Diversification Through a Succession Lens

_{Marshall's Farm Shop & Kitchen.}

Without a vision for your future, how do you know what you are working towards, or why you are doing what you do?

For many farmers and crofters, their purpose comes from a drive to build a sustainable business, produce high-quality nutritious food, and protect and enhance our environment while creating a fulfilling lifestyle for their family.

Ultimately, farmers want to pass the farm or croft on to the next generation (if they have successors who want to take over the family business) in a better place.

Farmers are custodians, ensuring their legacy continues for those who follow. Succession planning has come to the forefront of our minds recently following the changes to Agricultural Property Relief and Business Property Relief for Inheritance Tax purposes from April 2026.

It’s not easy to talk about succession, I know this firsthand as the ‘next generation’ formalising our succession plan as I write this. Many farmers don’t quite know how to approach a conversation about succession, and it can feel like an overwhelming topic to discuss. In my opinion, diversification is becoming an essential method of future-proofing farming businesses, particularly when viewed through the lens of succession.

By involving the next generation in exploring diversification opportunities, you can not only strengthen your business by bringing new skills, experience, and perspectives, but also create a proactive dynamic towards succession planning that engages and empowers the whole family. Although dependent on individual family circumstances, I believe that considering diversification opportunities for your farm or croft is crucial for long-term farm business planning, and it can help to initiate positive conversations about the future.

Diversifying can create new opportunities for family members who want to get more involved in the farm business but perhaps there isn’t currently a role for them, or maybe the farm isn’t financially able to provide for another person or family. Diversifying can be the solution and encourage the next generation to drive an enterprise that they are interested in, gain experience and build confidence, which ultimately will benefit the wider farm business in future. The next generation are ambitious, creative, and bring new perspectives on things which can really benefit your business.

These attributes were clearly demonstrated by the Marshall family, winners of this year’s Diversified Farm of the Year Award at the Scottish Agriculture Awards, sponsored by SAC Consulting. Marshall’s Farm Shop (Aberdeenshire) is an outstanding diversified farming business which has expanded from humble beginnings to now include a new state-of-the-art farm shop, in-house butchery, restaurant, gift shop, drive-thru, children’s play park, dog park, and a dog grooming facility. Carefully considered succession planning, and a forward-thinking approach, has enabled three daughters, all interested in agriculture, the opportunity to bring new ideas to the table and each be responsible for developing their own unique interests and skills within the wider family business.

Winter is an ideal time, depending on the nature of your business, to take stock and plan ahead for the future. Big is not necessarily best when it comes to diversification. Many farmers instinctively consider the term ‘diversification’ with farm shops or glamping pods, but small, relatively low-cost enterprises like farm tours, dog parks, arts and crafts workshops, health and wellbeing classes, and sport and fitness coaching, are all enterprises which can be both personally and financially rewarding without significant overheads. Often the best diversified businesses are those which are a natural extension of your lifestyle adding value to your own, or your family’s skillsets, interests, or passions.

Getting started on diversification:

• Start by writing a list of three to five interests you have outwith farming. Photography, arts and crafts, training sheepdogs/gundogs, floristry, sport and fitness, yoga, clay pigeon shooting, to give a few examples.
• Do a skills audit. What skills or knowledge do you, or someone in your family, have that could align with a new diversified enterprise? Are you creative? Do you love engaging with people? Do you have any professional qualifications, certificates, or accreditations? A skills guide for rural industries is available for more guidance.
• Consider the physical assets on your farm. Do you have underutilised or redundant shed space/outbuildings? A beautiful view? Lochs, woodland, or trails, that might be suited to adventure sports, leisure, or tourism? Do you have machinery or equipment which isn’t fully utilised all year round that could generate income through contracting?
• Once you’ve narrowed down the options, then do more detailed market research. This might include, but is not limited to, a competitor analysis, gap analysis, understanding the legislative requirements, planning permission, insurance, health and safety, industry qualifications, along with completing partial budgets to understand the capital investment required, cash flow, and return on investment.

Take the next few months to consider diversification options for your business, speak to your family, and create a vision plan for your future.

As farmers, we’re good at looking over the fence and seeing what everyone else is doing. Plough your own furrow and do what’s right for you, your family, and your farming business.

If you would like help exploring diversification opportunities on your farm or croft, please get in touch calum.johnston@sac.co.uk

Posted by SAC Consulting on 11/12/2024