There are a lot of benefits to owning a turnkey business. All businesses have their ups and downs, as any experienced business owner would agree. However, there are many reasons why a turnkey business helps newcomers start a business more easily.
Turnkey businesses are extremely valuable in many ways. One of the main benefits is that it gives you a starting point to begin running your own business. When business failure is most common in the first few years, turnkey businesses are more likely to succeed long-term.
In this article, we will outline the pros and cons of a turnkey business and help you decide if this is the right type of business for you.
What is a Turnkey Business?
A turnkey business is a business that is ready to operate upon purchase. All the necessary equipment and supplies are included in the price of the business. The business is also fully staffed with employees who are familiar with the company’s procedures.
In addition, the owner of the turnkey business or franchise is available to answer any questions or provide guidance as the new owner gets started. There may even be ongoing training, support and mentorship included, or assistance with marketing and promoting the business.
This style of business works well for those who want to own their own business, but don’t have the time or resources to start one from scratch. It’s also a way for those new to entrepreneurship to get started without a whole lot of experience required.
Turnkey businesses offer a pre-made business plan, training for employees, and guidance from the owner. Purchasing a turnkey business can be a less risky way to start your own business, and streamlines the process of setting up a business.
Types of turnkey business include purchasing an established business, buying a franchise, or another kind of licensing agreement. You may have a franchisor or parent company who supplies parts and systems for your business. When franchising is involved, you may be starting a new franchise in your area, or taking over the business from the current franchisee.
How Does A Turnkey Business Work?
Once you purchase a turnkey business, you will become the owner and operator of the business. Just like any other business owner, you’ll be in charge – but taking over an established business means all the set-up and planning will already be complete, and the business may be actively bringing in revenue already.
The employees who are already working for the business will report to you and follow your procedures. You will be responsible for the financial success of the business, though if purchasing a franchise business, you may need to pay ongoing fees in return for support and marketing from the franchisor.
As the business is already operational when you purchase it, you won’t need to do large amounts of startup work at first. This will give you more time to focus on growing the business and meeting your sales goals. However, you will need to familiarise yourself with the company’s procedures and policies so that you can effectively manage the business.
Day-to-day operations of a turnkey business will vary depending on the type of business you purchase. However, you can expect to be responsible for managing the employees, marketing the business, and overseeing financials.
Should I Buy A Turnkey Business?
If you’re thinking of starting your own business, a turnkey business may be a good option for you. It allows buyers without previous experience in opening their own franchises or small businesses to buy into proven industry names instead of taking the risk on an unknown start-up with a potentially shaky future.
With a turnkey business, much of the initial guesswork is eliminated. Not only do you acquire a fully functional business complete with the necessary equipment and supplies, the vendor typically offers pre-opening and ongoing support, from grand opening marketing tips to procedural help should you need it.
When considering a turnkey business, it is important to research the company and its track record. Ask for references from previous customers. Make sure the company is reputable and has a good reputation in the industry. You’ll also want to be sure that the company you’re buying from is in good financial standing and will be able to continue supporting your business with replacement parts, supplies, and marketing advice well into the future.
When considering buying a turnkey business, there are a few things you should keep in mind.
First, be sure to do your research on the company you’re buying from. Make sure they have a good reputation and that the company is in good financial standing.
Second, clarify what kind of ongoing support and replacement parts you’ll receive from the franchisor or parent company.
Third, be prepared to manage the day-to-day operations of the business. This may include overseeing employees, marketing the business, and managing finances.
Finally, be prepared to make an upfront financial investment. A turnkey business can be a great way to get into a new industry quickly, but you’ll need to finance the initial purchase or franchise fees, as well as any ongoing franchise or licensing fees.
Pros of a Turnkey Business
There are many advantages of a turnkey business. Buying a turnkey business eliminates much of the guesswork and risk associated with starting your own business from scratch.
Consider the following benefits you can enjoy by investing in a turnkey business:
- Proven successful business model
- Support from the franchise company
- Easy start-up process
- More time to focus on the core of your new business
- Less time spent establishing business basics
- Opportunity to hire your own employees
- You are provided with the supplies and equipment you need
- No requirement to develop processes (operating, HR, marketing) from scratch
- Minimal business experience required to get started
- Built-in customer base from the beginning
- Quick expansion opportunities
Cons of a Turnkey Business
Like any business venture, there are always risks, even with a turnkey business. Be mindful and consider these potential issues before purchasing this type of business:
- Requires capital upfront to purchase
- Lack of creative freedom versus a brand new business
- May be more restricted in product and service options
- May be subject to contractual obligations
- Expansion may be limited to specific service area
Are Turnkey Businesses Profitable?
The profitability of a turnkey business will majorly depend on the business niche itself. There are turnkey business and franchise opportunities across a huge range of products, services, industries and locations. Market demand and competition are the biggest factors in long-term profitability.
There’s no denying it—turning a business idea into tangible wealth requires hard work which can be difficult for a new business owner. That is why turnkey businesses are a popular choice for start up-companies. Turnkey businesses tend to break even and generate profit more quickly than brand new businesses, and may even be bringing in revenue from day one.
As with any investment or purchase, it is important to do your due diligence on the company you are buying into and to understand what is included in the purchase price. Be sure to ask questions about the company’s past performance and future goals to get a good understanding of whether or not the investment will be worth your while.
Generally speaking, businesses that are easy to operate and have a recognisable brand tend to be more successful. These two traits are common with the majority of successful turnkey businesses and franchises, including some of Australia’s most successful franchises.
Factors that will affect the profitability of a turnkey business include the type of business, the franchisor or parent company you choose, your investment, and the market conditions. You’ll want to carefully choose what type of business is best for you.
The seller or franchisor should be able to provide reliable and verifiable data to support any revenue projections. A trusted parent company or franchisor should have nothing to hide, and you should ensure you have your own accountant or financial advisor verify all financial details.
Generally speaking though, turnkeys offer a high chance of success due to the pre-existing infrastructure and support you receive. So, if you are passionate about starting a business and have the skills and resources to get it off the ground, a turnkey could be a great and profitable option for you.
Can You Grow A Turnkey Business?
As with any business, it is possible to grow a turnkey business. If you’re aiming to build a profitable and wealth-generating business, turnkey businesses are a great place to start. While lacking the complete control of a new start-up, these business options offer some unique opportunities for growth.
On the other hand, turnkey businesses can be great for a quick start and have been known to bring in more income per employee than most other business models. So, if you are looking for a business with high potential for growth and scalability, then a turnkey may fulfil those requirements nicely!
However, if you’re aiming to build your own national or international brand, you may need to launch a brand new start-up for complete entrepreneurial control. Turnkey businesses often involve an ongoing relationship with a franchisor or parent company, so you’ll have another stakeholder to consider in your business’ long-term direction.
There are some unique opportunities for expansion through turnkey business models. Many franchisees purchase multiple franchise businesses over time – for instance, operating semi-independent mowing franchise businesses in multiple service areas.
Other opportunities to expand include scaling up staffing levels and securing commercial contracts, which can significantly boost profits for service businesses.
Master franchise opportunities also allow successful franchisees to ‘level up’ their involvement, overseeing a certain region or division – like Jim’s Mowing, Jim’s Cleaning and Jim’s Test & Tag.
Is Buying a Turnkey Business Cheaper Than Starting A New One?
Buying a turnkey can be cheaper than starting a new business from scratch. This is due to the fact that most turnkey businesses already come with all the necessary pieces in place and you do not have to go through the hassle of starting from scratch.
In terms of investment, a turnkey business can range anywhere from a few thousand dollars to upwards of a million dollars. It all depends on the type of business, the franchisor you choose, and the location, as well as current market value of the business and its assets.
However, when starting a new business, you run the risk of losing money in the early stages as you invest in marketing, hiring employees, and other overhead costs. Buying a franchise or established business reduces financial risk and allows you to break even more quickly. So, if you are looking for a lower-risk investment option, then buying a turnkey business may be the better option for you.
What is the Difference Between a Turnkey Business and a Franchise?
The main difference between a turnkey business and a franchise is that with a turnkey, you are buying an existing business with an established customer base, marketing strategy, and staffing. Buying a franchise can be a type of turnkey business.
With a franchise, you are buying the right to use the trademark and business model of a franchisor, including systems and processes. You may be starting a new franchise for that brand in your area, or you may take over a franchise business from an existing franchisee.
Typically, a franchising model means accessing ongoing support, training, marketing and even ongoing leads from the franchisor. A turnkey business may or may not come with this kind of support – you may simply be taking over an established business, then running it on your own from that point.
So, which option is right for you? That depends on your business goals and financial situation. If you are looking for a business idea that will let you hit the ground running, getting into a franchise or another turnkey business can help you achieve your dream.
What Are The Most Successful Small Businesses?
In terms of industry, the most successful small businesses are usually in service-based industries. Some common examples include gardening companies or cleaning services.
When it comes to franchises, the most successful small businesses are those that offer a unique product or service that is in high demand.
What is the Fastest Business to Start?
The fastest business to start is typically a service-based business – they don’t need a lot of equipment and you can start operating very quickly. Another benefit is that they often have lower overhead costs. Some common service-based businesses include cleaning, car detailing, lawn mowing, dog washing, and handymen.