Home Business Guide To Turnkey Business & Its Advantages To Business

Guide To Turnkey Business & Its Advantages To Business

by Gaurav Gupta

The term ‘turnkey’ comes from the act of ‘turning the key to open a lock and implies something that needs minimal effort. While it may be an oversimplification, a turnkey business is one that is fully functional and well-conditioned for use as soon as you buy it. The eCommerce industry is at an all-time high and all reports indicate that it will continue to flourish over the next several years to come. In such a scenario, the possibility of buying an existing, profitable business is quite alluring to investors and buyers. As a result, turnkey businesses are in high demand. Purchasing a turnkey business has several advantages. Here are some of the prominent ones.

Seamless Change in Ownership

As a buyer, it is natural to be risk-averse. Buying a new business is fraught with risks. As compared to setting up a business from scratch or buying one that is barely standing on its legs, turnkey businesses are relatively less risky, as they are already established and operational. You bypass all the labours of market research, advertising and marketing expenses, investment in technology etc. Once the terms are agreed upon, contract papers signed, and the purchase amount has been provided, you become the new owner of a business that is ready-made and requires minimal external impetus from your side. Sure, you may wish to expand or change a few things, but that in no way impedes the proceedings of the business as usual.

Expert Tip: It is recommended to, always, conduct thorough due diligence before deciding to buy a turnkey business to ensure it is a low-risk purchase and is in good financial health. For this, you should rigorously go through the business’s financial statements such as annual sales report, future revenue projections, recent tax filings, total expenses and outstanding amounts, if any. You may also wish to study the key business performance indicators and metrics such as sales conversions, drop-offs, average customer ratings, etc.

Higher Business Continuity

Turnkey businesses have a high degree of continuity, once the ownership changes. This is due to the fact that as the new owner you inherit the existing customer base as well. Without making any extra efforts you continue to serve the customers, both old and new. Your cost of new customer acquisition is almost non-existent until you wish to shake things up. Furthermore, you also get access to the supply chain and logistical pipeline that had been serving the erstwhile owners well. By working with the same vendors, suppliers, delivery, pickups, etc. your new business continues the way it has been like it is on auto-pilot. This smooth functioning is further enhanced by streamlined operations and functions that the business and its employees are used to, which should, ideally, continue even under your ownership.

Expert Tip: It is recommended to raise these vital aspects during the negotiations stage and have it built into the terms and conditions of the sale. Factors affecting business continuity include suppliers, employees (all or some – you can cherry-pick the key positions that have the most knowledge and experience in running daily operations), reusability of licenses, certifications, and technology. Businesses with clearly drafted Standard Operating Procedures and Training Manuals will make it easy for you to onboard new hires and carry on your operations unaffected.

Quick ROI

If it’s all about the money, as many claims, then here, too, a turnkey business offers a great advantage. Upon taking ownership of a well-oiled business, and with minimal additional effort from your side, you can expect sales to happen and revenue to come in from the very beginning. Typically, online customers are unfazed in their buying choices due to a change of ownership in the background. For them, it is the brand, product, quality, price and service that eventually matter. And if there is no change to that, you can expect to hear the cash register going ‘ka-ching’ on a regular basis. Not only does a turnkey business give you a quick return on your investments, but you also save a lot too. The saving comes in the form of cost reduced in activities such as marketing, advertising, new sales, customer acquisition, promoting job openings, hiring and recruitment costs, finding new suppliers, and technical infrastructure

Expert Tip: Look for turnkey businesses that have scalable technology and operations. This will save you more money in the future when you decide to grow and expand your business.

In Summation

By now you should have a fair idea of the advantages of a turnkey business, why it is attractive to buyers, and what they are looking for. If you are a business owner looking to sell your turnkey business then you should know what attracts buyers and the steps you can take to maximize your profits through its sale. If you are on the lookout for a turnkey business for sale, then this article has all the advice and reasons for you to go ahead with your search.

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