InsightsInsight - Agriculture and Rural - POSTED: February 16 2022
Top 5 considerations for establishing a successful farm-based business
From deciding on your business structure to protecting yourself against the unforeseeable, we look at the top 5 considerations for establishing a successful farm-based business.
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Diversification is nothing new in the agricultural sector. Whether it be glamping, ‘pick your own’ initiatives, petting zoos or even renewable energy, for years rural business owners have created extra income streams by establishing new ventures on their farm or land.
In the wake of the pandemic, with many people recommencing their previously postponed wedding plans and others continuing to staycation rather than holiday abroad, it’s not too late to consider the diversification opportunities that this presents.
With this in mind, we’ve put together the top points to consider when setting up a new venture.
1. Obtain all necessary approvals for your business
Depending on the type of business you’re considering, there are likely to be certain approvals you need to obtain prior to pressing ahead with your plans.
Perhaps you fancy yourself as the next Michael Eavis and are considering diversifying into music festivals. If this is the case, you’ll need to consider applying to the relevant local authority for a licence so that music can be played and alcohol can be sold. If smaller scale events such as weddings are more appealing and you’re thinking of creating a wedding venue, you’ll need a grant of approval to hold civil marriages and civil partnerships.
If you are putting up new structures or changing the use of existing buildings, this is likely to require planning permission and building regulations approval. An additional consideration for leaseholders will be whether the plans for a new business are permitted or require consent under the terms of the lease.
2. Decide on your business structure
Operating a new business carries with it a high degree of risk. In most circumstances, the liabilities of business owners can be limited to the amount they invest by running the business through a limited company or limited liability partnership. The choice of corporate vehicle will depend on a number of factors, in particular tax.
When setting up a new business venture with others, consideration should also be given to documenting each party’s rights and obligations. The documentation required will depend on the type of corporate vehicle used to operate the business and the level of each party’s day to day involvement.
3. Understand your financing options
Often new business owners require an extra helping hand to achieve their goals. There are more options open to budding entrepreneurs for finance these days than ever before. Traditional sources of finance from the banks or family wealth will always have some appeal but may not be available to new businesses. Crowd funding and peer-to-peer lending are increasingly popular ways of helping a business get off the ground.
4. Finalise agreements with your suppliers
Depending on the size and type of your venture, you might be planning to use external suppliers to support you in the operation of your venture. For example, partnering with a catering firm to supply the food for your café or hungry guests may be more cost effective in the long run. In this scenario, consideration should be given to entering into arrangements with suppliers. To avoid disputes, it is important to have considered agreements in place with suppliers which clearly set out each party’s rights and obligations.
5. Protect yourself against the unforeseeable
Needless to say everyone hopes their new venture will operate smoothly, but business owners need to have a contingency plan in place if things do not go to plan. Being prepared for any eventuality will, hopefully, avoid complaints or, worse, litigation. Having the correct insurance in place can help to mitigate the potential impact of something going wrong and bespoke insurance policies are available dependent on the type of business.
This is a brief summary of key points to consider when setting up a new venture and, dependent on the nature of the business, there will be a broader number of considerations to be aware of. When undertaking any new venture, you should seek professional legal advice to ensure you and your business are protected.
This article was first published in the February 2022 edition of South East Farmer.
This content is correct at time of publication
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