which you are truly passionate about. Make a list of your current assets, both physical and personal. Can you utilise them further? Do you or other family members have specific knowledge, skills, or talents which could be developed into a business opportunity? Once you have a shortlist of options, write down the pros, cons and impacts of each option on your existing farm business and personal lifestyle.
Hopefully by now, you are narrowing down your options and could create a partial budget to assess start-up costs, fixed and variable costs, and profit margin. Does it make money? Does it fit with your future ambitions? Does it fit with your lifestyle? Does it add value to the core farming business? These are all questions you may ask yourself before coming to a decision.
Top 3 things to consider:
- Focus on what interests you, your family, and fits with your own farming or crofting business. Don’t necessarily follow the rest of the flock!
- Consider diversification as a route to facilitate succession in your business. Can you create a diversified enterprise someone else could lead with your input and support?
- Write down the options with pros, cons, and implications on your farming business and personal lifestyle. Seeing it written down always helps to free up space in your mind to make a conscious decision.
If you already run a diversified business, consider entering the Diversified Farm of the Year Award at the Scottish Agriculture Awards 2023 to celebrate your achievements… but be quick, the entry deadline is 14th Aug. Alternatively, if you would like to talk to any of our team about diversification and what it may mean for your business, please e-mail SACConsulting@sac.co.uk.
Posted by SRUC on 28/07/2023