Diversifying from traditional enterprises supports viability
Alternative revenue streams can be anything from glamping to artisan foods, writes Teagasc's Barry Caslin
Diversification is not for everybody. Growing food is still the core business of most farmers but there are certainly areas on all farms that we know are not delivering a productive or sustainable return, and there is an increasing number of alternative options.
However, diversification ventures often require a different set of skills and resources than those needed for the farm business.
There is now a real mix of farmers looking into how to diversify their business away from core farming, from the biggest farms in the country right down to landowners with just 10 acres. Many people focus on the more standard diversifications such as glamping, but there are also more innovative enterprises, such as on-farm restaurants, artisan food and renewable energy.
Adding value through diversification is going to be key to support the future viability of small-farm businesses. With such a wealth of options out there, which ones are best suited to your existing enterprise and budget? Farmers really need to think carefully about what type of enterprise they choose. If you're going to do it, you've got to get up to it every day and want to do it forever.
Key considerations in farm diversification
• What are your key interests and what are your skills?
• Why are you contemplating a diversification project? If your reason is to make money you have to know if the project will deliver the best use of your time and money.
• Why are you choosing a particular type of farm diversification enterprise? Very often people can get an idea into their head but do not consider whether the project is suitable for the location. The project must also suit your own skillset and you need to recognise competition in the area.
• Determine whether the proposed new enterprise fits in with the existing farm business. It's often useful to start a new business off small and test the water before you build and invest to a higher level.
• Identify your customer base and determine exactly what they want. You need to know how you are going to reach out to your customer base. This can be effectively done through social media instead of a physical presence. There is no substitute for spending time on understanding and identifying your target customer.
• How willing are family members to get involved in a new business enterprise? It will be important to have regular family meetings and to respect various perspectives on a planned diversification.
• Timelines should be developed and deadlines set regarding decisions relating to a new diversification. These deadlines should be narrowed down to a shortlist and you need to move forward with plenty of research towards the planned dates.
1 It's important for somebody to take control of a project and not assume that someone else will take responsibility and make it happen. Any new project should become a mission which you take control of.
2 Not getting key decision makers on your side. If you don't convince key project decision makers such as banks, builders, relatives, LEADER companies and local authority planners about the merits of your project, it could grind the venture to a halt.
3 Very often there is not enough effort invested in research. A new diversification project can often mean entering a much more competitive market than traditional agriculture, such as retail. It's important to build an understanding of how things work.
4 Not taking time to examine the financials. Very often people start big and then decide to shrink the project before they decide to build it back up again.
5 Neglecting the core farming enterprise while trying to develop the diversification project. It is imperative to hold family meetings in order to discuss family farm matters and to ensure that resources are being devoted to the farming enterprise.
The best diversifications complement the existing farm business by improving the cashflow and improving the profitability. A good diversification will also remove the volatility which can exist in many farming sectors.
However, alternative ventures can be a drain on time and money from the main core farming business.
The most important thing is to forward plan by thinking ahead and looking at every aspect of the project before making a commitment, and seeking appropriate advice.
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