Here’s how to prepare your travel agency for sale : Travel Weekly
Q: In your Legal Briefs column, “Gaugeing the best time to sell your agency,” in the September 12 issue, you said the best time to sell is when you’ve had a year of good financial results and you’ve taken the steps necessary to prepare your agency for a sale. You’ve already touched on bottom line issues, but what about the steps needed to prepare your agency for sale?
A: Assuming you had – or will have by the end of the year – a good year of profits, here are the steps to take to facilitate the transaction and maximize the sale price.
Generally speaking, the larger the agency, the more you will likely need to do to prepare for the sale. Conversely, if you have a small agency with only a million or a few million dollars in gross sales, you can probably stop after the first three steps below.
• First and foremost, every agency owner should have accurate and clear income statements (also known as profit and loss or P&L statements) and balance sheets, collectively referred to as “financial statements”. Unless you have a large agency (i.e. over $10 million), you don’t need it to be prepared by a CPA.
• Second, you need to familiarize yourself with your financial statements so you can answer questions from potential buyers. Nothing is more off-putting than salespeople who can’t answer basic questions like “What’s your mix of cruises versus hotel sales?” or “What are the long-term liabilities on your balance sheet?”
Fortunately, many if not most travel agencies use the Trams accounting system, which is designed specifically for retail agencies and produces financial statements in formats that are fairly easy to understand and familiar to buyers in the industry.
• Third, make sure you maximize your revenue by choosing preferred vendors who pay the highest commissions. Join a hospitality agency or use a branch appointment from a large agency that has at least some airline commissions as well as deals from suppliers that offer well over 10% off cruises, tours, and packages all-in.
• Fourth, try to place your most important corporate groups or accounts under written contracts. This will make your business more attractive to buyers, as accounts under contract are more likely to remain in place, even if contracts give accounts the right to terminate.
• Fifth, refrain from signing new long-term contracts with sellers or landlords. If you have Saber and sign a new five-year contract today, you’re probably turning off almost every Travelport or Amadeus user from wanting to consider buying your agency.
• Sixth, cut all non-essential staff and other expenses so you can show a high profit margin. This is often the hardest step to take, as many agencies have loyal senior executives, but they may not be contributing to your bottom line.
• Seventh, if you have a larger agency, train or recruit someone who can replace you in case something bad happens to you or you want to retire soon after the sale.