How I sold my travel agency when no one wanted to buy it
- Wen-Wen Lam, now a partner at Gradiant Ventures, sold his travel agency during the COVID-19 pandemic.
- The industry completely disappeared, and she began by making a list of everyone who would ever consider buying.
- She describes her whole process and says it took about 6 months from start to finish.
I sold my travel agency, NexTravel, at the height of the pandemic in 2020. It was the hardest thing I have ever done in my life.
We’ve seen a huge drop in revenue: in 2019 we had 100 million annualized trips, then in 2020 we saw a 90% drop to around 10 million.
This is the DIY guide on how to sell a business when you’re strapped for cash, your industry is gone overnight, and no one wants to buy you. I thought I would outline the process and add some tips so other founders can avoid making the same mistakes.
Note, the book Magic Box Paradigm: A Framework for Startup Acquisitions by Ezra Roizen explores some of these topics. I have broken my own process down into steps and the tactics I describe can be used in any type of sale.
- Make a list of everyone who might want to consider buying your business. For us, we have listed all the travel agencies, any type of business that we have partnered with – ERP, Expense, ATS, etc. When we were done, we had a list of over 70 companies, from large travel companies to very long-standing companies like Zoom.
- Prioritize who you would have the best chance of success with. Start with the people with whom you have already formed a relationship. In our case, we made a spreadsheet with the following criteria:
P1– Likely to buy with an existing relationship
P2– Fairly likely to buy, existing relationship
P3– Could happen, no contact
P4– Long shot
We sent personalized emails to players we knew, and we used it model for the cold approach. Make sure that for each scenario you have an idea of how you are positioning the sale. The question you need to answer is why your business, and why now?
- Exploration of opportunities. In addition to the awareness for the acquisition, I also scheduled meetings with people I knew just to brainstorm ideas on what to do or opportunities during this really difficult time. Almost everyone I reached out to agreed to meet them, and one of those companies ended up buying us.
I also timed this over a two month period. This is very important to do as it creates time pressure for responses – you have to create a limited time frame to complete a transaction. The best way to think about it is, can you run the business sensibly beyond this period? Set your parameters to what is reasonable for you – the answer is often not black or white here. If the answer is no, then the opportunity cost of continuing beyond the time zone is likely to be extremely high.
- Investor management. I spent a fair amount of time managing the expectations of my main investors. I kept them updated every step of the way and we had bi-weekly, and sometimes even weekly, board meetings in the weeks leading up to and during the acquisition process. During these meetings, I communicated the following in ALL meetings:
a) KPI / state of the company
b) state of the industry
c) all big updates (ACT / condition sheets on the table, buyers we were talking to)
d) scenarios and potential outcomes
The key outcome you want here is for your investors to support your decision so that you can come to a mutually acceptable conclusion. I also had slides for each meeting detailing all of the major decision points.
LAW and termsheets
“If you only have one buyer, you don’t have a deal.” -Bill Phelps, CEO of Wetzel’s Pretzels, Blaze Pizza and Dave’s Hot Chicken.
The tricky thing about this is that most people in this situation have a little time pressure and very little time to figure out what to do. Here’s a breakdown of how to run the process, assuming you don’t have a standing schedule (which we didn’t have back then).
- Obtain a letter of intent. This creates urgency for all other buyers, even if the LOI is not on terms that you (or your investors) are happy with. I am a big fan of Xenon who sent us our first letter of intent. While the terms aren’t what venture capitalists are looking for (the existing team keeps the product, investors don’t get any feedback), their process was as painless as it gets for an extremely difficult situation. They were professional, to the point, and did exactly what they said they were going to do within a set time frame. By the time of the sale it was clear that it was time to leave the business – if we had tried to keep it going, we would have done ourselves and our customers a disservice. In the previous 12 months, I had made 3 rounds of layoffs, watched the industry evaporate and had a hard time retaining the team.
- Define the purchase period and shop the LOI. I went back to everyone I had spoken to in the past and also met new players. It also prompted players who were already in the process to be decisive and put them on a timeline. At this point, we also sent out cold emails saying, “We have a letter of intent from someone in your space. We have contacted all viable buyers. In total, we contacted more than 70 companies. Document it all.
- Decide on a path and don’t look back. In our case, it was about taking the offer that suits the company as a whole. My investors lobbied for Travelperk as a buyer, while Xenon would have been the best fit for me due to the quick release / ads, and we had a few acquisition opportunities that would have been the best for the team. In the end, we decided to do the best thing for everyone involved.
- Make sure the condition sheet has all of the conditions you need to have before signing. One of the biggest mistakes we made was rushing to sign the condition sheet. (I was ending the shopping period on the LOI, and so in our case it was necessary, but I wouldn’t do it again. If I could go back in time, I would have signed the other LOI as it mitigated the risk of non-agreement being done at all.)
Two things to watch out for in advance would be the amount of due diligence and the exclusivity period. In addition, it is generally in the seller’s best interest to have a short shopping period, so that the buyer has the urgency to do their due diligence and close the deal. I would recommend a maximum of 30-60 no-shop days (and eliminate no-store in its entirety if possible).
- Hire a good lawyer. Negotiate the terms beforehand. We engaged Litwin Law and requested a lump sum due to the nature of the transaction. They were absolutely brilliant.
To note: It’s normal for buyers and sellers to have a lack of alignment. What will make the deal successful is whether there is enough alignment between the two parties to make the deal.
- Preparation of the Data Room. You should start this well in advance, as it takes a long time. All buyers will need a basic (and often more comprehensive) item checklist. Here is a short list of things you will need to provide since starting the business:
– All documents relating to the company (Creation, Cap-table)
– Customer contracts
– Company data
– Employment contracts PIIA contracts dating back to the creation of the company
– A bunch of other things that you completely forgot to exist
- Agree in advance on the amount of due diligence that will occur. For small business, you can and should negotiate this: you can limit due diligence, especially if you are on a schedule and have multiple offers.
Get a full understanding of the process and what is needed. As this was the first substantial acquisition from both sides, I think we both weren’t sure what to expect.
I would have liked to spend time explaining step by step with the lawyers what had to happen in our specific case. There were a lot of things I didn’t know about, like the difference between the mechanics of an asset sale versus a reverse merger versus an acquisition.
On the Friday before the close both sides thought we had done everything when we were actually missing a pretty critical piece to close (which would not have been necessary in other scenarios).
The people part
This probably applies to more than just acquisitions, but these guidelines are important.
- Work with people you love and trust to guide you through the process. Ask for help. I contacted my investors to ask if they knew anyone. I also leaned on friends who were going through the same thing at the same time and asked for their advice.
- Try to prepare all stakeholders as much as possible for the closing. We had a ton of angel investors that I didn’t do a great job of preparing, mainly because I wasn’t sure the deal was going to close for a few days. If I could go back in time, I would have communicated with them more frequently and more effectively throughout the life of the business and the acquisition process.
- Hope for the best, but expect the worst. People behave in all kinds of strange ways in these kinds of circumstances. Try to communicate the result as much as possible to everyone involved. As such, protect the business and yourself as much as possible, document the entire process, and take out D&O insurance.
The process from start to finish took us about 6 months, not counting the relationships and partnerships we had spent the past few years building. It is a long and intense process and it is normal to have a lot of feelings, both bad and good, when selling.
In the end, I was exhausted and slept for several days after working around the block for several weeks. I was especially happy that it was over. I especially want to thank Pete Van Dorn, Dino Zaharopolous, Chris Yeah, Ethan Bernstein, Frost Li, and Diego Saez Gil for their support during the process.
It has been an incredibly difficult time for me so I hope I can pay it forward and be a resource for others. Finally, I have found that psychologically the best way to approach selling your business is to think of it as something you just have to do. As a founder, selling a business is naturally an emotional moment. You are letting go of something that has been a big part of your time, life, and identity for a while, and it’s healthy to recognize the loss.
Wen-Wen is a partner at Gradient Ventures. She was previously CEO and co-founder of NexTravel, a corporate travel solution that served clients like Lyft, Twilio, and Stripe.