A capital idea - new opportunities for farm businesses

"Natural capital" is something of a buzz-phrase in discussions about the future of agriculture.

It’s part of the wider picture to encourage investment and manage assets through developing alternative, sustainable opportunities that generate new income streams.

This approach is fast-becoming essential given the withdrawal of EU subsidies and the likely replacement of these with funding based on environmental management schemes.

The question is whether farmers are happy to simply survive, or to use both their natural and business capital to thrive.

The first step for all businesses is to take an overview of their assets to identify what improvements or business opportunities may be available to help create this sustainable future.

What is natural capital and why is it so important?

Natural capital includes soil, river, or woodland.

Natural capital benefits society in a number of ways, including producing the food we eat, the water we drink and the materials we use for fuel as well as crop pollination, and the natural flood defences provided by forests and woodland.

The debate now, of course, focuses on how individuals looking after these assets are reimbursed.

Indeed, the National Council of Rural Advisors’ vision for 2027 is such that natural capital is enhanced to the extent we grow Scotland as a world leader in green agriculture and green land management.

Add that to the wider debate on sustainability, whether in an environmental or in a business sense, through diversification, and we see land use in Scotland increasingly being viewed as something that needs a collaborative approach, pulling together sectors such as tourism, food production, agriculture, forestry and fisheries.

Of course, from an individual farmer or landowner’s perspective, the key driver remains to develop the business in such a way that it can sustain current and future generations.

Identifying opportunities

Auditing the capital of the rural business must be the first step; a true understanding of the available opportunities acting to clarify the options for making the businesses as ‘sustainable’ as possible.

That’s where business advisors come in.

They look at land, holdings, businesses and family circumstances holistically, taking an overview of what the assets comprise, how they may best be used, and the potential profitability of each element, if developed.

The opportunities are numerous — and growing — but include the likely directly-supported routes of agri-environment schemes: providing funding to those farming in a way that supports biodiversity; enhances the landscape; and improves the quality of water, air and soil.

Opportunities for traditional farm horizontal diversifications include

  • Establishing a B&B in the farmhouse
  • Setting up self-catering or glamping facilities Offering farm tours Providing paid-for storage facilities in farm buildings, such as sheds
  • Land development
  • Energy — assessing the availability of grid connection or the feasibility of renewable energy production.

Plus, progressive vertical forms of diversification such as selling food and drink direct to consumers are also coming to the fore.

Funding options

Once the opportunities are uncovered, the next step is taking professional advice on what funding options and business structure might be available; the key to how that development may be delivered.

A business plan that looks to the future and naturally includes succession planning is essential.

The ultimate end goal should inform the business growth plan, and preparations for the exit of members should be taken into account.

Putting aside the political discussions around Brexit, we now have to think for ourselves about what our future agricultural, land and environmental policies will look like.

Therein lies the opportunity to leverage collaboration, vision and innovation to build a sustainable future, not only for each individual business, but for the rural sector as a whole.

An earlier version of this article appeared in The Courier on Monday, 28 February.

Linda Tinson

Stirling-based Linda Tinson is the director of rural business at Ledingham Chalmers. Linda has vast experience in all aspects of business in the rural and agricultural sector. She also has experience in family business and personal succession planning.

Posted, 13 March 2018 by Linda Tinson
Categories: Family law | Private client | Rural

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