Podcast: Fertile Minds on planning your diversification

Farmers should look beyond sources of agricultural funding when seeking finance for diversification, the fourth Fertile Minds Roadshow in York heard last week.

Young farmers at the roadshow, heard from Savills associate Alistair Johnston and John Welbank, director of rural development consultancy Rural Futures.

They advised the delegates on the elements for setting up a successful diversification, including; funding options, planning, market research.

Listen to the podcast and read the report from the roadshow below.

See also: More podcasts and Roadshow reports from Fertile Minds

Savills associate Alistair Johnston told delegates at the event that the agricultural sector could be very insular when considering funding options.

“Agriculture is very good at looking at what its friends and neighbours do, and what there is in terms of government money for farming,” he said during a workshop on planning and funding diversification projects.

See also: How to find help to fund agricultural career development

“What they actually forget is that they are like any other business. The Knowledge Transfer Partnership has been out there for more than 40 years, giving advice, guidance and grants to small businesses and helping them become more competitive. Why shouldn’t you use it?”

Venture capital for diversification

Mr Johnston said venture capital for diversification projects was also underused in the UK: “In America, venture capitalists own a lot of dairy farms. These are a group of people who have money to spend and have put their money into farming.”

Government start-up loans, which can be as high as £25,000, are another source of finance that can help farmers diversify, Mr. Johnston added.

However, in order to obtain funding, farmers need to have clear business plans with projected cash flows, predictions of profits and losses, and know when their peak borrowing requirement will be.

When starting a diversification project, he advised the young farmers and agricultural students at the event, you need to work backwards. “If you know your goal, you have to plan backwards,” he said.

“You have to identify where you are now and where you have to be in the future. Only once you have worked out where you are now can you go forward.”

Shop around for finance

The roadshow’s other speaker, John Welbank, director of Lancashire-based rural development consultancy Rural Futures, said farmers should shop around for bank finance.

“I’ve had many clients ring up saying: ‘We have planning permission and we know what the project is, but we can’t raise finance,’” he said.

“You start asking a few questions and what you tend to find is that most farmers tend to bank with the agricultural managers. They’ve often been with that bank since they first opened an account and they take that first response as the only response.

“There are certain banks that are extremely good at financing agricultural projects, but quite often those same banks don’t want to know when it comes to diversification opportunities. You may find what you want to do steps out of the agricultural area and goes more into the commercial area.”

Get planning in place

Mr Welbank said the planning system and highways access was the single-biggest challenge for diversification projects. “If the planners don’t give you permission, you don’t have a project, so access is something you need to be very aware of.”

Another common barrier to diversification is resistance within the family, Mr Welbank added.

“It can be curmudgeonly old Dad who doesn’t want to change, but more often it tends to be [the younger generation] because they probably haven’t got to grips with the business accounts yet.

“It’s only when you get those kind of economic strains that you sometimes realise you have to do something a bit different.”

Sponsor’s message

“Diversification is a vital part of farming today and the Fertile Minds roadshow in York offered young people useful and practical insights into what it takes to start a new diversification project. NFU Mutual is pleased to have been able to support this event.”