An important consideration for any diversification is to identify who will be involved; this will determine the business structure going forward, whether that be as a sole trader, partnership, or joint venture. It will also establish if further measures need to be considered for the day-to-day running and/or higher-level management of the diversification.
When deciding on a business structure it is essential to seek professional advice on the tax and legal implications that the chosen business structure will have on the diversification and existing business It is important to be mindful that some diversifications may result in a change in circumstances from a tax perspective. Appointing directors or partners can be a good management choice, particularly if the directors/partners are experts or have experience in the chosen diversification.
Before establishing how the diversification will be managed, it is important to review the current enterprises to establish if capacity is available from both an existing labour and time point of view. For a large-scale arable farmer, a diversification into the tourism, leisure or hospitality industries may be challenging when considering the demands of both the existing farming enterprise and the new diversification in the peak summer season.
Another fundamental element is self-reflection; a wholly different set of skills are often required when diversifying and it is important to play to existing interests, experience, and knowledge. Using hospitality as an example again, the question will need to be asked if customer facing interaction is a strength that the proposed manager of the diversification possesses.
Considering a diversification that plays to existing personal strengths will only increase the likelihood of success and make the transition from traditional farming to rural enterprise easier.
Having established the management needs of the diversification, reviewed the business structure, and reflected on strengths and weaknesses of the proposed team, the gaps where the diversification will struggle to operate should begin to emerge.
Some gaps are easier to resolve than others; if it is simply a case of needing additional support, the most obvious route to pursue would be the hiring of employees. This could either be someone to help assist with the day-to-day tasks or a managing director who will oversee the management of the enterprise.
If labour is not the issue but perhaps the current farming enterprises are too time consuming, considering a letting of the whole diversification is another possible and practical solution. Pawfect Retreat in Merseyside is a good example of this situation. The client owned a redundant farmstead where the farm buildings required significant investment. They did not want to invest heavily in restoring the buildings or run their own diversification so approached us for advice on a way forward. We then invited proposals from both established businesses and new start-ups which allowed them to move forward with the most attractive and suitable venture to complement their existing rural business. The successful candidate agreed to a twenty-year lease and invested significant funds to bring their dog hotel business to fruition.
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