DIVERSIFICATION RIGHT T
HOW TO GET
Diversification can be seen as the panacea for many struggling dairy businesses, but careful planning and management is needed to make it a success though, says George Cook of The Andersons Centre
he role, need and type of diversification are all topics for hot debate. The word diversification can mean many things to
different people. It can range from something as simple as one family member going out to work to the development of a full- blown retail outlet or the renting out of buildings for storage. Properly planned, researched and implemented ventures can provide significant and important new income streams for businesses, as well as provide an opportunity for local employment and for another generation of family members to be retained and earn an income from the holding. However, when poorly planned, resourced, staffed and researched or seen as a possible solution to a failing dairy business, then the outcome can be disastrous and hasten the demise of the core business.
In general terms a diversified enterprise is one that differs significantly from the core business. The options are wide ranging in their type and use of resources for specific examples to be covered. It can be a completely fresh start or it can be something that evolves gradually from the letting of your buildings, a small caravan site or something similar.
The setting up of such an enterprise does require careful planning as it is likely to require among other things additional funding, staff with different skills. It will need to be set up with clear management objectives, accounting procedures and to have been properly
30 THE JOURNAL OCTOBER 2014 researched and planned.
It also needs to be recognised at the outset that the diversified enterprise will be taking resources or limiting the availability of resources to the core business which may in turn impact on the longer term viability of that business. It is, therefore, essential that at least some objective outside assistance is sought at an early stage in the planning process. It is easy to get carried away with the excitement of a new project as it is different; it is interesting and often potentially more exciting than the day to day running of the core business. However, before embarking on any such venture, the business will need to identify product ranges, markets, suitability of location, key personnel (who will run it and staff it) and resources required. It will also need to embark on clarification of appropriateness in terms of local planning policy and the potential return on capital
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