13 August 1999

SHOP AROUND

FOR PROFIT

As pressure on farm

incomes intensifies, who

hasnt considered trying

to diversify farm income?

But, whether its a

farmshop, a market or

some other diversification,

look before you leap is

the experts advice

A charming way to reach

the top in farm retailing

Want to start a farm shop?

Youll need charm, chat,

energy, a fondness for the

great British public and a USP.

Chairman of the Farm Retail

Association, Andrew McTurk

tells Tim Relf what to consider

before taking the plunge

IF YOURE after an easy life, dont do it, says Mr McTurk of opening a farm shop. But it can be a good way to make a living and, in these difficult days in farming, can mean the difference between survival and disappearance for some businesses.

Like valuing a house, the first three things to consider are location, location and location. Some successful farmshops are well off the beaten track, but it helps if youre near a large centre of population – and have easy access. "You dont want to be on too busy a road, though, because that could cause problems with safety."

Liking people is another prerequisite. "You have got to like the public. And remember that standards of customer care are continually increasing.

"So, not only have you got to like people, youve also got to be able to bite your tongue every now and then," says Mr McTurk. "If you dont like the public, you are never going to please them."

Consider, too, whether your family is willing to get involved. Farm shops are time-consuming and the whole family will probably need to pitch in at busy, and sometimes unsociable, times. Some customers also prefer dealing with the farmer or a member of his family than, say, a manager or an employee. "It needs the personal touch."

Farm shop

This helps to contribute to the authenticity of the farm shop. People also like it when they can see tractors working in the background or cows in neighbouring field. "They like nice scenery. They like animals.

"They like, too, traditional-looking buildings, rather than purpose-built ones. They just have a different feel."

So, consider what you can offer – what, to use the jargon, are your USPs. Your unique selling points.

"It can be anything – freshness, a beautiful barn, a lovely view. It might be wonderful chickens or spectacular vegetables. Theyre all USPs.

"What can you give visitors that someone else cant? If they can see the cabbages coming off the field, a few minutes before they buy them, they know theyll be really fresh. And freshness is one area which gives you an edge over the supermarkets."

Think about what retail outlets are nearby. And, when it comes to supermarket competition, be realistic. "Theres no way any farm shop could compete with, say, baked beans or toilet rolls.

"But in the fresh produce sphere, theres no reason why you cant compete, and beat the big retailers, on price, quality and service."

Plan ahead and grow slowly, advises Mr McTurk. Dont introduce too many product lines – some farm shops, for example, have a massive range of bought-in delicatessen lines rather than fresh fruit and veg. "Without freshness you are just a shop that happens to be on a farm."

Problems

Planning permission is something to consider early on. "Your problems may have only just started." But in practice it might not be as bad as you fear and a planning officer at the Local Authority will talk to you "off the record" about your proposal.

It will increase the chances of getting permission if there is a local demand for the produce you grow. There might, for example, no longer be a village shop and you will be satisfying a need of the local community.

"What planners are so scared of – quite rightly – is that a project will develop into a mini-supermarket."

Remember, that you may not need planning permission. Its often only if youre making alterations to a building or start buying in – or processing – produce for resale that you get into planning issues. "Nobody can stop you opening your gate and selling your own fresh produce." &#42

Nannys help gave them their start

Blocked by the introduction

of milk quotas, heres how

one farming couple found the

answer in goat production.

Alan Barker reports

IT CAME as a hammer blow. The introduction of milk quotas in the mid-80s threatened to scupper the farming ambitions of Angus Wielkopolski and wife Kathleen.

A young farm manager, Mr Wielkopolski was eagerly seeking an opportunity to launch business. His parents had run a small dairy farm in Devon when he was a boy so the couples plans focused on building a dairy herd. But quotas put an end to that idea.

Determined to succeed, Angus set his mind to finding a business opportunity that could not be blocked by lack of quota. He found the answer in goat farming.

"We spotted an emerging demand from supermarkets for high-quality, fresh goats milk products," says Mr Wielkopolski. Fifteen years later, he is one of the UKs largest specialist goat keepers and goats milk processors. The couples 72ha (177 acres) St Helens Farm at Seaton Ross, near York currently milks 1200 goats and the herd will soon climb to 1500 as young stock come into production.

From the outset, the farm has concentrated on supplying supermarkets while retaining the St Helens Farm brand image. As demand outstripped supply, the Wielkopolskis were forced to move to new premises. "Since then, we have invested more than £1m in specialist group housing for 1800 goats, a carousel milking parlour, and dairy processing and packaging buildings and equipment," he says.

Hybrid

His goats, Saanen, Toggenburg and Alpine three-way cross hybrids, yield 1100 litres/year. Most of the milk is sent to supermarkets in cartons of whole milk and semi-skinned milk. "Prompt delivery ensures that its offered fresh to customers within 24 hours of production," explains Mr Wielkopolski.

Surplus milk is made into yogurts or offered as cream, cheese, and goats butter. To meet consumer demand for a range of hard goats cheeses, the business has recently acquired a controlling interest in Cricket Malherbie Farms, the West Country producers of prize-winning farmhouse cheddar and goats cheese.

The Jeanes family, who developed the cheese-making business, will continue to have an interest, and will carry on supplying cows milk and goats milk.

St Helens goats are housed all year and fed a complete diet based on maize silage with the addition of zero grazed grass in the summer months. The diet is supplemented with soya, brewers grains and beet pulp, minerals and vitamins. Concentrate is fed in the parlour at the two or three times a day milking, which depends on stage of lactation. Goats also have access to flower and herb rich hay from the Derwent Ings.

The farm also grows 46ha (115 acres) of maize. To maintain a rotation, he swaps land on an acre-for-acre basis with a neighbour. His neighbours land is lighter and better suited to maize growing, while his own heavier land produces improved cereal yields for the neighbour.

Its been a long, hard battle to turn their dreams into commercial reality but the Wielkopolskis are proud of what they have achieved so far. And pleased that milk quotas led them to try goat farming.n

Planning helps to

beat those new

business blues

Too many bright farm

diversification ideas, which

could lift profits, fail for

lack of thorough planning,

warns business consultant

Barrie Bishop

ONE word of advice to farmers contemplating diversification: Stop. Thats not because I believe diversification should be avoided, but all too often, enthusiasm and excitement may leave farmers blind to the many new and additional business skills necessary to run successfully a new venture.

Most new businesses are capital-hungry. If the existing business is having a cash problem, not many new businesses could alleviate that difficulty in the short term. So approach all schemes with caution.

First, a business plan must be drawn up to cover all aspects of the proposed business. It will be an important document to put before the bank manager when requesting borrowing and overdraft facilities.

The plan should state clearly your targets and include a description of what the business is and how you will run it. Dont forget to mention the skills and experience you already have or how you intend to gain them.

Experience

If youre farming in a traditional manner, you may have no experience of dealing with the public as consumers. Marketing is also likely to be a new experience.

You may well have a good idea but what about finding consumers to purchase your goods and how do you reach them in the required volume? Can you calculate the break even point? How many items must you sell, or hours must you work, to cover all costs before making a profit or a loss? What are the risks if targets are missed?

In any business, cash is most important. A business which fails invariably does so because it has run out of cash and, probably, the ability to borrow more.

So its important to include a cash flow projection in your business plan and vital that that this projection is regularly monitored against the actual cash flows through the business. That will ensure you focus on your targets and will also give an early warning of problems.

Your business plan should state the investment required, and its return. If the return does not calculate at a high rate, its probably necessary to re-look at the figures.

Credit control

Terms of trade should be produced, particularly in relation to a credit control policy. Its likely that you are used to being paid, even by large companies and organisations, without too much chasing and using self billing.

In any other business it will be necessary to produce invoices regularly and chase those which have not been paid within your credit terms.

Seek specialist help in the form of business consultants and in specific areas such as marketing, retail and manufacturing. But choose carefully or you could spend more time talking about it than doing it.

If you have prepared the business plan with care and detail, it should minimise the need for consultants. Oh, and by the way: Business can be fun.

Take time to make the most of your capital idea…

Planning capital requirements

realistically is just as

important as customer care

and stocking levels when it

comes to opening a farm

shop, Suzie Horne reports

FAILING to plan for capital requirements is one of the biggest problems facing farm diversification proposals, warns Mike Greetham, corporate and professional partner with consultant Andersons.

Common examples include over- optimistic production assumptions such as expecting 100% production or a much higher occupancy rate than is realistic for holiday cottages.

It is also common for the project to be well under way, and creditors awaiting payment, before thought is given to finance.

"People invariably fail to give an adequate lead time to the project, which means that both physical and financial resources are stretched. And if the marketing is not right, which it often isnt, then the financial plan is flawed from day one," warns Mr Greetham.

Business

Rather than making a separate business plan and examining likely capital requirements, farmers often expect existing resources, such as the overdraft, to cope with the additional requirement.

Far better is to have a specific proposal, with a capital repayment structure to impose discipline on the project.

"It is important to get the length of borrowing and repayment terms applicable to the venture. If the business plan is over ambitious, that will lead to a commitment to higher levels of capital repayment than the project can afford."

It is also important to put a contingency amount in the plan to cope with unforeseen costs. These almost always arise when one enters an unfamiliar area. If, having launched the project, its failing to meet financial expectations, many people assume that its because they have not got the scale right and so expand quickly thinking that will help. But the basics must be right, including repayment structure, warns Mr Greetham. Banks are open to funding diversification projects provided there is sound planning and a good idea, says Mr Greetham.

But in his experience, farmers and some banks dont appreciate the massive diversion of management time which these projects require. Sometimes they cause the main farming business to suffer.

The banks tendency to specialise in agricultural business may put those diversifying at a disadvantage, suggests Mr Greetham. "It may be a good idea to ask that the proposal be appraised by a small business manager at the bank."

Insurance

In drawing up a proposal, costs such as insurance and any likely planning charges may be overlooked. VAT is another big issue. If run as a separate business, Customs are unlikely to give a second VAT number if the partners are the same as those in the farming business. Often farmers are unaware of the need to charge VAT on goods or services provided by the diversification. Or they assume that because they maintain that it is separate from the main business, it is under the turnover threshold for VAT.

Often diversification may be funded from a source other than the farms main banker. Although its a good discipline, because the new venture can be judged on its own merit, it reinforces the need to get charging structures right so that overheads are allocated properly. &#42

Fresh ideas will pay off at farmers markets

Fresh, local produce is one

of the essential ingredients

in the recipe for running a

successful farmers market,

reports Suzie Horne

BY THE end of this year there will be more than 70 farmers markets in Britain with many more planned. But its not just a case of collecting some like-minded farmers together.

At the very least a market needs good fresh local produce, organisation, commitment, finance, a good location, and lots of enthusiastic supporters on both sides of the stalls.

"The initiative may come from just one or two producers, but success depends on quickly convincing a critical mass of producers to join," says Jeff Tuyn, chairman of the steering group for the National Association of Farmers Markets.

Farmers thinking of setting up a market should be careful to make efforts to contact as many potential stallholders as possible to get a good range of produce. A minimum of 20 stalls is needed, says Mr Tuyn.

The next big problem is finance. Many local authorities are willing to fund up to three pilot markets, but they need to stand on their own feet financially.

If there is no farmers market in your area, check whether your local authoritys Local Agenda 21 plan, part of the authoritys sustainable development strategy, may already include plans to establish a farmers market.

A key figure is the local market operator who holds the charter for the market in the area – if there is one. He or she will be able to help with organisational elements such as stalls, power, water and licences.

The town may also have a town centre manager. A good one will see it as part of his or her remit to encourage the development of a farmers market, says Mr Tuyn.

Integrity

The concept of farmers markets depends heavily on the integrity of the produce. Markets should have a clearly defined constitution, with market membership criteria including a defined locality or radius from which products can be drawn for sale, and a strong emphasis on the sale of own produce.

One of the fundamental principles of a farmers market is that it is the producers themselves who market their own produce, rather than selling bought-in goods. Some markets allow a proportion of complementary bought in goods.

Having people on the stall who know how the food has been produced is important, so that customers questions can be handled in an informed way.

It is also important that those taking stalls have the enthusiasm and aptitude for dealing direct with the public. Successful trading depends on producers understanding and responding to the needs and interests that motivate consumers to buy at farmers markets, says NAFM guidance.

These include food safety and wholesomeness, quality, taste and freshness, value for money and fair pricing, sustainable production and care for the environment. The opportunity to buy local produce and support the local economy is also important, as is variety, animal welfare, organic produce, convenience products, vegetarian diets, snack foods and novelty and entertainment.

Running out of produce by as early as 11am has been a problem at some trial markets. That can put off customers who may not bother to try a second time, points out Mr Tuyn.

There may initially be a feeling among local retailers that the new market threatens their business, and in some cases their trade has been down on market days, for example at Lewes in East Sussex.

But there are benefits too. For example, some non-competing local businesses have found that the market brings more customers to them, and the influx of local producers has raised awareness of local goods among high street.

New markets may offer low-cost stall rental at first, but it is important to quickly work up to a charge in line with those of other markets in the town, says Mr Tuyn.

"At Stratford, we began with a charge of £18 for a 10ft by 4ft stall, but now we are at £21.50, in line with the Friday market."

Clear pricing and labelling is essential. Organic produce often makes up as much as 20% of that on offer at farmers markets, but advice from the NAFM is that the same of both organic and non-organic produce benefits all types of producers by encouraging a larger range and number of customers. &#42