Farm Diversification

Background
At the time of the development of the livery enterprise, the arable farm of Carberry Mains/Hillhead, Musselburgh, East Lothian extended to around 283 hectares (700 acres).  The steading at Hillhead sits on high ground overlooking the Firth of Forth and Edinburgh and is located close to the towns of Tranent and Musselburgh and lies around six miles from the edge of Edinburgh.  Labour was provided by Andy Blackwood and one employee.  The steading buildings at Hillhead were used for grain and machinery storage and the winter fattening of cattle.

Why Diversify?
Returns from combinable crops in at the time (2005) were relatively low, with wheat prices below £100 per tonne coupled with rising costs.  Returns from the cattle enterprise were also relatively low.  Opportunities to expand the scale of the farming operations were also limited due to the lack of suitable land and the capital required.  At the time the partners were discussing possible options there was also uncertainty about the future of farm subsidies.  Therefore the business was looking for an alternative income stream which, if possible, was not reliant on subsidies. 

Researching the Idea
Andy Blackwood has had an interest in horses since childhood and has kept and ridden show-jumping and point to point horses in the past.  From his knowledge of other livery yards in the area he knew there was a high level of demand for livery.  The farm has a number of off-road routes suitable for hacking which have been used by local horse owners for many years, so there was an awareness amongst local horse owners of the location, quality of hacking and views from the farm, all of which appeared to indicate that there would be demand for livery at Hillhead.  Knowledge of the livery business also included the fact that many horse owners move around different livery yards so they can enjoy different facilities, hacking routes and meet different owners. 
Informal research obtained by speaking with other local livery operators showed that these yards were operating waiting lists, hence substantiating the demand for livery.
Knowledge gained from other livery yards allowed Andy to decide on the type of facilities he planned to offer at Hillhead in order to attract customers.

Funding
A business plan was prepared and the total cost was estimated at around £60,000.  The business successfully sought a FBDS grant for around £24,000 in 2005.  The partners found the application process helpful, particularly with regard to the need to produce budgets and cash flow projections for the enterprise.  With this information they could assess the level of working capital required for the livery as well as providing target figures for costs and returns. 
The balance of the cost was met from a combination of bank funding and business reserves.
It is important to budget very carefully for all costs at the business planning stage, particularly if applying for a grant or applying for a loan.

Business Establishment
Planning permission was applied for and finally obtained in 2006.  The process was more lengthy and time-consuming than expected, a fact that Andy Blackwood would highlight for other, would-be diversifiers to bear in mind when planning a new enterprise where planning permission is required.  A review of costs during the business planning stage led a change in the building plans; a new stables complex was built rather than using the existing agricultural buildings for stabling.  The building work went according to plan and the livery yard, complete with outdoor, floodlit arena opened in late 2006.  The yard was built to accommodate 20 stables for DIY livery and there is sufficient capacity for an additional 8 grass-only liveries.  Facilities include a tack room, feed storage area for “hard” feeds and a kitchen/toilet area.  The provision of some sort of communal area is important in that allows owners to socialise with each other and this can be an important aspect of a livery yard from a horse-owner’s point of view. 
Using the standard stocking rate allowance of one horse per 0.4ha (one acre) Andy established grass paddocks close to the yard, extending to 15ha (37 acres).  Hay is made on 4ha (10 acres); the rest of the grass is used for grazing.
Advertising was restricted to local newspapers, small ads at local feed/tack supplies premises and word of mouth.  This was successful in attracting customers so wider advertising or advertising in trade/national publications (which can be quite expensive) was not required.  The yard achieved full capacity in its first year.

Problems Encountered
As mentioned above, the planning permission process took a little longer than hoped for.  Discussions with the Local Authority Planning Department early in the business planning process were helpful in order to make necessary adjustments to the original plans in order to meet planning requirements.  This did help save time.
Andy’s attention to detail meant that the building process and launch of the yard went pretty much according to plan.
Once the yard was up and running there have been few problems.  Owners sign a detailed contract before their horse is accepted into the yard.  A rigorous system for ensuring payment from customers is important, to reduce the risk of non-payment of fees.  Payment at Hillhead is on a direct debit basis, with payment made monthly, in advance.  On-line banking means that Andy can deal with any issues quickly, as delays can make the situation more difficult.  Andy believes this system has helped reduce potential problems.
Occasional conflicts between owners may also have to be dealt with.
The economic recession does not, so far, appear to have reduced demand for livery – the yard is still operating at full capacity (as at early 2011).

Where the Business is Now
The yard has operated at full capacity since it opened.  There has been a complete turnover of customers between 2007 and 2010, but this rate is not any higher than comparable livery businesses.  A waiting list of potential customers is in operation.  No additional facilities have been added to the enterprise, as customers are very satisfied with the existing yard, arena and hacking routes.  The business has considered converting one of the farm buildings into an indoor arena, but the costs would be substantial (e.g. construction, maintenance and business rates) and customers do not appear to require such a facility at this time. 
Livery is still provided on a DIY or grass livery basis only.  There are no plans at the moment to offer full livery, as this would require a much greater labour input. 
The enterprise is generating a profit much in line with the original budget drawn up at the planning stage.

Critical Success Factors
The success of the livery yard at Hillhead can be attributed to several factors.  The location of the farm, close to centres of population and with good road access is very important.  The quality of the hacking on the farm, with very little road work required is also an important selling point for the business.  Andy Blackwood also believes that a good quality arena and grazing land are also important components in the success of the enterprise.  Andy’s knowledge of, and enthusiasm for working with horses is also essential.