When you think about expanding your farming business, you’re imagining all the possibility and profitability that will come with more land, more livestock, higher production.
It’s an attractive thought. But what you may not have considered quite as realistically is the cost and infrastructure that comes with expansion. More land, livestock and production can mean more staff, more facilities, more equipment. And it most definitely means more money.
That’s not to say expansion is a negative move. We don’t want to deter you from growing when it’s right for you. But the question is whether you’re ready for expansion right now – and the answer is it depends, because there are a number of factors at play.
Factor 1: Is your farm running well enough to expand?
If your current operation isn’t as efficient as it could be, expansion could hurt more than it helps, because you’ll find yourself with even bigger inefficiencies. Before you think about growing, make sure you’re maximising opportunities for efficiency with your existing set up.
- Embrace technology and financial data to get a real grasp on how your farming business is performing – Your accounts are more than a box-ticking exercise. Discover how your accounts become a daily driver to help manage your farming business.
- When you have the data, take a look at your processes – break down your operations and uncover areas where even marginal improvements could be made, from suppliers, to production to customers.
- Could your processes be made more sustainable? Many UK farmers are investing in more sustainable procedures to improve their soil, protect water resources, boost biodiversity and improve production. This could be a more valuable long-term investment than expanding land.
- Do you have the right team, spending the right time? Many Farmers will already be doing a large proportion of the work themselves. Expansion will likely mean a need to invest in a bigger team, so make sure your current team is maintaining a good work-life balance, maximising their time (and saving yours!).
Factor 2: How will you fund expansion?
Let’s say you’re a dairy farmer, and you are looking to increase your herd by 25%. What impact is that going to have and what funds do you need to be able to go ahead? Sometimes expansion can have a negative effect. You may need extra staff which costs more, meaning the cost of increasing your herd by 25% may actually outweigh the benefit.
These are the costs and benefits you’ll want to weigh up before you move forward with expansion. It can be really helpful to sit down and plan this out, projecting the income and expenditure and really getting a picture of what the outcome could look like. We have a team of farming specialists who will be happy to help you make a plan and show you how your cash flow will be impacted. You can find them here.
When it comes to finding the funding, there is more widely available finance these days.
Banks – Many of the main high street banks offer finance for farmers to help you sustain or grow your business. Look out for Agriculture funds and mortgages and short-term finance options to help you through challenging markets. Here are just a few examples:
Specialist Finance Companies – There are a good deal of finance lenders who are dedicated to supporting the agricultural industry. Here are some examples of reputable lenders:
- AMC
- UK Agricultural Finance
- Rural Finance
- Shire Leasing
- Lakeland Commercial Finance Ltd
- Finance Connect
Grants – We’re really thrilled to be able to share some grants and funding opportunities we’ve come across that you may be eligible for.
One to note: Under the Countryside Stewardship Scheme, the cap for standalone capital grants has increased for the three separate elements of Water Quality Items, Air Quality Items and Hedgerow & Boundaries. Each grant is now capped at £20,000, meaning you may be eligible for £60,000 in funding in total. This has increased from £10,000 for each element in 2019-2020.
You can read more about opportunities like this here.
Factor 3: How will you expand?
Increasing acres isn’t the only route to growth, though it’s often thought of first.
- If you already have the shed space and labour availability for livestock, there is always the option to increase stock numbers on the same acreage.
If you can’t grow sufficient feed & crop yourself, you could buy crops in from other growers, who don’t have to be immediately local to you. Buying crops from further afield is becoming commonplace, whether that be fodder beet, turnips, grass/maize silage or even grain.
One major consideration is the price fluctuations – so contract growing may be the right option. Fix the price at a level both sides are comfortable with. If you end up with too much muck for your own holding, you could consider offering the excess to neighbours too. You may end up in the situation whereby a neighbour will be happy to spread it on their land at their expense. This could ensure you gain something from them, in that you wouldn’t have the expense of spreading yourself, and your neighbour gets the nutrient value and organic matter to help them.
Straw for Muck agreements have been commonplace for years, this would just be a possible expansion on that theory.
- Other options could be diversification, multi cropping and maximising the outputs.
Selling milk at the farm gate is becoming ever popular, however, adding value to the milk could reap rewards – whether that be cheese, yoghurts or ice cream.
Farm shops or tourism facilities may also be worthwhile. Without wanting to saturate the market, and subject to local planning guidance, these could be ideal alternatives to the normal expansion route. Things to consider if you’re planning to go down this route:
- Can you sell produce direct to local butchers to promote the local heritage of their meats?
- Would you consider farmers markets?
Although much of this is labour dependent, broilers, eggs and other poultry could be worth investigating too. Although potentially a big capital outlay, the physical acreage use could be a minimum.
- Could you sell small plots of land for leisure activities?
With the Coronavirus pandemic giving some a desire to have a more rural lifestyle, you could potentially sell small plots of less productive, or more labour intensive land for leisure activities.
Factor in all the considerations and make a realistic plan
We have a specialist Farming team here at Saint. We know how to help farm businesses grow, and it’s our job to help farming and agricultural businesses with diversification projects and expansion plans. And that’s the most important keyword there – plans.
The best thing you can do for your business is get a good accurate picture of how it is performing now, and make a realistic expansion plan. It all starts with looking at your numbers – and that’s where we come in! Check out our hub for agricultural businesses, and see how we can help you create a more profitable business.
