Navigating the opportunities and risks of new business ventures

From glamping ventures to farm shops, summer is a time of year when farmers and landowners can capitalise on diversification. But while there are lucrative opportunities, as Tim Coulson, of rural insurance broker Lycetts’ Edinburgh office explains, there are also risks to be mindful of.

The latest DEFRA farm business survey¹ clearly illustrates the critical role of diversification for farmers navigating tough economic times.

Diversification opens up many opportunities, but launching new business ventures in unfamiliar markets can also carry inherent risks. Strategies to mitigate these are, consequently, imperative for success.

For instance, if you’re considering introducing tourism-related activities, such as allowing public access to your farm, conducting thorough health and safety assessments is crucial. These risks should be addressed from the design phase to ensure a safe environment for visitors.

Additionally, securing Public Liability insurance is mandatory and insurers may request site inspections to ensure quality standards and requirements are being adhered to.

Farm shops also present lucrative opportunities, but they too can come with risks. Direct sales to consumers mean direct liability. If any of the products cause illness or harm to customers, the farm shop could face legal claims, making liability insurance crucial.

Further risks emerge should farm shops engage in processing or production activities. Insurance cover can protect the would-be entrepreneur against financial losses, such as equipment breakdowns, contamination or accidents involving staff.

Renewable energy projects are another area many farmers are looking to diversify into. If you’re thinking about this, it’s important to consult with your insurance broker early in the planning stage to ensure the scheme can be insured once completed.

Reflecting on the DEFRA survey data, it’s evident that diversified activities have significantly boosted income for various types of farms.

Cereal farms enjoyed an 11% increase, dairy farms 19% and pig farms, which often engage in tourism, food processing and retail, saw a 84% rise. Horticulture farms have also successfully embraced renewable energy, seeing a 69% increase in income from such activities.

However, it’s important to remember that diversification does not guarantee success. General cropping farms saw no change in their income from diversified activities, and specialist poultry farms even experienced a 17% decrease.

While diversification offers promising opportunities for agricultural businesses, it’s crucial to approach these ventures with caution and plan accordingly. Prioritising risk management and seeking expert guidance are essential steps to harnessing the full potential of diversification and thriving in an ever-evolving industry.

¹DEFRA, Farm Business Income by type of farm in England 2022/23