Turnkey business: what a seller and a buyer need to know?

Dec 10, 2020 1:56 PM ET

iCrowdNewswire   Dec 10, 2020  8:56 AM ET

It is worth mentioning that following article will focus mainly on the sale small businesses, the turnover of which does not exceed approximately half a million dollars a year. To make it better to perceive examples from the article, take in mind that we are talking about beauty salons, restaurants, agencies or any other small business.

Market realities and some statistics

Nowadays, there is a popularization of entrepreneurial activity and the agitation of people to start or make their own business. Needless to say, this topic has been sorted out a lot by different authors. But what should a person with little or no business experience actually do?

The question is “Should I open a new business or buy a turnkey business?”

Buying a turnkey business has both obvious pros and cons.

Pros of buying a turnkey business:

  • Saving money. You can analyze the return on investments and understand what you are paying for. Anyway, you will have a clear understanding of how the business works and what investments it requires to progress.
  • It does not require time for starting things up. You will get a fully organized business with an existing client base and some financial statistics.
  • If you are experienced in a particular industy, then you should consider the purchase as a strategic asset for you. For example, you have a network of 4 restaurants, and you fully know all the processes “from A and to Z”. You see that the current owner does not use the potential of his business, then you buy out the business and implement your developments, thereby increasing the performance of your business.
  • The previous owner will explain how their business works and support you. This is a common post-purchase procedure and is extremely important for new owners. Feel free to ask the salesperson for advices, over 90% of them will agree to support your business in the first place.
  • The statistics of the viability of a ready-made business in comparison with businesses that started from scratch are almost 50% higher.

Cons of buying a ready-made business:

  • There is a lot of fraud on the part of sellers. Imagine the situation: a man opened a restaurant, after a certain amount of time he realized that his business “did not go”, and the owner decided to get rid of him. The buyer often does not know how to properly check the business before buying and evaluate it.
  • The market for the sale and purchase of turnkey businesses in Ukraine is at the stage of formation.
  • The seller mostly does not know how to evaluate the business, and the whole assessment in Ukraine boils down to: “We have invested X in this business, we want to get X+Y because we want it that way.” When more detailed questions begin: “Where exactly did you invest X, then, as a rule, the answers will be as follows:” In repair, in advertising, in the purchase of equipment, in development. “Advice to buyers – be careful if investments cannot be confirmed papers and invoices, then this is an ephemeral investment of the seller.

Summarizing the above

It is possible to sell or buy a turnkey business in Ukraine, but there is a likelihood of encountering certain market nuances. It will be more efficient and safer for both parties to work with the industry experts such as GTInvest!