Dos and don’ts for starting a diversification

Are you thinking of starting a diversification enterprise this year?

Michael Mack, farm and business consultant at Savills in Norwich, says he has seen a “massive” increase in enquiries from farmers about future-proofing their businesses through diversification.

This is a real mix of farmers looking into how to diversify their business away from core farming, he says, including some of the biggest farms in the country, right down to those with just 30ha.

See also: 6 key areas to consider when planning farm diversification

People have been looking at the more standard diversifications such as glamping, but also more innovative enterprises, such as on-farm restaurants and vending machines.

But he warns that farmers should think carefully about what type of enterprise they choose; “If you’re going to do it, you’ve got to get up every day and want to do it forever.”

So what are the key things to consider before starting a diversification and what are the common pitfalls to avoid? Mr Mack shares this advice:

Key points to consider

1. What are you interested in? This should be your starting point.
2. Why do you want to set up a diversification? If it’s to make more money, then is it the best use of your money and time?
3. Why that particular enterprise? People often get stuck on one idea, but consider whether that enterprise is right for the location, your skills and the competition in the area.
4. Does it fit with your farm business? Is there a way of starting small, and testing the water and then building from there?
5. What does your potential customer want and how? This will vary by region. Think about how to reach them – this could be through social media rather than having a bricks and mortar presence. Spend time understanding them and identify your target customer.
6. What is the objective of each person in the family? Respect each others’ perspectives. Have regular family meetings to discuss this.
7. Consider setting a deadline for when you want to have made a decision about starting a diversification and have it narrowed down to a shortlist. Then drive towards that date with research.

Common mistakes

1. Not taking control of the project and thinking it is someone else’s responsibility to make it happen. Make it your project and your mission to understand everything about it.
2. Not getting people who can influence your project on your side. Builders, relatives, planning officers and the bank manager can all stop the project happening if they are not on board.
3. Not doing enough research. Often, starting a diversification business means entering a more competitive market than farming, such as retail. So do everything you can to build an understanding of how things work.
4. Not spending enough time looking at budgets. Often people start with a big project idea, realise it is too big and then shrink it, only to try to build it back up again.
5. Overlooking the core farming business while building a diversification project. Have a regular team/family meeting to discuss things and ensure resources are still going to the farm.