The want versus need for farm diversification

According to a recent research paper, one-fifth of farmers plan to diversify their farm business in a bid to remain financially sound post-Brexit.

However, when it comes to starting a new project there is more than meets the eye when considering the type of business model that may work best for you.

Hannah Moule director of The Business Barn and Moule and Co explains more.

One of the multiple factors influencing the decision to diversify it your main driving force, and by this we mean, do you want to start a new venture or is there more of a need to diversify your business? There is a subtle difference between the meaning of these two words.

See also: Assessing farm assets for farm diversification

Understanding your main motivator will help guide you towards the direction of business model that may best suit you and help achieve the intentional goals you have set your sights on.

Low risk, low cost business opportunities

For example, for those where the need to diversify is the greatest driving force, it’s likely that they would consider an option that would allow them to add an additional income stream to help sustain the farm business.

In this instance, individuals may consider looking for a business model that would be fairly low cost and low risk and could generate between £5,000 and £15,000. Enough to support the existing business.

Renting out land or buildings or small-scale tourism operations are examples of businesses that could fit this bill.

See also: Ideas for generating a rental income

On the other hand, you have those who want to start a new business. This could be because they want to add another income stream in addition to what the farm is generating, they are looking for a career change or are looking for an opportunity to make a lot of money from a new venture.

Again, each of these driving forces will suit different business models. For those wanting a career change for example, they would have to ensure that their business venture has the potential to generate an income that would replace that of a salary.

In this instance, on-farm events and attractions, food processing, professional services and tourism and leisure businesses all have the potential to fulfil this desire to diversify the farm business.

High risk, high cost business opportunities

There are very few rural or land-based businesses that have the potential to generate a large amount of money, and in general these businesses are those that need a higher level of capital invested in the business to get it off the ground and are generally higher risk.

Specialist farming enterprises such as poultry and pig units are one example of this, and so too are technology-based businesses, online or web-based businesses and large-scale food or drink production.

See also: Ideas for alternative livestock and cropping enterprises

Ultimately, you have to be passionate about your new venture – there is no point in opening a glamping site if you are not a fan of people. There are multiple factors that are involved in this decision process but understanding why you are looking at starting a new venture, whether it is a want or a need, can be a great place to start.

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