What is a turnkey business? A turnkey business is one that can open and operate, or continue operating, immediately after purchase. This is as opposed to a business that needs to hire new staff, purchase machinery or the rights to manufacture products, needs to find a premises to operate from and so on. They require a minimum of effort on the part of the new owner to make money, and are therefore highly sought-after in the context of business buying.
The guide below first addresses the finer points of the meaning of a ‘turnkey business’, before running through examples of turnkey businesses in different industries.
Turnkey Business: Meaning
A turnkey business is one that is ready to make a profit from the moment a buyer takes ownership of it. The term ‘turnkey’ is probably an analogy to driving a car; all you have to do is turn the key in the ignition and drive. In the same way, a turnkey business is ready to make you money from the moment you lift the shutters and open the door on a Monday morning.
Not all businesses for sale are turnkey businesses. So, for example, the buyer of a turnkey business will not need to:
- Refurbish its offices or premises
- Purchase machinery vital to the operation of the business
- Contact suppliers and purchase stock
- Pursue a marketing campaign to earn their first customer or client
- Recruit and train staff
In other words, a turnkey business is an established business that can continue operating as-is following a change of ownership. While there is no formal definition of a ‘turnkey business’, buyers are advised to check whether their target requires growth or an overhaul before it can make a profit for them.
Is There Really Such a Thing as a Turnkey Business?
Not every business for sale as a ‘turnkey business’ really is one. That’s because both brokers and owners know that buyers are looking for opportunities that can immediately start making them money. There will always be an incentive for a seller or a broker to gloss over issues like the need for new staff, new machinery, or other expensive problems.
That, however, does not mean that there is no such thing as a turnkey business. It is perfectly possible to find genuine turnkey businesses for sale should you know where to look.
Examples of Turnkey Businesses
To better understand the definition and value of a turnkey business, here are a few examples.
Online Turnkey Businesses
An online turnkey business would be one that already has a fleshed-out online store, has existing suppliers in place, and has an established position in search engine rankings.
Take an ecommerce business for example. A turnkey ecommerce business would have an existing relationship with suppliers e.g. through AliBaba or directly. Infrastructure to deliver goods to customers would also already be in place. Staff that liaise with suppliers and customers would be retained to ensure a seamless provision of service throughout the change of ownership.
The value of an online business being a turnkey business is less than in other industries. That’s because barriers to entry are relatively low, as is the cost of establishing a website as opposed to physical premises. It is nevertheless easier, at least, to buy and run a turnkey online business than one which is yet to be fully established.
Manufacturing Turnkey Businesses
It is far more meaningful to buy a turnkey manufacturing business. That’s because companies that manufacture things require machinery, trained staff, large premises and strong relationships with buyers of their products. It is far easier to set up and establish a website than a manufacturing concern.
A turnkey manufacturing business would already have:
- Machinery that can be used to manufacture goods
- A relationship with a supplier for raw materials
- A team of trained staff who can operate the machinery
- Management staff e.g. line management, HR and health and safety
- A premises in which to manufacture things
- Patents and intellectual property rights
A buyer could continue to utilise these resources after purchase. So, an example manufacturing turnkey business could be one that makes cutlery. The new owner could, should they wish, carry on making the same cutlery with the same machinery and the same staff.
Franchise Turnkey Businesses
Another good example of a turnkey business is a franchise. Many businesses with a franchise model will assist a new franchisee by branding their premises, hiring staff, presenting systems for payroll and similar, and generally taking care of everything that a new business owner would have to do. Not every business using a franchise model will do this for a franchisee, and this is typically reflected in the initial setup cost.
How to Find Turnkey Businesses for Sale
Most businesses in the U.K. are sold without them ever being officially listed for sale. Instead, they’re sold on an ‘off-market’ basis. Rather than relying on advertising, sellers discreetly and confidentially discuss terms with their existing industry contacts. Unless you are a part of this inner industry network, you would never know the business is for sale; even then, sellers take pains to avoid alerting direct rivals to their sale.
In short, this means that potential buyers—and especially overseas buyers—miss out on the best turnkey business opportunities before they even become aware of them.
Buy a Business with Chelsea Corporate
Welcome to Chelsea Corporate. Our expertise is in identifying and securing off-market opportunities for business buyers.
An off-market deal is one made without the business officially being listed for sale. As specialist brokers, we identify and approach businesses with owners discreetly looking to sell. We then connect our buyers with this hidden market they would otherwise not have access to. Off-market deals have several advantages both for the buyer and the seller: the seller benefits because they only need deal with serious buyers, while buyers can request a fair price and avoid the competition they would find in a public sale.
If you’re interested in how to buy a turnkey business—whether you’re looking to expand your own business, or you’re an overseas buyer interested in British businesses—contact us today. You can reach our expert team over the phone at +44 (0) 20 3011 1373. Alternatively, fill out our contact form or email us at email@example.com.