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Turnkey Business



Definition

A turnkey business is a type of business that is already set up and operational when sold to a new owner. It’s essentially a “plug and play” business model, where everything, from the equipment to the operational guidelines, is included. The main appeal of a turnkey business is that it requires minimal effort or knowledge to run, as all systems are already in place.

Phonetic

The phonetics for the keyword “Turnkey Business” would be: “ˈtərNˌkē ˈbiznəs”.

Key Takeaways

Three Main Takeaways about Turnkey Business

  1. Convenience: A turnkey business offers immediate access to operational business platforms. This means you do not need to build structures, create systems, or assemble teams from scratch. It saves the business owner from the struggles involved in setting up a business.
  2. Reduced Risk: Starting a new business involves significant risk. A turnkey business helps reduce that risk by providing an established business model, reliable business strategies, and existing customer base. This allows for an instant source of income.
  3. Training and Support: Majority of turnkey businesses include ongoing training and support from the previous owner or franchisor. This is particularly beneficial to entrepreneurs who may not have specific industry experience or knowledge.

Importance

Turnkey Business is an important term in business/finance because it represents a business model that is ready to use, immediately upon acquisition. This concept is crucial as it eliminates many of the challenges associated with starting a business from scratch, such as building a customer base, marketing the business, hiring staff, and setting up business operations. In a turnkey business, the structures, systems and often even an established customer base are already in place enabling the new owner to take over operations immediately. This substantially reduces the risk and allows for quick entry into the market. Therefore, many investors and entrepreneurs favor turnkey businesses due to their convenience, efficiency, and potential for immediate income generation.

Explanation

Turnkey business refers to a setup that is in full working order and is ready to be used immediately upon purchase. The primary purpose of a turnkey business is to enable an investor or entrepreneur to launch their business operations without the need to build from scratch. This type of business model is especially useful for individuals who wish to dive into entrepreneurship but lack the technical knowledge or time commitment to establish systems and operations on their own. Predominantly, the turnkey business concept is embraced in franchising, where the franchisor provides all necessary items, including equipment, systems, and processes needed for the business to function effectively.The turnkey business model is commonly utilised for its ability to help establish a business quickly. Often, turnkey businesses come with a proven business model, inclusive of trained employees, brand recognition, established customer base, existing systems and procedures, and sometimes even within a market with an existing demand for the product or service. For many entrepreneurs, the turnkey operating system saves time wasted on trial and error, and they can instantly reap the benefits of a business blueprint that has already been tested and proven. This makes it easier to focus on growth strategies and other more significant aspects of the business. Therefore, turnkey businesses function as a catalyst for individuals to get quickly started in the business world with significantly reduced risks.

Examples

1. Fast Food Franchise: One of the most common examples of a turnkey business is a fast food franchise like McDonald’s or Subway. In this setup, the franchisee purchases the right to use the franchisor’s business model, name, branding, and products. The franchisor also provides the necessary equipment, training, supply chain, and support needed to start and operate the business. This allows the franchisee to start operating without having to build everything from scratch.2. Real Estate Investment: Turnkey real estate investment companies sell fully renovated properties to investors. These properties are often already tenanted and managed, making it easy for the investor to start earning rental income from day one. This type of turnkey business is rising in popularity in various cities worldwide.3. E-commerce Stores: Some companies offer turnkey e-commerce stores, where they set up an online shop complete with products, payment processing, and often even marketing strategies. Shopify, for instance, offers an easy platform for individuals to start their online stores with little technical knowledge or experience. Other companies even offer fully stocked dropshipping stores, where the store owner doesn’t need to handle inventory or shipping.Both the store setup and operations are almost fully covered, making it a turnkey solution for individuals looking to dive into e-commerce.

Frequently Asked Questions(FAQ)

What is a Turnkey Business?

A Turnkey Business is a type of business model where the business is sold to the new owner as a fully operational entity – from the infrastructure, customers, to operational procedures. It’s essentially a ‘ready-to-go’ enterprise needing little to no changes to start operations.

Are turnkey businesses a good investment?

It would depend on individual circumstance. For someone who lacks experience in setting up a business from scratch, a turnkey business can be an attractive option. However, it is still important to perform due diligence and evaluate the business before investing.

Why would someone sell a turnkey business?

There are various reasons. Often, original owners sell their turnkey businesses because they are retiring, moving on to new ventures, or unable to handle the physical or time demands of the business.

What is the buying process of a turnkey business?

You should first analyze if the business model suits your skills and interests. Then, perform due diligence: financial evaluation, assess operational procedures, review legal aspects, and more. Lastly, close the deal with legal paperwork and transfer of ownership.

What are some examples of turnkey businesses?

Franchises are the most common type of turnkey businesses. Other examples can include e-commerce businesses, rental properties, blogs, or any business that the owner has established and outsourced operations to the point where a new owner can step in and begin running the operations immediately.

Can turnkey businesses be run remotely?

Yes, depending on the nature of the business. An online business or franchise with a management team in place can be run remotely.

What risks are involved in buying a turnkey business?

Some risks include overvalued business price, inaccurate financial records, unforeseen operational costs, or inheriting debt or legal issues. Therefore, performing thorough due diligence is critical.

Related Finance Terms

  • Franchise
  • Business Operations
  • Startup Costs
  • Entrepreneurship
  • Turnkey Solutions

Sources for More Information


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