Many people glorify the idea of building a business from the ground up. But don’t overlook the opportunity to buy a turnkey business that is already up and running. Buying a profitable business for sale–especially an online business–could be an ideal path to entrepreneurship.
During the pandemic, many small businesses struggled, as many were forced to shut down their brick-and-mortar operations. Some never reopened. The White House at one point estimated that the crisis wiped out nearly one-third of small businesses. It shined a light on the plight of the small business owner and how difficult it is to start a business. But it also highlighted how innovative entrepreneurs could be, especially when they leverage the power of the Internet. According to a recent report, the pandemic sparked a great new wave of online businesses, as the business model was oftentimes easier to operate. Many were able to transition back to a brick-and-mortar model as the world began to reopen.
So, for those who are eager to delve into business ownership yet want to mitigate short- and long-term risk, exploring the world of turnkey businesses, especially those that are online-based, can be a great starting point.
What is a Turnkey Business?
Purchasing a turnkey business is similar to buying a turnkey home, as it’s move-in ready. A turnkey business has, by and large, everything you need to start running the business. It’s already in the market and fully equipped–all the new owner has to do is to continue successfully managing and operating it. If you buy it, all you have to do is invest capital and labor, according to a definition by Investopedia. You just “turn” the “key,” and take ownership.
Since the startup phase has been completed and the business is fully functioning, buyers can directly jump into a management and operation role.
The most common types of turnkey businesses include real estate firms, e-commerce businesses, and franchise restaurants.
The Pros and Cons of Turnkey Businesses
The Advantages
The biggest advantage of buying a turnkey business is that you’re taking on a mature business model that has proved to be successful. It helps buyers to eliminate certain risks associated with setup, as it already includes necessary equipment, employees and marketing materials.
If you want to start a new business from the ground up, you need to put a great deal of effort into developing a stable supply chain and building up customer demand through endless trials and errors during the process. But with a turnkey business, the owner does not have to worry about proof of concept or building a customer-base. Purchasing a mature, well-established business–just like buying a new house with all the furnishings and renovations–can save you time and money.
Turnkey businesses that are fully online-based are now more attractive than ever. In addition to the aforementioned benefits, an online business skips the need for paying for overhead, and additional maintenance costs or repairs. You can run a turnkey business while enjoying the perks of a remote role. It’s a win-win for the new owner.
Disadvantages
Buying an existing business will come with some downsides as the new owner will probably inherit problems that existed under previous ownership. This could be anything, from poor brand reputation, to unstable suppliers and financial loan issues, etc. That’s why it’s important to assess the entire situation before making the big purchase.
Where to buy a Turnkey Business
You may find turnkey business opportunities through brokers or private sales. You could buy a business via a third party that would save you a great amount of time. There are marketplaces such as bizbuysell.com, which is kind of like the Amazon of business sales with more than 45,000 active listings. You can also check Craigslist ads or go the old-fashioned route: classified newspaper ads.
Sometimes opportunities are found offline. Ask others in your network of small business owners if they know of any businesses for sale, attend industry conferences, or work with a professional business broker.
What to know before buying a Turnkey Business.
Buying a turnkey business is not completely without risk. Be sure to review the business’ financial statements and long-term earning history to ensure that it is a solid business. Have the seller give thorough information on the processes and systems, the commercial lease, as well as key partners and suppliers.
If it’s an online business, ensure that the web design, built in widgets, software, and payment systems are on point. Determine whether the website can be revamped, be it through better branding or a stronger SEO strategy. Make sure the previous owner gives you access to the backend of the web domain and any key files. Ask them to also provide social media logins, lists of email contacts and other accounts. Purchase any related web domains that can redirect to your original website. They should also hand over any necessary information about employees and freelancers, as well as employment contracts, benefits and workplace policies. Engage a qualified lawyer for tailored legal advice, and an accountant or other finance expert to assist with due diligence if you require specific expertise.
Just like starting any business, make sure you are purchasing a business that is profitable or has the potential to be profitable–and equally important, make sure you have an undeniable passion for the business, even if you are not building it from the ground up.