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Turnkey Business: Definition, How It Operates With Examples

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Becoming a business owner is a dream for many, but the reality is often filled with grueling work. Starting from absolute scratch means coming up with an idea, business plan, branding, supply chain, marketing strategy, and everything in between. It’s no wonder over 20% of new businesses fail within the first year.

So, what if you could skip the headaches of building a business from the ground up? That’s where turnkey businesses come into play.

A turnkey business provides an already operational company that allows new owners to bypass the demanding startup phase. The turnkey business model explained simply means purchasing a ready-made business rather than building one from scratch (which can take a year or more). The heavy lifting of getting operational has already been done for you.

Franchises are a common example, but direct sales companies and certain real estate investments also follow the turnkey business model. The advantage is starting with a proven, successful formula to follow. However, the disadvantage is having less flexibility and control over branding, operations, and decision-making.

For entrepreneurs who value convenience over customization, operating a turnkey business allows you to get up and running fast. But don’t be fooled into thinking they’re a magic “easy button.” Weigh the tradeoffs carefully for your goals. Turnkey businesses offer speed to market yet require relinquishing some ownership.

Group of people in a business meeting.

What is a Turnkey Business?

Not everyone has the time, resources, or experience to build a business from the ground up. But that doesn’t mean you can’t have your own business.

A turnkey business provides aspiring entrepreneurs with a ready-made path to business ownership. Rather than building a company from absolute scratch, you can purchase a turnkey operation and get up and running quickly.

Turnkey businesses come pre-assembled with many of the foundational elements needed to operate. This allows new owners to bypass the demanding startup phase of conceptualizing, business planning, branding, securing funding and licensing, establishing vendors, hiring, and more.

With a turnkey business, much of the heavy lifting is done for you. Franchises like McDonald’s exemplify this perfectly – all the operational aspects, from branding to menus, come predetermined so owners can start serving customers immediately.

Turnkey opportunities allow entrepreneurs of all backgrounds to skip the risky startup phase and hit the ground running. Why spend countless hours testing unproven ideas when you can purchase a turnkey company with an established successful track record?

While turnkey businesses often offer less flexibility than independent startups, the tradeoff comes with reduced risk and quicker time to profitability. For resource-strapped entrepreneurs or those with limited experience, turnkey solutions open the doors to operate in a proven system.

Rather than knocking yourself out to build something new, consider leveraging turnkey to make your entrepreneurial aspirations a reality. Turnkey businesses deliver the perks without the pain – get started immediately in an already thriving operation.

Group of people discussing examples of turnkey businessses.

Examples of Turnkey Businesses

For many prospective business owners and investors, the turnkey model seems like a dream come true to start your own business. The idea of purchasing a ready-made business that can generate revenue from day one is undeniably appealing.

You’re probably thinking – it can’t be that easy, right? And you’re not wrong. Turnkey businesses come with their own risks and challenges. But while turnkey businesses promise a faster track to passive income, they come in many different forms. Franchises, direct sales companies, and buying existing businesses represent attractive turnkey business opportunities for entrepreneurs to consider.

Franchise Business Model

Most people are surprised by how many big-name businesses are actually franchised out to independent operators. In fact, the 2017 Economic Census Franchise Statistics Report surprised many when it stated that 11.4% of all businesses in the industries published and covered by the report were actually franchises.

Yes, we all know McDonalds is a franchise. But franchises are more than just fast food restaurants. You can find franchises in the hospitality, automotive, fitness, education, and electronic sectors. Did you know that UPS stores are franchises? And so are Anytime Fitness, Ace Hardware, and Kumon Math & Reading Centers.

The franchise model allows large companies to expand rapidly by selling the rights to use their brand and successful business model to franchisees. In exchange, the parent company collects an upfront fee and ongoing royalties. For franchisees, buying into an established brand with a proven track record can reduce financial risk and startup costs compared to an independent business. However, franchisees must follow the franchisor’s rules and systems.

Franchising provides a proven business model and brand recognition to franchisees while allowing rapid expansion for franchisors. It’s a symbiotic relationship that plays to the strengths of both parties. But prospective franchisees should still do their homework to find the right brand match.

Direct Sales & Multi-Level Marketing

Tired of the 9 to 5 grind and want to be your own boss? Then, you may have considered joining a direct sales or multi-level marketing company (aka network marketing) like Mary Kay, Amway, or Herbalife.

These businesses promise that you can start making bank in your free time by selling products directly to customers – often friends, family, and your social networks. All you need to do is pay a fee to become a consultant, buy some starter inventory, and start hustling.

As a consultant, you’re not technically an employee – you’re an independent rep. You make money by selling products at a markup from what you paid. And if you recruit other consultants under you, you get a cut of their sales, too.

So how does it work? Sellers earn money not only from their own sales but also from commissions based on the sales of people they’ve recruited. In theory, you build your own pyramid of sellers below you.

But there’s a dark side too. MLMs have faced heavy criticism for oversaturating the market and requiring sellers to take on huge upfront costs. And many report relying mostly on their existing social circles for sales rather than growing a sustainable customer base.

So, while MLMs promise big money for the average Joe, the reality is much more nuanced. Before joining one, you’ll want to dig into the compensation structure and whether these companies are still drawing in new customers. Just something to think about before alienating all your old high school friends with nonstop sales pitches.

Private Businesses for Sale

If franchises and MLMs aren’t your style, but you still want a ready-made business without the huge startup hassle, there’s always the option to buy an existing private business from another business owner.

There are plenty of reasons for business owners to want to sell. Some sellers are looking to retire, cash out a profitable enterprise, or just move on to new ventures. Their loss could be your gain.

You can find established businesses for sale through brokers, sites like BizBuySell or LoopNet, or by reaching out to owners directly if you have a lead. The upside over franchising is avoiding ongoing royalty fees and keeping full control of the business’ operation and trajectory. The tradeoff is that more due diligence falls on you, and you don’t have the support of a larger parent company.

Before purchasing a private business, you’ll want to rigorously vet the financials, operations, customer base, and growth potential. Buying an existing business isn’t without risks or potential headaches, and it absolutely does not mean that it’s profitable. Make sure to kick the tires thoroughly so you know exactly what you’re getting into. Consider all business owner sellers untrustworthy; verify their financials and question any deal that seems too good to be true.

But if you find a promising, proven, profitable company aligned with your skills, taking over an existing business can provide that instant revenue stream without the heavy lifting of starting from scratch. It’s an intriguing middle ground between franchising and building your own startup.

Turnkey Real Estate

The problem with most turnkey businesses is that they are both costly and require a lot of work. You are not buying passive income but buying a job.

Turnkey real estate investing can be different if done right. While no investment is ever 100% passive, a turnkey rental property can generate mostly passive income with the right provider.

A quality turnkey company handles the heavy lifting of finding, renovating, and preparing a rental property on the investor’s behalf. They also place a tenant and provide ongoing property management.

This level of turnkey service is unique to real estate investing. It allows you to collect rental income with significantly less day-to-day management than most other turnkey business models.

However, some due diligence is still required when buying a turnkey rental:

  • Vet the turnkey provider thoroughly to ensure they deliver a truly hands-off experience.
  • Understand you will still have some investor duties for oversight.
  • Have realistic expectations about the level of passive income.

While turnkey real estate takes much of the work out of being a landlord, it is not as hands-off as some providers market it to be. But with the right provider relationship and owner mindset, it can deliver mostly passive returns while being a great way to grow a business that doesn’t require your daily attention.

Pros and Cons ofturnkey business.

Pros and Cons of a Turnkey Business

When considering a turnkey business opportunity, it’s important to weigh the potential advantages against possible drawbacks. Turnkey businesses offer notable benefits but also come with risks. Looking at both the pros and cons allows for an informed decision based on your specific situation and goals.

Pros of Turnkey Businesses

Acquiring an existing turnkey business can provide significant advantages compared to starting a new business from scratch. While launching a startup has appeal for some entrepreneurs, a turnkey model offers benefits that allow you to get up and running faster with less risk.

  • Time And Cost Savings
    An existing turnkey business has much of the initial startup work and costs already completed. You avoid steps like securing locations, inventory, licensing, hiring, etc. This allows you to start generating revenue much faster than launching a new business from scratch.
  • Lower Risk of Failure
    Purchasing a turnkey business allows you to tap into an established, proven business model, thus lowering the risk of failure. Someone else has already worked out the kinks and created systems and processes that are proven to generate success in that industry. This provides a guide for operating the business based on tried-and-true methods.
  • Support, Guidance, and Pre-Established Operating Systems
    With a turnkey business, you gain the seller’s knowledge and plug into pre-built operating systems rather than having to develop your own through trial and error. Ongoing training and support during and after transition is invaluable.

Cons of Turnkey businesses

While turnkey businesses provide the advantages of launching quickly, reduced risks, and built-in support, there are also downsides to evaluate. Turnkey models involve unique challenges and limitations that may not be ideal for all entrepreneurs. Carefully consider the potential drawbacks of acquiring an existing business before moving forward. This prevents making an under-informed decision that leads to disappointment later on.

  • Higher Upfront Costs
    The purchase price of an existing successful turnkey business is usually much higher upfront compared to slowly growing your own business or startup from scratch. You pay a premium for the instant operational capacity.
  • Less Flexibility and Control
    With a turnkey business, you are somewhat limited to working within the existing brand, systems, and processes rather than being able to build every aspect from the ground up. This can reduce flexibility in making changes.
  • Inheriting Hidden Problems
    Any existing problems with staff, systems, suppliers, etc., may not be readily apparent at first when acquiring a turnkey. Identifying and addressing issues can take significant time and money.

Turnkey Real Estate Investing Differences

Turnkey real estate can provide a more hands-off management experience through trusted providers. However, investors ultimately still maintain full ownership and control over the properties. This allows more flexibility to make changes or sell assets when desired. The turnkey provider’s involvement is primarily on the front end.

So, while turnkey real estate utilizes turnkey systems for convenience and efficiency, investors retain more control than with a full turnkey business where branding and operational systems are pre-established. But both models aim to provide a smoother, simpler entry point for passive ownership.

Can I Customize a Turnkey Business to Fit My Needs?

You can customize a turnkey business to fit your needs, though the extent and nature of customization will depend on the specific business and the terms of purchase.

Understand the existing business model and assess how much customization flexibility it offers. Some turnkey businesses are designed with a degree of flexibility to allow new owners to make changes according to their preferences. If the turnkey business is a franchise, consult with the franchisor about the possibilities and limitations of customization. National franchises have major restrictions on how each franchise can operate as they want to maintain a uniform brand representation and quality of service.

Customizing a turnkey business may involve additional costs. Evaluate whether the benefits of customization, such as increased relevance to your target market or improved operational efficiency, justify these costs. Create a detailed plan outlining the changes you want to implement, including timelines, resources needed, and impact on current business operations.

Don’t act too quickly. The best changes happen slowly so that you can minimize disruption and assess how changes are impacting the business. After implementing customization, monitor the business’s performance and make further adjustments as necessary to optimize results.

Turnkey real estate investing.

You Want Your Own Business – Consider Turnkey Real Estate

Starting and running a traditional business is not for everyone. The process can be complex, risky, time-consuming, and full of uncertainty. But what if there was an easier way to generate passive income without needing to build a business from the ground up?

Turnkey real estate market investing offers a simpler path to profits. Companies like Ohio Cashflow take care of all the hard work for you – identifying quality rental properties, purchasing, renovations, securing tenants and ongoing property management.

As the investor, you provide the capital to buy a fully renovated, tenanted turnkey rental. Then, you sit back and collect the monthly cash flow while the turnkey company handles the rest.

You get the benefits of investment real estate ownership without the headaches. No direct maintenance, repairs, or tenant headaches to deal with.

If being a true passive investor appeals to you, turnkey rentals are worth exploring. Become a passive real estate business owner with Ohio Cashflow. Complete our Investor Application to review potential properties and get started generating hands-off income sooner than you think.

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About the author

Picture of Kelsey Heath
Kelsey Heath is a real estate content specialist with an extensive background in residential, industrial, and commercial property. She has been involved in the industry for a decade as a professional and personal investor, gaining a deep understanding of the market and trends. With a passion for written communication, Kelsey loves helping people understand the sometimes-complicated concepts behind real estate and is now a sought-out guest and ghostwriter.