Tim Ryan, Partner at ifac said: ‘While many Irish farms rely on off-farm income to remain viable, working for others is not the only way to generate additional revenue’
THE recent Farm Report from ifac, Ireland’s farming, food and agribusiness professional services firm, found that 56% of Irish farmers have a positive outlook for their sector.
However, 71% haven’t identified a successor with 1 in 3 citing their farm is not viable enough. With future viability a worry for many farmers, diversification can be a good way to create new opportunities and generate additional revenue.
Tim Ryan, partner at ifac in Limerick said: “While many Irish farms rely on off-farm income to remain viable, working for others is not the only way to generate additional revenue. Farm assets can sometimes be used to diversify into new activities that complement your existing business, improve your work/life balance and benefit the bottom line.”
How to diversify
The activities that you may be able to diversify into will depend on factors such as your existing business and resources, your ability to raise finance if needed, and where your business is located. Examples of typical activities that can generate additional income on farms include:
Farm shops: Farmers’ markets, mobile shops and selling farm produce online.
Tourism: Starting a B&B, providing self-catering accommodation, or converting fields for use as a campsite.
Leisure activities: Offering facilities for leisure activities such as horse riding, livery stables, private fishing.
Conservation: Grants are available under the Green Low-Carbon Agri-Environment Scheme (GLAS) for the conservation of traditional farm buildings and structures.
Leasing: Farmers who want to expand often find it difficult to purchase land so if you have land to lease, this can be a good way to boost your income. Subject to satisfying certain conditions, you may be able to claim income tax relief on the income you generate.
Renewables: In regions with suitable wind patterns, farmers can achieve a good long-term return on investment from wind energy, while revenue streams in the region of €700—€1,300 per acre are being discussed between farmers and solar development companies.
Forestry: Research carried out for ifac last year found that around four in ten farmers would consider planting more trees on their land. Tax incentives are available for forestry investments operated on a commercial basis to realize a profit.
Farmers are usually eager to embrace opportunities to improve processes, increase productivity and enhance quality. Advances in technology and consumer trends such as demand for gluten-free and vegan products have accelerated innovation in recent times. Where farmers engage in innovative activities or carry out research and development, support may be available through incentives like R&D tax credits.
Assessing the business case
Tim continued, “Before deciding to diversify, it is important to assess the business case. This is because some activities that you might diversify into could involve a substantial outlay before any returns are realised, and certain activities could impact your eligibility for important tax incentives when transferring your business to the next generation.”
“Switching farm assets from agriculture to tourism, for example, could affect your ability to claim agricultural relief. So, it’s a good idea to get advice from professionals with expertise in the farming sector who understand the pitfalls and help you make the right decisions.”
Other tips include
Conduct thorough market research – you need to get a firm handle on demand so that you can have confidence when investing in your new venture. Seek assistance from your contacts and take advantage of relevant incentives. For example, the Teagasc Options Programme is designed to help farm families examine ways to generate additional income and stimulate new ways of thinking.
Work with your business advisor and accountant to develop a credible business plan with realistic financial projections, a clear roadmap for growth and strategies to address potential risks on the path ahead.
Branding is one of the components that should not be overlooked. Creating a brand that resonates with the consumer can be difficult and is often the difference between successful and unsuccessful projects. Good communication and effective use of social media will help you develop a community around your brand.
Keep in mind that there are plenty of supports for start-up businesses including the LEADER programme which provides grant aid for projects that help develop local areas. Local Enterprise Offices and Enterprise Ireland also provide support for eligible businesses. Grants are available for market research, product development, financial planning, capital investment and much more.
By improving income on rural Irish farms, diversification supports viability, resilience and can help overcome succession difficulties. However, as is always the case, it is important to examine the business case before making any decisions. For more information and/or advice, contact your local ifac office.
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