Getting the basics right to make diversification pay

The diversification of the farming industry is becoming more and more apparent, with over 50 per cent of farms in the UK now putting their farm assets to good use.

With around 57,000 farms in the UK deemed to be large enough to occupy a farmer for at least half of his time, there is often room for another money-making activity.

Although this is only half of the total number of farm businesses in England, they actually account for 91 per cent of land area farmed and 96 per cent of agricultural production.

Out of the 50 per cent of total farms now operating some sort of diversified activity, 22 per cent of these are generating more income from diversified activities than from the remainder of the farm.

Starting diversification

The first step is to look at your farms assets in terms of space, buildings, produce and staff, and see what you could utilise.

Pay particular consideration to your strengths and weaknesses, and what actually interests you.

You also need to consider the area where you will trade, and what other companies operate so you don’t over-saturate your region with the same type of business. Once you’ve done this, you can move on to the fun part.

For example, a dairy farm with a spare barn could be converted into an onsite farm shop. Ruth Kimber, of Kimbers Farm Shop, winners of 2009 West of England Society Best Farm Shop, did just that.

“You are not going to make millions from having an onsite farm shop, but you are generating good cash flow and serving your customers who appreciate what you do,” she says.

“Before we had the farm shop we were always at the whim of big buyers like supermarkets.

We were able to fairly easily sell directly to local individuals and it grew from there.

“We do things in a traditional manner, which is appreciated by our customers such as offering a wide variety of cuts of meat.

“We have developed our own niche and loyal customer following so much, that people talked about having a ‘Kimber Christmas’ enjoyed our milk, meat and cream over the festive season.”

Maximise value of farm’s free space

Farmers do not always diversify into food. Helen Bristol from Somerset lives on a 400-acre farm with her husband, Andrew, and their three children.

While her husband still works long hours running the dairy, Helen utilises farm space for her business, which specialises in the children’s fashionable bib product named The Original Skibz.

“We use spare space on the farm to store our products which are in a 60ft x 40ft building.

“We would have really struggled without also converting part of our farmhouse into a packing room and three offices, and utilising some other barns for storage.

“For me, there are also huge benefits of working from the farm – I can still support my husband, keep an eye on the people coming and going on the farm and be around for the children.”

Other successful concepts to utilise the farm may include paintballing, off-road go-karting, equine livery, rentable storage, commercial units and office space, especially as more people seek to move into rural locations and choose to holiday in their own countries.

Funding for Rural Enterprise

Funding can offer small businesses and start-ups with essential cash to launch a website, create a new product or train an existing member of staff in a new skill required for the business venture. Funding streams can vary from year to year and usually do focus on one particular area within the business. Match business is a more common funding type, which means for every pound you commit, your funding partner will match it.

As well as utilising surplus farm space, there can be opportunity to expand your business both at home and abroad by obtaining the correct funding.

Placing yourself in a showcase environment can really get your name out there. A good example is to find an appropriate exhibition where you can speak to distributors and potential customers about your product.

Your local Business Link will be able to provide you with advice on funding streams that you might be able to access to help you set-up your new venture.

Routes to market

Once you have established what you want to offer, you need to decide how to offer it.

Known in the marketing world as the 4 P’s of marketing – product, price, promotion and place – will help streamline your thoughts and create an effective route to market.

How you choose to promote your product and what place you choose to sell it, form important considerations. Some of the options available to you include: set up a website and sell online; attend farmers’ markets and other mobile shopping locations; open a farm shop of your own; providing your diversified goods wholesale or launching a home delivery service.

Whatever you do, you need to ensure you are constantly in the mind of the customer. It is important to communicate what you are selling and why the customer should buy it and in order to do this effectively, you will need to collect as much information about customers as possible.

Cost-effective communication

Communication with customers is one of the most useful ways of helping to retain and generate new custom.

One option is to collect customer e-mail addresses by inviting them to opt into your mailing list.

By using a free customisable e-mailing software you can regularly e-mail those customers with special offers and farm news to keep them up to date and build stronger relationships.

“Regular contact with your customers isn’t all about special offers and sales,” says Jon Thorner who began his multi-outlet farm shop business from a butchery counter inside one of the farm’s outbuildings 30 years ago.

“Our weekly e-mails are so much more than a sales tool as they keep people in touch with what we are doing.

“If you make the content interesting enough, it keeps your name in their mind even if they don’t plan on shopping with you for the next couple of weeks.

“I often get people coming up to me and asking me about a recent holiday I had or a new product development. It puts you on a personal level with them and that is priceless.”

Loyalty cards or operating some sort of loyalty system is an excellent way to encourage your customers to come back to you.

In its simplest form, you can inexpensively have a stamping system on the back of your business card and each time a customer returns, they get another stamp. Once the card is full, you can offer them a discount or something for free.

This works particularly well in farm shops or tea rooms where you can offer something which is perceived as high value to the customer but low-cost to you.

Running a ‘recommend a friend’ scheme is another very low cost way of growing your customer-base and rewarding loyalty to your business. If you give a little, you often get a lot back.

Taking a risk

Whatever you decide to do moving forward, look to capitalise on your assets and make the most of your spare capacity.

As we find ourselves at the start of a new year and a new decade, it is a perfect time to pursue any dreams you may have to expand your farm.

Put some carefully-thought plans in place and have the confidence to run with it to tap your potential market.

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