Ready-made turnkey business, startup, ready-made business. Terminology of business brokerage.
In the field of buying/selling a ready-made business, when buyers, sellers and business brokers communicate, there are often problems of misunderstanding between them due to different interpretations of a particular term. Very often, different people understand very different things by the same concept. What do we mean when we say "ready business"? What do we mean by this concept? And then what is "not a ready-made business"?
Let's clearly define terms such as "ready business", "operating business", "startup", "turnkey business", "not ready business", "unprofitable business", "profitable business", "business in development", "self-supporting business", "frozen business", "stopped business" in the field of business purchase/sale.
To begin with, a little theory
Each organization, like a person, goes through certain stages of its development. This is birth, becoming, peak, extinction. This is clear to everyone. At what stages of development do business organizations sell? Yes, they sell at all. More precisely, they try to sell, but it doesn't always work out. Why?
Let's take a closer look. Let's take as an example the production of no matter what.
A business plan of the project has been written, a legal entity has been created, premises have been rented with the conclusion of a lease agreement, all permits, certificates, licenses have been obtained, production equipment has been purchased, installed and connected, furniture, tools and technological equipment have been delivered, contracts for the supply of raw materials for production have been concluded, information work on hiring personnel has been carried out with the consent of future employees to start work at any time necessary for the owner.
What can you call this state of business? That's right, this is a "turnkey business". That is, everything is prepared for the start of work. Just turn on the switch, and production will be launched. But all this is ready just to GET started. Business processes have not yet been worked out, the staff has not yet "got used to", there is no advertising, and most importantly, sales have not yet been established.
Further. The staff was invited and placed in their places, raw materials were purchased, an advertising campaign began, the marketing department began to work on concluding contracts for the sale of finished products, the switch was turned on, and the machines started working. What's it? That's right, it's a startup.
Business under development
We continue. Production is working, sales volumes are gradually increasing, that is, the process is underway, although there is no profit yet. But according to the business plan, it should not be there yet, since it is only the seventh month from the start of the project launch. The business is under development.
Another option. Two and a half years have passed, but the company has not even reached "zero", that is, there is no profit, only expenses. Although according to the business plan, in 14 months the company was supposed to start recouping its expenses. How to call such a business. You can't just call it unprofitable.
Further. The company is temporarily closed after a certain period of operation. Production has been stopped, employees have been released on unpaid leave. It turned out to be a "frozen business". But business is a process, it is a movement. It cannot be stopped at all. If a business is stopped, it is very bad, as this is a direct road to its complete closure.
The next option. According to all calculations, the company went "to zero", expenses equaled the income from the sale of finished products. Business does not "eat itself". Great! At the present time, this is already good. This is a self-supporting business.
And finally. The enterprise began to bring profit to the owner. Of course, this is a profitable business, even if the profit is small.
Now it is already possible to define a ready and not ready business.
You can call a business ready only and only if the business necessarily has two components.
1. The business must be OPERATIONAL. That is, it must necessarily be working.
2. The business should be PROFITABLE. That is, it should bring its owner income.
All. Businesses in other forms, at other stages, cannot be called ready. Thus, turnkey businesses, startups, businesses in development, unprofitable businesses, stopped businesses do not fall under the concept of a ready-made business. These are all not ready-made businesses. And buyers are looking for ready-made businesses. The buyer is willing to pay precisely to start making a profit the very next day after the purchase, and not to bother with pulling the business out of the swamp of failures.
The only exception here is this. The buyer is super-professional in this type of production. He already has similar enterprises, he has good suppliers of raw materials, he has a lot of contracts for the sale of finished products. And he knows exactly what needs to be done with this enterprise in order to make it a profitable enterprise QUICKLY and with MINIMAL COSTS. Then an enterprise, such as: turnkey, startup, unprofitable or stopped enterprise can be bought. But this is rare.
Advice to a business buyer. Always check with the seller and the business broker what they mean by this or that concept. Because the seller may cheat or simply do not know anything, and the broker may get caught just not experienced.