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What is a Turn-Key Business: Pros and Cons
November 4, 2022
Among the many pieces of marketing speak you hear from sales agents and franchise reps will be about looking to buy a turn-key business or how what they’re repping is a true turn-key operation. So, naturally, they make it all sound great, but what is a turn-key business exactly, are they all the same, and what are the pros and cons of turn-key business models?
Here we’ll look to answer those ‘what is a turn-key business’ questions and help you decide whether it’s the right kind of opportunity for you.
What is a Turn Key Business?
So, what is a turn-key business? Basically, the name comes from the concept that once you turn the key in the door or the engine, the business is ready to go. What we can take from this is that it should be an existing business that’s already running smoothly, and you’re basically just buying the keys that open it in the morning. At the same time, that might sound like an attractive way to start off running a business, as in just taking control of the wheel when it’s already cruising. In actuality, the different types of turn-key businesses are not always at the same level of preparedness. So, let’s take a closer look at what people might actually mean when they say something is a turn-key business.
They essentially fall into two categories:
True Turn-key Business
This is where it is exactly what it says on the tin. Say someone’s selling a pizzeria that’s a turn-key business. If it’s a ‘true’ turn-key operation, then it will have the premises, the branding, the seating, the pizza oven and everything you need to start making pizzas once you open the door. These types of turn key businesses come up, for example, when business owners are moving location, retiring from the business or just wanting to cash in on their asset. Common examples of a ‘true’ turn key business would be independent restaurants, laundromats or auto repair shops.
Partial Turn-key Business
While the meaning of a turn-key business should be clear, often when people talk about it, especially in the context of new businesses, the operation is only partially ‘turn key’. What this means is that you will be buying the operations manual, marketing materials, and some key equipment. You may also even be buying the products and services you will be selling in your business, like, for example, buying the pizza base recipe and instructions for making them rather than the actual physical product. Examples of a partial turn-key business would be a real estate agency or a home improvement franchise.
The idea behind a true and partial turn-key business is the same, as in you will be given everything you need to start the business, but for a ‘partial’ operation, it will require more input to get it running than a ‘true’ turn-key business.
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What is a Turn Key Business: Pros
Ready to Go:
One standout advantage of a turn-key business is that you can jump straight in and start working on Day One. This has great appeal to potential business owners who want to get going immediately in the business field of their choosing rather than waiting around for months or even years as they go through the setup, design and certification phase of starting a business from scratch.
Established Business:
There are a number of advantages to taking the reins of a business that’s already in operation or buying into a tried and tested operation. As a business owner, it takes a lot of the guesswork out of making the business a success — your products or services are set, your production model is established, and you know a lot about your market and what your target audience is looking for.
Reduced Time to Market:
Even for partial turn key businesses, such as a franchise with a really great service, getting on top of an idea before someone else sets it up can be the difference between major business success and being an also-ran. A turn-key business means that if you have the capital to get started, then you can make the business happen now.
Immediate Revenue:
Cashflow is the lifeblood of any business, and so many can fail in the early years when the outgoings involved in setting up the business overstretch any incomings. With a turn-key business, this is solved as you will be running and turning over revenue right from the first day.
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What is a Turn Key Business: Cons
High Initial Costs:
Of course, for all of the advantages of slotting into a fully-functioning business, there’s going to be a premium. It will generally be much more expensive to buy into a turn-key business than it would be to start your own business from scratch.
Evaluating the Business Effectively:
It can also be difficult to properly assess the value of a turn-key business. They may be willing to provide financial records, but how much is their goodwill worth, or how healthy is their client book? Getting into any business is an unknown, but when buying into a turn-key business, the costs involved can leave you playing catch-up for years if the business is overvalued.
Legacy Issues:
With a turn-key business, you aren’t just getting the equipment and the stock, you will also be getting the reputation of that business, for good or for bad. You may also inherit the staff of the previous operators or inefficient practices, which have to be changed anyway. As a new owner, it can be tough dealing with all the legacy elements built up over previous years.
Final Thoughts on Turn-Key Businesses
A turn-key business is one where you should be able to turn the key in the door, and the business is ready-to-go. This may not always be the full story, as a partial turn-key business may require a few steps more than simply opening the premises in the morning. Turn-key businesses are attractive as they require minimal setup and planning and can start making you revenue right away. However, they may also come at a considerable premium in initial purchase cost.
If you’re interested in starting a business where all the preparation work and product planning have been done, and you can get to work within a few weeks, then why not consider a Screenmobile franchise? Our systems and products have been honed over decades in the home improvement industry, and our start-up package supplies you with everything you need to provide a full service for your customers. To find out more about becoming a Screenmobile franchisee, you can read more about it here or get in contact with our team.
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