Key considerations when diversifying

Farming in today’s fluctuating market is not always profitable. The desire to launch a new venture can be compelling. Some will want to boost income levels on existing enterprises, others will want to tap into alternative markets. Successful examples include Christmas tree farms, a bakery, and holiday accommodation; combined with traditional arable or livestock enterprises. If you’re thinking of starting a new enterprise, then here are a few things to consider:

Detailed Planning

Creating a detailed plan before you start will allow you monitor actual costs to make sure that you are on course and let you make adjustments as needed.

Gill Caine – a rural accounts and business specialist with Farmplan – adds:

“Planning ahead is essential in any new project, it’s important to have a good budget in place and an idea of where money will be spent during the set up process and on-going costs which will be incurred. If your planning is robust you can easily achieve your goals and even adjust your plans if you need to.”

How will you manage your business records?

Use software that allows you to allocate costs and income to specific projects so that you can keep track of exactly what your initial start-up costs are, how much your on-going costs will be and whether you are making any money out of it. Gill says:

“This level of record management can easily be achieved with a suitable software program. If you are using Farmplan’s Business Manager program, you can easily set up a new enterprise in the program allowing you to allocate costs specifically to that enterprise, therefore being able to keep an eye on how that enterprise is progressing. You can report on income and expenditure and monitor your actual figures against those budgeted to ensure things are on track. Plus in the longer term, once your business is set up in the software you can easily create meaningful reports which can be useful for your accountant, to complete tax returns or simply for management purposes.”

Diversifying into non-agricultural businesses

If you are diversifying into a non-agricultural business you ought to check for any relevant regulations for example health and safety or food hygiene before starting. Your local council would be able to help.

“This is particularly important as you may need to make plans to improve staff training and update your health and safety policy particularly if you’re moving into an unfamiliar business sector”, adds Gill.

Do you need planning permission?

It sounds obvious, but planning regulations can apply not only to new building. If you are re-purposing land then it’s always best to check with your local planning department in advance to make sure you are able to build or change the use of the land.

Are you a tenant farmer?

Tenant Farmers would need to check with the Landlord since some tenancy agreements rule out diversification. Gill adds:

“Help and advice can be found via the Tenant Farmers Association as well but it’s always best to check with the Landlord whether any restrictions are in place.”

And finally…

Why not ask someone who’s been there before, seek advice and perhaps take on board any lessons learned. Often people will be only too happy to discuss their business and impart some knowledge and suggestions to get started, this can often be the best way to decide how your project could work.”

You may also wish to consider applying for funding that may be available in your area or specifically for start-up businesses, it’s always worth a look on the internet as Defra provide information on this subject.

For more information about Farmplan Business Management software…

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