A turnkey business is a lucrative opportunity as it allows you to become a business owner and bypass the arduous stages that a startup typically goes through. A turnkey business, by nature, is one that is already established and fully operational. In an ideal scenario, it requires very little innovation on your part and you can hope you start getting a return on your investment as soon as you take it over.
Benefits of buying a turnkey business
The appeal of a turnkey business lies in the several advantages it offers, such as:
- Proven business model – Since the business is already up and running, you don’t need to reinvent the wheel. Just ‘turn the key’ and it is business as usual for your enterprise.
- Established customer base – You save on the costs and hassles of marketing and customer acquisition due to an established customer base.
- Streamlined processes – Not only customers but you also gain access to streamlined processes, systems, trained employees, and scalable technology. No further immediate investments are needed from your side.
- Quick returns – One of the most attractive aspects of a turnkey business is the quick returns it offers. This is complemented by the fact that very low new expenses need to be incurred in marketing or training of staff.
- Lower risk of failure – All the aforementioned aspects make a turnkey business a low-risk proposition as compared to setting up a business from scratch.
Your interest must be piqued by now and it is likely you’re all excited to invest in a turnkey business. However, like any important financial venture, you need to go into it properly prepared to maximize your returns and avoid any unpleasant surprises later on. Here are the 5 vital steps to take before investing in a turnkey business.
- Introspection
Before you set about investing your hard-earned money, you must take time to introspect. What are your goals from this investment? What is your 5-year plan? What is your risk tolerance? These are just some of the questions that you should ask and answer before deciding to buy a turnkey business.
Furthermore, you should also do an honest self-evaluation of your skills, experience, and resources to determine whether you have the knowledge and resources to run the business successfully. Unless the business aligns with your personal and professional goals, it may be ideal for you to proceed.
- Due Diligence
Once you are convinced of your ability and intentions, it is time to go turnkey business shopping. Due diligence is a must! But, this is a broad term. Several important activities fall under its umbrella. These include:
- Understanding the industry and the market
- Knowing your customers and competitors
- Reviewing the shortlisted turnkey business’ financial health, operational performance, legal structure, reputation, and track record.
- Evaluation
The first option may not always be the best one. You need to take your time to evaluate your options. Most buyers shortlist 2-3 businesses as a result of the due diligence. Thereafter, they carefully review the terms and conditions of the investment. This step also includes minutely combing through the business model, understanding legal and regulatory liabilities, upfront investment amount, recurring fees and expenses, and projected returns.
- Contract Review
The negotiation phase of the buying process can be the most challenging one. Naturally, the seller aims to maximize their profits while you’re looking for the best price in the bargain. It is not all financial though. There are several other aspects that are negotiated in the contract such as the retention of employees and suppliers, royalties to be paid (if any), partnership agreements, etc. Once signed, the arrangement is legally binding. To avoid making it counterproductive, review the contract thoroughly. Raise any concerns or red flags at this stage itself, before it becomes a legal document.
- Seek Professional Support
Throughout the course of buying a turnkey business, there will be several complexities that may arise. The process can be cumbersome and involves a lot of documentation that needs to be carefully reviewed. Professionals such as a legal counsel, a chartered accountant, and a contract expert, can help you achieve the clarity you need to make a business decision. If this is your first time buying a turnkey business, you can greatly benefit from the services of an intermediary like a broker. While they will charge a brokerage, what you get in return is experienced advice to navigate each stage of the buying process right from due diligence to the transfer of ownership.
In SummationBuying a turnkey business can be a good way to become a business owner without going through the hassles and anxieties of building a startup. Follow the suggestion provided in this article to smoothen the process. Click the link to learn more about turnkey business.
