Starting a business from the bottom up can be tempting for an aspiring entrepreneur.
With so many ideas buzzing around inside your head, it seems obvious to kick off your entrepreneurial journey with a fresh start you’ve created yourself.
But what if that’s not the way forward?
Many established businesses (also known as “turnkey businesses”) have spent years building their brands, and now the owners are ready to move on. This gives fresh entrepreneurs like you the chance to take over.
Let’s take a closer look at how turnkey businesses may offer you a more secure investment and — why they might be a wiser choice than creating something from scratch.
What’s a turnkey business?
A turnkey business is a company you can buy that’s already established.
The business was previously running. So, everything is up and ready to go. You buy the business and “move in” — taking over from the previous owner.
Typically, turnkey businesses come with:
- A business plan
- Ready equipment and machinery
- Inventory
- Staff
- Premises
- Permits
For example, imagine you’re buying an ecommerce store specializing in men’s custom suits and accessories. In this case, your new business would already have a warehouse, inventory, suit makers, and ecommerce software, so you could continue operating as usual.
Is a turnkey business a franchise?
No, a turnkey business is not the same as a franchise.
With the franchise model, franchise owners operate under a broader brand. They must follow specific operations and branding guidelines and pay ongoing franchise fees.
They also rely on the more prominent brand as an umbrella for their business. But don’t own the brand itself; they’re just an extension of it. For example, a franchise owner owns and operates one or a few Taco Bell locations but doesn’t own the Taco Bell brand.
With a turnkey business, you become the new owner of a previously established business. You own all of it — the brand and everything associated with it.
7 reasons aspiring entrepreneurs should consider turnkey businesses
A ready-made business already has established revenue streams, a solid business plan, and growth potential. This can seriously increase your chances of success.
Here’s why:
1. Proven business model
Determining a suitable business model is fundamental to creating a profitable business.
This isn’t easy, and lots of startups get it wrong. In fact, 20% of startups fail in the first two years, and 16% fail specifically due to poor business models.
But when you buy a successful pre-built business, the previous owner has already created a business model that works. Not only do you get an established business plan, but you also get a well-documented system of operations, financial projections, and marketing strategies.
You’re stepping into something with a proven record of success, which gives you a better shot at long-term success.
Pro tip: Read up on the best investing blogs to learn about the best business models to invest in.
2. Less uncertainty
Turnkey businesses are an excellent option for entrepreneurs because there is less guesswork than with startups.
You’re investing in something with a history. You can see financial records and performance data that tell you how well the company has done in the past. This indicates the chance of ongoing success.
Plus, with the company’s financial history, you can look at how well the business weathers challenges over time. You can identify which factors have negatively affected the business’ performance in the past and design safeguards to avoid these potential risks in the future.
Consider it like this.
69% of buyers look to invest in recession-resistant businesses. If you’re starting a company from the beginning, you have no idea how well it will do during economic downturns.
With a turnkey business, you can see how a recession affects its bottom line and plan to compensate.
This significantly reduces risk and uncertainty.
3. Ready-made customer base
One of the critical advantages of turnkey business opportunities is that they come with a pre-existing customer base.
While startups must spend time and money building a solid customer base, you’re jumping into a business with loyal customers. This is gold.
You won’t need to invest heavily in marketing to attract your first customers — they’re already there. With a head start on cash flow potential, you can focus on growing the business rather than simply surviving.
And it’s not just that you have customers that already generate revenue. You’ll likely also benefit from reviews showing people’s positive experiences with your company.
Plus, a ready-made audience gives insights into your target market to help you understand your potential growth opportunities. You’ll have access to customer data that shows you the market values and trends that appeal to your audience.
This can help you develop the right strategies and products to grow the business further.
4. Pre-built reputation
Creating a strong, positive brand image takes time and effort. If you’re starting from nothing, this can be slow and costly.
When you enter the startup game, brand awareness is critical.
You might spend months (or even years) trying to convince potential customers of your value. But, with a turnkey business, you “inherit” the trust and credibility that its previous business owners have built.
A successful business will likely have a solid online presence, positive customer testimonials, and maybe even industry awards. You can use these as trust elements to continue building the business’s reputation. Leverage the power of the best free market research tools to uncover valuable insights and tailor your strategies to meet customer needs.
5. Experienced team
Another standout benefit of turnkey business opportunities is having an experienced team as part of the deal.
You must hire and train new staff when starting a business from scratch. It’s not just that the hiring process takes time. You also have to factor in the costs of the learning curve, which is where your new team makes mistakes as they train. This can take weeks or months of hurdles before you have a solid team you can count on.
Plus, you’re never sure if the team you bring together will gel. (Team disharmony is one of the top 5 reasons new startups fail.)
But, when you inherit a business, you can take on the existing team.
The staff is already familiar with the day-to-day operations and business processes. It’s a good idea to create digital business card versions so that new hires can easily share their contact information and connect with colleagues. If they’ve been there a while, they’re likely already aligned with the business’s goals and culture. (You must do your part to keep the morale high.)
6. Established supplier relationships
An overlooked perk of buying a business is that it often comes with established supplier relationships. This can save you time and hassle right from the start.
With existing positive partnerships in place, you don’t have to worry about finding your vendors and suppliers. You’ll have a history of the relationship to understand how reliable the contracts and service are.
Plus, you can benefit from the business experience of these suppliers.
Since they’re already working with the company, they’ll have valuable insights into how market trends affect market demand. This can help you immediately understand what inventory levels you need rather than figuring this out yourself through trial and error.
7. Quicker financial return
Perhaps the most important advantage of a turnkey business is the potential for a faster financial return.
When you build from the ground up, it might take years for you to see a profit.
However, a turnkey business often generates instant revenue.
The business is already up and running. So, there’s an existing customer base, established revenue streams, and clear financial data to support your future decisions.
While the purchase price of the business will reflect its ability to generate profit immediately, you’ll probably find your return on investment is likely much faster than with a startup. This means you can achieve financial stability sooner. It also means you can explore growth opportunities rather than simply keeping your head above water.
Wrapping up
Investing in a turnkey business can help you start earning profit without setting up the systems that take time, money, and stress.
You get to piggyback off the success of previous business owners and enjoy the stability of established suppliers and an experienced team.
As an aspiring entrepreneur, this could be a smart move.
Our advice? Lay out your goals and priorities — and weigh out the pros and cons of both options before deciding which path to take.
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Here’s to your success!
Author Bio:
Kelly Moser is the co-founder and editor at Home & Jet, a digital magazine for the modern era. She’s also the content manager at Login Lockdown, covering the latest trends in tech, business and security. Kelly is an expert in freelance writing and content marketing for SaaS, Fintech, and ecommerce startups.
