Not every farm (or farmer!) is suitable for diversification and it is important not to diversify out of desperation since you may not have the funds available to develop a new business. Thorough research and a good business plan are essential before diversifying. Also, if you are on a low income, are you claiming all the state benefits you are entitled to?
Why diversify? Diversification can reduce economic risk on the farm and provide a more stable (or increased) income. It can make more efficient use of your resources - labour, land, equipment - and offers opportunities for future growth.
The list of opportunities is limitless and can be daunting. You will probably investigate several schemes before picking the one which is right for you, your family and your farm. Explore the costs in detail and seek advice from Business Link, NFU, DEFRA, your local planning office, your bank and so on before going ahead. The Scottish Agricultural College's website has information sheets on many diversification schemes from cheese making to worm farming (including set up costs) and lots of advice for those considering diversification www.sac.ac.uk/management/external/diversification/default.asp.
You will need to research the market for your proposed venture and prepare a detailed business plan - Business Link and other trade organisations can help you do this. Talk to people who have diversified into this area already, even if their business failed, they can give you useful information on the mistakes they made or problems they encountered. Grants may be available to help you diversify, for example the England Rural Development Programme aims to "help farmers adapt to changing markets and develop new business opportunities." www.defra.gov.uk/erdp/default.htm
Investigate the legal requirements of any business you intend to diversify into. You will need to meet health and safety standards and your staff may also need to complete a health and safety course, from chainsaw operation to a Basic Food Hygiene certificate. These can be done through local colleges or industry bodies. You will also need public liability insurance.