How to start up a smallholding

Young man attending his vegetables on his smallholding

Young man attending his vegetables on his smallholding If you're aiming to earn a living from your smallholding, you'll need to be physically fit, innovative and enjoy working outdoors in all weathers. Our practical guide will help you start up and run your smallholding venture.

Buy an existing business

You might decide to take over an existing smallholding rather than start your own venture from scratch. Buying a going concern can mean that:

  • crops are already in the ground or in storage and livestock herds and flocks are already established
  • the land has already been converted to organic (if you want to go down that route)
  • the buildings, polytunnels, machinery and equipment are already in place
  • there are established customers
  • the business can generate income immediately
  • suppliers have been identified and relationships established with them
  • the business has a track record which can help if you are looking for finance
  • relationships with agricultural contractors have already been established

However, look critically at any business that you are interested in to make sure that the price you negotiate with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up.

Your market research into the sector as a whole and the locality in particular will help you to establish whether or not the owner is selling because he or she can no longer make the smallholding work financially. This may not necessarily deter you - your primary goal may not be to make huge amounts of money. The important thing is to have established the current position so that the price you pay for the business is not too high.

Other matters to consider include:

  • the state of the buildings, equipment and so on. Will you have to spend money refurbishing or replacing assets
  • the condition of any animals, crops, feed, packaging and so on that you are buying. Check these over carefully, especially any commodities that are perishable
  • existing staff rights
  • does the business owe money that you will be responsible for

Ask your accountant to look critically at the business accounts for the past three years and discuss with him or her the selling price in the light of what the accounts reveal. Make sure you budget for other professional fees such as legal fees and valuation and survey costs.

Market research

Estimating demand

You will need to make an estimate of the type and number of customers who are likely to buy your products.

If you plan to sell produce door to door or at the 'farm gate' in some way, try to make a realistic estimate of the number of people that will buy from you in this way. You're likely to benefit from more people buying direct from you if:

  • there is holiday accommodation such as a camping or caravan site nearby. Holiday makers are often keen to buy fresh produce
  • your local area is not well served with shops
  • you provide pick-your-own facilities. These are very popular with customers and are often treated as an enjoyable outing rather than merely a shopping trip
  • farmers' markets are held in your area

You may also decide to take a stall at a farmers' market if there is one operating in your area. Before taking a stall, it's a good idea to visit the market on a few occasions to see how busy it is and to try to gauge the potential level of demand for your produce. This will also give you a chance to assess some of your direct competitors.

Trade sales

It is possible that a large proportion of your sales will be to other businesses. These may include:

  • restaurants and hotels. These may be both local and national, depending on the type of produce that you sell
  • food retailers. Again, these could range from your local fruit and vegetable shop or butcher to a national specialist stockist of more unusual produce
  • packers and processors. If you go into any area of smallholding/farming on a large-scale basis, you are likely to be selling to these types of customer
  • buyers at livestock auctions

If you plan to sell to trade customers you'll need to:

  • count the number of suitable businesses/organisations in your area and further afield, if you think that your produce could reach a wider market
  • work out what product ranges to offer them
  • decide on the prices they'll pay - the government agriculture departments, industry bodies and other specialist sources all publish up to date price information which you may find useful when you set your own prices
  • approach them to see if they would be interested - don't forget if they are already being supplied you will have to give them a good reason to change. This might be a wider range, better quality products, the appeal of locally-produced goods, lower prices or a better service
  • talk to livestock auctioneers, who should be able to give you a good idea of the level of demand and the price to expect

You would be likely to sell to the types of customer listed above if your smallholding is run along broadly traditional lines (for example livestock, livestock products, fruit and vegetables). However, you may decide to branch out into other areas (as many smallholders do) and this would mean that you would have very different customers. Much will depend on the type of smallholding business you are planning to run.

Research current trends, plus legal and tax issues

Customer profile

Your market

You might have several different types of customer, depending on the nature of your business. For example:

  • members of the public. You may sell to them at local farmers' markets, from your own retail outlet (generally located on your holding and possibly something as simple as an unmanned stall with an honesty box), door-to-door, mail order or online
  • local retailers, such as butchers and grocers
  • local catering establishments
  • abattoirs
  • buyers at livestock auctions, who may be local farmers or butchers, or agents for meat processing organisations
  • catering establishments around the country (for example if you produce a particularly niche product)

Estimating your income

Your market research will have helped you to estimate what market there will be for your produce, whether within your local area or further afield and you should have given some thought to the price you will receive. However, accurately estimating your income can be difficult because in the farming sector prices are liable to change, sometimes significantly, due to circumstances beyond your control. Defra publishes weekly, monthly and annual price information for many agricultural commodities which you might find helpful to use when you make your estimates. You can download a range of statistical publications from the Defra section of the Gov.uk website.

You also need to consider:

  • your own experience (or lack of it)
  • unpredictable levels of mortality amongst your livestock
  • crop damage due to bad weather or disease
  • lower than anticipated yields (this applies to both crops and livestock. For example, you may anticipate that you will harvest 20 tonnes per hectare of new potatoes but only manage to lift 15 tonnes or think that you'll get 25 dozen eggs per bird per year but get only 20 dozen)

You are likely to offer your trade customers like local retailers discounted prices, for example 10% or 20% off the price you'd charge to consumers buying directly from you, as well as payment terms of up to 30 days. If you decide to sell into the wholesale supply chain, you won't get a great amount of say over the prices you'll receive and they're likely to be some way lower than the retail price.

Type of Business

The range of produce that you decide to sell and any services you decide to offer will depend on:

  • how much available land and outbuilding space you have
  • your smallholding's soil type and climate
  • whether you are targeting niche or mainstream markets
  • what your personal preferences are and what you are skilled at doing
  • whether you will be a traditional smallholding or explore more unusual ways of generating income

Many smallholdings include the following:

  • livestock, such as cattle, sheep, pigs, goats, chickens, ducks, geese, turkeys, rabbits, horses, llamas, alpacas and so on
  • fruit and vegetables. This could be on a small, garden scale up to a couple of fields
  • livestock products, such as milk, wool, cheese and eggs

Smallholders often undertake other activities as well, such as renting out spare buildings, renting fields for grazing, keeping rare animal breeds, offering stabling and livery services, trout pools, mushroom production and so on.

Many smallholders branch out into areas that are completely unrelated to agriculture, such as welding, carpentry, crafts and so on in order to supplement their income.

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