A turnkey business is a fully functional and well-established enterprise that is standing on its feet with the promise of future growth. It is unsurprising then, that a turnkey business is a highly attractive prospect for buyers and investors alike. Before you sell your business though, it is important to know the reason for doing it. This clarity will help you in good stead through the course of the next steps such as preparing, valuing, listing, and negotiating for your business for sale. As a turnkey business owner, if you are contemplating selling it then here is a guide to highlight the key reasons why turnkey businesses are much sought after and why you should go ahead with your decision.
Quick Returns on Investment
One of the key reasons why people wish to invest in a turnkey business is that they can start getting returns on their investment almost instantly. This is because the business is already functional and has carved a name for itself in the market. It is just a matter of change of ownership, but that should not hinder the actual business performance unless some severe actions are taken in the transfer process.
Apart from the immediate ROI, buyers also save a lot on costs. Consider the aspects involved in setting up a new business, customer acquisition, marketing, sales, technical infrastructure, advertising and branding, website design and creation, tie-up with suppliers and logistics service providers, etc. All of these take a long time to establish and each involves a certain cost. By taking over a turnkey business buyers are eliminating most of the effort and cost associated with these costs and can simply let the business run as usual.
Established Customer Base
Customer acquisition is a vital activity since after all, generating revenue is the end goal of any commercial enterprise. This process can be expensive and take a long time for a fledgling startup trying to make its way into the cut-throat market. Your turnkey business, on the other hand, has already gone through these motions and is now in a position wherein it has an established customer base with (most likely) a certain loyalty as well. Now, when a buyer takes over your business, naturally they take over the customer base as well. Studies have shown that unless there is some significant external factor that is socially detrimental to the process, a change in ownership does not impact the end user or consumer. This is one of the important reasons why turnkey businesses tend to get high valuations as well, and are able to generate instant returns over the buyer’s investment.
Apart from a thriving customer base, buyers will also be interested in the ease of running your business upon taking it over. A turnkey business that is streamlined, well-oiled, and convenient to manage is bound to attract better offers. This is also a good step for introspection. Analyze your current operations to identify areas of improvement or gaps to be plugged in. The creation of standard operating procedures (SOPs) and detailed training manuals for new hires are known to help make the transition seamless for the new owner and employees. It is also recommended to have all aspects of your inventory management system, delivery mechanism, website maintenance, etc. carefully listed out to give buyers the confidence they need to back their buying decision.
Yes, a turnkey business is easier to manage, has a lower cost of operations (OPEX), has an established clientele, and can generate revenue right from the outset. But, put yourself in the investor’s shoes for a minute. It is likely that they have some ambitions for the future. Whether it be horizontal expansion, adding more diversity to the inventory catalogue, or pursuing newer markets and demographics, buyers are likely to pay more for platforms that are scalable. If you have already invested in technical and logistical infrastructure that is scalable to handle more volume and traffic in the future, then this is inherently more appealing to potential buyers. The cost of the infrastructure should be baked into your overall asking price and highlight the scope of future growth to justify it during the negotiations.
By now you must be able to see the reasons you sell your turnkey business and how it can be an attractive prospect for investors since it saves them immense amounts of time, effort, and costs that they would have incurred in setting up a business from scratch. Apart from these aforementioned reasons, you may have your own personal reasons as well. A change in your personal circumstances, a more lucrative opportunity to pursue, a change of heart or burnout are all valid reasons to contemplate selling your business. Once the reason is clear and your decision firm, you must go through the formal steps involved in selling your turnkey online business in order to make the process smooth, successful, and rewarding.