There are some great advantages to purchasing a turnkey business. The following is a list of the advantages:
- Pre-existing product(s) or service(s) with a proven business model already in place, lowering your risk of failure (as apposed to a start-up).
- Established business relationships with supplier(s) and customer(s) making future sales easier to predict.
- Closer to true total costs known, so financing is easier obtain then for a start-up. A breaking-even point has already been established.
- Established system in place already. Previous owner has done all the setting up of bookkeeping, etc.
- Should employees be needed, they will come with the business, fully trained.
- Branding of business will already be in place, like business logo and reputation.
- You will be able to focus your attention to expanding the business once you own it, making it even more profitable.
The disadvantages of buying a turnkey business are as follows:
- A very large investment will be needed in order to purchase an existing or established business.
- Existing business may be in financial trouble. A thorough investigation and appraisal will be needed when considering purchasing any established business.
- You will need at LEAST a working knowledge of the type of business that you are consider to purchase. If you have no knowledge of wedding dresses then purchasing a bridal shop is NOT a good idea.
- Inventory might be outdated.
- You would be inheriting any and all staffing or employee problems if any exist.
- As buyer, you would be responsible for any and all unforeseen contingent liabilities. Example: unpaid taxes.
Lawyer Rich Sierra discusses Key Aspects of Buying an Existing Business
How to buy a business without losing your shirt – Part 1
How to buy a business without losing your shirt – Part 2
How to buy a business without losing your shirt – Part 3
For more in depth information on buying an established business in Canada: http://www.canadabusiness.ca/eng/page/2854/
Where to find established businesses for sale in Ontario, Canada: http://www.kijiji.ca/b-ontario/turnkey-business/k0l9004
What Other’s Have to Say:
10 Things to Look Out for When Buying a Business
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