Q: I repeatedly hear the call to diversify, but I don't know where to even begin. How should I approach it?
Starting a diversification project is not something to be rushed and key to a successful project is careful research and robust financial planning.
A great starting point can be to carry out a SWOT analysis of your farming business, so you can make an informed decision about the best opportunities.
As part of this process, think about the location of your farm and how accessible it is, what assets you have – and their quality – as well as how much time you have available, your skills and what sort of diversifications appeal to you.
For example, if you are happy to be hands-on and are located close to an urban area, you may consider options such as a farm shop or wedding venue. If you are after something less time-consuming then you might want to think about letting out farm buildings for commercial use such as storage.
To identify the right enterprise, do your research about where there may be gaps in the market. This should also involve checking out what neighbouring farms are already doing, so you are not in direct competition with them. Consider how your project might integrate with existing farm activities. Also, speak to other farmers who have diversified and find out about their experiences to work out what might be right for you.
Once you have an idea you are confident in, then you can start preparing a detailed business plan which includes estimates of the costs of implementation, alongside projections for future profitability and a cash flow. This will be essential if you need to go to the bank for finance.
At this early stage you will also need to consider whether you will require planning permission. We would also suggest you speak to your accountant who will be able to advise on the implications of your project from a tax and accounting perspective.
Q: Why should I diversify, is it not better to focus on maximising profitability of my main farm income?
Having a strong core business is important and we would always suggest you ensure your farming business is in the best possible shape before embarking on a new project.
However, farm incomes continue to be very volatile because of the impact of the weather, high input costs and global factors. Plus, with Basic Payments in England now being phased out, margins are likely to continue to get tighter. Diversification can be a sensible way to reduce your exposure to risk, providing an alternative revenue stream in years when farm incomes come under pressure.
Remember, it can be as simple or complicated as you want to make it. Some may regard signing up to a scheme like the Sustainable Farming Incentive (SFI) as a form of diversification, in that it helps to derisk some farming income. Other farmers may want to do something much more ambitious, such as adding value to something grown on the farm and then selling it direct to consumers.
Q: Is there Government funding available for diversification projects?
Grant funding for diversification projects is now much thinner on the ground than it used to be. Defra is channelling most of its funding at nature-friendly farming initiatives and schemes to help boost farm productivity.
However, it is worth checking local authority websites as they sometimes have funding available for projects that boost the local economy.
The Farming in Protected Landscapes (FiPL) scheme, available to farmers in National Parks and other protected landscapes, has been offering grants for projects which increase opportunities for people to discover, enjoy and understand the landscape and its cultural heritage. However, the FiPL programme is scheduled to close in March 25 and in most areas the funding is likely to have already been allocated.
Whilst Government funding (or any type of external funding for that matter) can be helpful when financing a project be mindful that your autonomy can be impacted, and you can have less ability to develop a scheme or project as you see fit.
Q: I am putting together a public-facing diversification, which is new to me. What should I be aware of when dealing with the public?
If you are inviting the public on to your farm, the priority has to be keeping them safe. This means carrying out a full risk assessment to identify hazards and to find ways to mitigate the risks. This might involve fencing off any areas where you don't want people to go and installing clear signage.
You will need to talk to your insurer about whether you have the right level of cover in place. Public Liability Insurance will be a must, as will Product Liability Insurance if you are selling a product. If you are employing anyone, you will also need Employers' Liability Insurance.
More generally, think about the infrastructure required to host visitors, in terms of providing parking, handwashing stations or toilet facilities. How you are going to deal with any queries and complaints, particularly at busy times of the year for the farm?
Social media is incredibly important for promoting public-facing diversifications, so you are likely to need someone with the time and inclination to engage with the public in this way. Be prepared for negative feedback and use it as a way to learn and develop your new enterprise.
Q: I would love to explore agroforestry options which can increase food security and reduce environmental impact. What are the most promising strategies?
There has been growing discussion around agroforestry over the past couple of years and payments to support it are now available through the SFI. Until late 2024, when the Government announced the temporary closure of capital grants, some additional agroforestry options were on offer under the capital grant scheme.
Several organisations are promoting greater integration of trees into farming systems – both at the edge of fields and in-field – so there are lots of useful resources online. These explain the different approaches to agroforestry, the potential benefits and offer advice on tree species choice and density.
Q: I am a tenant farmer, what do I need to think about and how do I deal with my landlord if I want to diversify?
Start by reading your tenancy agreement. It is likely to say that you will need written consent from your landlord for any change of use or alterations to existing buildings, but it is worth checking the exact terms. Be mindful of the term left on your agreement and if your diversification plans can be part of a wider discussion around a longer term.
Tenants are advised to approach their landlord - or landlord's agent - at the earliest practical opportunity to open discussions about a potential project. Make sure you are well-prepared for this conversation, as your landlord is likely to want to see a business plan and a strategy for the project. Some landlords can be very supportive and may be willing to invest in the holding by contributing towards the cost of a new building, for example. However, before going into any meeting, it is important to have thought about what you might be willing to offer the landlord in return for permission – as some will seek an increased rent or equivalent for their consent.
It can be helpful to get the support of a land agent when entering into these discussions, as they will have experience in negotiating the terms of any arrangements.
