Building a business from scratch is not an easy job – to say the least. Even years of sweat, toil, and tears cannot guarantee a successful enterprise. The majority of startups tend to wind down within the first 2-3 years of their existence with very few going on to carve a niche for themselves. With such an alarming rate of failure and cut-throat competition, it is no wonder then that turnkey businesses are highly attractive to potential buyers and investors.
Reasons That Make A Turnkey Business Appealing To Buyers
If you own a turnkey business and are planning on selling it, then you should know the advantages that you have to offer. Knowing them, and accentuating them (wherever possible) will help you sell your turnkey business with ease and maximize your returns from the sale.
- On the ground running: One of the main reasons why turnkey businesses are attractive to buyers is that they allow for a quick start-up. All the hard work has already been done, and the buyer can simply step in and start running the business. This can save the buyer a lot of time and effort and can allow them to start generating income right away.
- Established customer base: A turnkey business comes with an established customer base. This means that the buyer does not have to spend time and resources on marketing and new customer acquisition. Instead, they can focus on maintaining and growing the existing customer base.
- Established processes: Apart from the customer base, the new owners will also benefit from the training, advice, and process documentation that you can offer upon the completion of the sale. This can be particularly useful to first-time buyers or those who are not familiar with the industry in which your business operates.
- Proven business model: Turnkey businesses have a proven business model that has already withstood the test of time. The buyer can see that the business is already established, and can get confidence in their ability to continue to run the business successfully.
- Reduced risk: Because turnkey businesses are already established and successful, there is typically less risk involved in buying one compared to starting a business from scratch. This can be particularly appealing to buyers who are risk-averse or who have limited financial resources.
The Selling Process
Having understood the unique selling propositions (USP) of your turnkey business it is time to jump into the selling process. While the nuances may vary based on the uniqueness of your enterprise and the segment you operate in, the usual steps include the following:
- Gather Your Data: Even though your turnkey business might be doing well, buyers will want to verify its financial and operational data. Therefore, you must begin by gathering all the financial information pertinent to your business such as P&L statements, cash flow records, annual sales and revenue reports, tax receipts, outstanding loans, etc. Furthermore, you should collect operational metrics such as the average feedback score of your store, website traffic, sales conversion ratio, cost of inventory, and so on.
- Organize Your Paperwork: While you’re at it, it will be useful to organize your paperwork too. Legal documents such as store lease, ownership structure, certificate of incorporation, and similar information will all come in handy in the next steps of selling your turnkey business. Buyers will also be put at ease if they see well-defined supplier contracts, employee terms, and evidence of compliance with applicable regulations.
A recommended best practice here is to have non-disclosure agreements (NDA) in place before sharing any sensitive financial or operational information regarding your turnkey business.
- Get a Business Valuation Done: With your groundwork properly laid out, it is time to establish a fair market price for your turnkey business. This can be achieved in consultation with professional firms that will holistically evaluate your business and determine its optimal selling price.
- List Your Business For Sale: Online marketplaces, digital platforms, selling via a broker, or selling directly on your own are some of the popular modes of listing and selling your business. Many online platforms offer you access to a wide audience at a minimal cost. If you’re selling a turnkey business for the first time, you may consider engaging the services of a broker or selling directly to an acquirer.
In both cases, you will get the professional guidance and hand-holding you need to maximize your profits while reducing the hassles involved. Brokers, though, can charge a high fee for their services. So, do your recce before engaging one.
- Prepare for Negotiations and Closure of the Sale: While the overall process can be arduous at times, the negotiation stage is, probably, the stage that requires the most patience and finesse. While you’re trying to get the most profit for the sale, the buyer is also trying to find the most reasonable price and favorable terms and conditions. If you’re new to the process, consult with a tax attorney, legal counsel, and a chartered accountant to safeguard your interests. Collectively, they will help you structure the deal that makes it lucrative for you while adhering to the requisite regulations and minimizing your tax liabilities.
Armed with the knowledge provided here, you can now plan to sell turnkey business successfully and without any trouble.
Welcome to our blog! My name is Yuvraj Kore, and I am a blogger who has been exploring the world of blogging since 2017. It all started back in 2014 when I attended a digital marketing program at college and learned about the intriguing world of blogging.