A turnkey business deals with that gap by offering a proven business model, or an existing business ready for takeover. Can it work for you?
People often have the work ethic and drive to be successful business owners, but they don't necessarily have the expertise to start a small business from the ground up. A turnkey business deals with that gap by offering a proven business model or an existing business ready for takeover.
Considering taking over a turnkey business? Below, we'll discuss different types of turnkey operations and how to choose a business opportunity that makes sense for you.
While many agree that a "turnkey opportunity" is one that is ready to operate from the moment you, as a new owner, take over, you will often find references to "partial turnkey" and "true turnkey" businesses.
A true turnkey business is an established business with a proven track record of success. It has a business plan in place, high demand, consistent cash flow, an established customer base, stable employees and contractors, good relationships with bankers and vendors, and, perhaps most importantly, the potential for growth.
Such businesses can be found locally through classified listings or nationally and internationally via brokers and websites. The type of business can vary from a local one that is run out of a traditional office to one that is location-independent and home-based. On sites like Flippa and Empire Flippers, you can even find turnkey opportunities in the form of websites that are fully automated. These websites generate revenue in a number of ways (providing content, services, or e-commerce, just to name a few) and can be run by a new owner from the first day they take over.
A partial turnkey is any full-time or part-time business that has most of the elements of a successful business but needs a certain amount of time to get started. The most typical partial turnkey business is a franchise opportunity.
A franchise business offers a successful business model for new business owners. There will typically be a one-time franchise fee paid to the one offering the opportunity, the franchisor, by the franchisee, the one taking the opportunity. In addition to the franchise fee, there will probably be ongoing royalty fees paid by the franchisee.
The most common example of a less expensive but globally recognizable franchise opportunity is Subway. It offers an initial fee of $15,000 per store, with estimates between $115,000 and $275,000 to open a location, and asks for 12.5% in weekly gross sales as ongoing royalty fees in addition to contributions towards national advertising.
As we've mentioned above, a true turnkey business is ready to go from the start, but a partial turnkey will require a certain number of hours of education across operations, marketing (including social media), and finance. You will be handed a business system that will make business ownership not necessarily easy but somewhat more straightforward than going it alone.
If you choose to start a business from scratch, you’re going to have to develop all of these systems yourself. Keep in mind that you’ll be developing them through trial and error, sometimes at a great cost of time and money. This won’t just be internal systems like employee manuals or social media practices but also your product and service mix, pricing, and customer retention practices. When you start a business from scratch, you really do have to come up with everything — from scratch. Any form of a turnkey business, true or partial, will make the path to starting a business easier.
On the other hand, if you want to build a business from the ground up, a turnkey business might not be for you. If you’ve invented a product that you want to patent, for example, starting a new company might be your best bet. But regardless of who had the original business idea, if you own the business, turnkey or otherwise, it’s 100% yours.
The cons of a partial turnkey business are primarily financial and creative. Financially, you are on the hook forever for royalty and advertising fees. Creatively, you have set limits as to how you can hire, innovate, price your offerings, and compete. Should you wish to expand, you will need to pay more fees.
There will always be costs involved in starting any business, not just a turnkey business, and you can finance those through your own savings or credit or by getting a loan from a bank, possibly backed by the Small Business Administration (SBA).
Alternatively, you can fund the business yourself with your own equity and savings. You might also consider asking friends and family to help out by offering them a stake in your business or by paying them back using a simple debt structure. Of course, mixing personal relationships with business can be tricky, so be careful before you take this route.
However you approach it, you’ll want to make sure you have living expenses saved up in case there’s a lag with profitability in the first few months as you get up and running.
Hoist isn’t a turnkey solution where you buy a business out of the box with no creative input. Nor is it a franchisor requiring hefty upfront fees and ongoing royalties. Instead, we’re a path to building your own painting business — with a lot of the guesswork taken out.
You’re the one building and owning your business, but we give you a model that works and stay with you as you grow. In fact, as you hit certain milestones in your business, Hoist invests in your company. After you’ve completed your first 20 jobs, we’ll invest $1,000 in a photo shoot to help you stand out from the competition. After your 25th online review, we’ll give you $3,500 to spend on Google Ads to help you reach more customers. When you get to 100 successfully completed jobs, you’ll get $5,500 to spend generating leads on platforms like Yelp.
Unlike franchising, you will have the ability to name your business and craft a brand in your own style. You'll also be able to make changes and innovate without getting clearance from a central office. You’ll have some of the most important benefits of franchising with none of the drawbacks.
Think a turnkey business might work for you? Take a moment to write down business possibilities that interest you, either because you have interest in the field or just a passion for that idea. At Hoist, we’ve chosen to focus on painting services because it’s a niche in high demand with easy entry and instant impact. You can see your results, complete projects with happy clients, and gain excellent revenue within a relatively short time frame.
If you want the proven track record that a turnkey solution provides, building your business with Hoist lets you follow a path to success while enjoying the freedom to shape your own business. As you build your team and grow your customer base by delivering outstanding service, we will be there each step of the way, offering training, support, and connections (as well as preferred pricing) with service providers. Here’s our guide to owning your destiny through business ownership.
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