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Diversification finance helps overcome sector volatilities

Published: 17 July 2017

Fashioning new and creative business ideas to overcome commercial challenges needs a long-term vision supported by common sense and passion. Devon dairy farmers Mark and Jen Baker have exhibited those talents to build a successful holiday lettings enterprise.

Mark, together with his sister and mother, had been running the 30-cow, 80-acre dairy farm at Higher Chapeltown since his father died when he was just 13. Together, they also farmed a few sheep and though the farm ticked over, there was little in the way of infrastructure.

In 1995 Mark married Jen, the daughter of another local farmer, and the pair decided to expand the dairy activity and supplement it with a holiday letting venture.

Changing times

Despite having no commercial training and trying to bring up a young family, the Bakers managed and designed the whole project themselves. They built their own farmhouse in the early 2000s and an extension was created as a summer season let. Its success allowed the couple to employ a local craftsman to build an old-fashioned shepherd’s hut, adding to the rustic charm of their holiday let offering.

The business has flourished, but the project has not all been plain sailing. Increased dairy output meant the business was very reliant on short-term rented land which was a distance away from the rest of the farm.

This proved challenging and created an impractical and labour-intensive model.

Then, in 2013 the Bakers had the opportunity of a lifetime. A neighbour wanted to sell a 150-acre farm, with Mark and Jen as his preferred buyers.

The Bakers were initially planning to buy just the land, but the vendor was actually looking to sell the whole farm. Not buying the whole estate meant risking it going on the open market and losing the sale, which would also mean Mark and Jen losing any hope of securing their forage supply and expanding their milking herd.

Timely intervention

On the figures alone, the purchase was seen as a challenging lending request. However, a meeting with AMC and their agricultural consultant gave Mark and Jen an opportunity to share their passion for the project. Their innovative but realistic plans for the future convinced AMC that the expansion plans were achievable. With funding secured, the purchase went through in 2014 giving the Bakers an expanded farm well suited to dairy production.

The timing was vital. Milk prices slumped within a few months, which would have made the securing of financial support for expansion plans very difficult.

It was a scary time and we were already heavily committed. It made us focus harder on getting a safety net in place.

Farming alternatives were limited as the farm’s geography didn’t suit arable production and turning it over to beef, cattle or sheep would never offer the required revenues. “Onsite milk processing was briefly considered but the costs were prohibitive,” explains Mark.

Building plans

The new farm offered great development and rental income opportunities though. These included securing Permitted Development on an off-lying barn which was sold and the proceeds used to renovate the farmhouse and part-fund the conversion of another steel framed building to a 5-bedroomed house. These were then used for assured short-hold tenancy and more luxury holiday letting. As well as providing additional income the Bakers concluded that these would add appreciating assets to the business – assets that, as Mark says, “help us sleep at night”.

Mark and Jen once again managed and designed the whole project themselves and as work gathered pace, AMC again provided the funding to support development plans. The Bakers had produced realistic projections and their self-belief once more gave AMC the assurance it needed. “And having the belief of someone else makes all the difference to us,” says Jen.

Jonathon Day, Regional Agricultural Manager at AMC explains that belief, “The Bakers are very enthusiastic, capable, straightforward people that we felt we would be able to work well with.

“They have a combination of technical ability as dairy farmers and an energy and passion for their diversification that has seen them over-deliver on their plans, even during difficult times. They have an ability not only to cost jobs and deliver on budget, but also to execute their projects with artistic flair at an amazingly high standard.”

The secrets of success

Though dairy farming will continue at the Bakers’ farm, the holiday business will give the family a protective income and some highly desirable assets for Mark, Jen and their four children.

Reaching this stage has been a measured process but one borne out of patience, hard work and a strong desire “to keep it simple”.

Supporting the Bakers’ planning is a genuine passion for what they are doing. As Jen says, “you’ve got to wake up in the morning and really want to get on with it”. The Bakers do just that.

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