So, you think you might want to sell your agency. Easy, right? Call up the local newspaper and take out a classified, or maybe post on Craigslist, right? If it were only that easy. With thousands of sales and mergers under my belt, I can tell you that there is a solid market for all types of agencies with all ranges of sales. But, there are three key points you need to consider before you sell your agency. If you are looking to get the best deal possible, make sure you are ready for the process—and it is a process.
PREPARE YOUR AGENCY FOR SALE
- Have 3 years of CPA generated monthly financials ready for buyers to review
- Avoid signing any long-term contracts prior to sale, i.e. GDS, location leases, phone system, copier, etc.
- Keep a detailed itemized list of ALL personal non-recurring expenses that are run through your agency (car, meals, travel, cell phones, entertainment, dues, membership, etc.)
- Hire a Travel Industry specialty lawyer to make sure you are protected
- Have an employee policy/procedures manual to present to the buyers as packaging helps increase value
- Keep your emotions in check, “head out of heart.” I know it’s “your baby,” but it’s time to let it go
- Consider the timing. The risk of selling too early pales in comparison to the risk of selling too late
PRICE YOUR AGENCY APPROPRIATELY
Agency values today are favorable to sellers as supply and demand 101 is in play. In the US, there are approximately 10,000 agency owners-down from 35,000 in the early 1990’s. The herd has been thinned, and we are currently in a sellers’ market. Break-even type shops are receiving 45% of annual gross profit while profitable shops are receiving 2-5 times EBITDA. Of course there are some variables in every transaction, and a solid business broker and your attorney can help you factor those into the equation.
FINDING THE RIGHT BUYER
Finding a buyer must be done in a confidential manner. An agency known to be for sale is worth much less than a discreetly handled closing transaction. General business brokers (brokers that represent multiple industries) know about 1% of about 100 industries and add no value. The most common costly error we see are the “do it yourself “crowd who limit their buying pool to their own consortium, thus losing out on over 80% of buyers. Selling a business is not like selling a house: you cannot post a “For Sale” sign out front, employees and clients would scatter quickly. Another point to consider is that buyers from outside the industry will tend to pay cash for an agency; insiders will work off an earn-out. Request references from any potential buyers and call them from a phone not associated with your office (remember the part about keeping it confidential). Never overlook your travel business broker. He or she likely has an equally large list of buyers as sellers.
The one thing that you need not be concerned with is any stigma for selling an agency. All stigmas are perceived. Agencies today range from barely able to keep the doors open to wildly profitable beyond your most grandiose dreams. They are sold for a myriad of reasons with age (retirement) being the top reason. The next most common reasons include health, death, birth, divorce, marriage, spouse transfer, and accidents. Buyers understand—life happens.
Innovative Travel Acquisitions, Inc. president Bob Sweeney and staff have completed more than 600 acquisitions of tour and travel related businesses since their inception in 1991. Bob has been in the brokerage industry for 21 years. He is a proud member of ASTA, NTA and many other known industry affiliations. Known as “the Matchmakers for the Travel and Tour Industry” ITA is available to answer any questions you may have by contacting them via phone 800-619-0185 or by sending an e-mail to admin@tvlacq.com.
