In my last column, I discussed six ways to kill a deal if you were selling your agency. But what happens when the shoe is on the other foot? What if you are the buyer? As the industry changes, we are seeing more and more acquisitions and mergers that create a larger agency with more buying power and influence in the industry. You may be very content with your single location agency right now, but there may be some very compelling reasons to consider expanding.
Access to New Clients. Face it, your client base is not growing like it was twenty years ago; it likely may be receding. With a reduced client base, you run the risk of reduced bookings and lowered commissions. The bottom line: you are not making the money you should. With an acquisition, you now have access to a whole fresh set of clients. You have the ability to introduce one set to the way you work and start to mold them into evangelists for your agency.
Access to Specialized Skills. Many single location agencies house the jack-of-all-trades type agent: Cruise. Air. Leisure. FIT. Corporate. Packaged. You name it, we’ll sell it. And there is a market for that. With a strategic acquisition, you may have the opportunity to gain employees or contractors with a specialized skillset. They may be online experts. They may have a different sales technique. They may be versed in that new CRM that you were considering.
Access to new distribution channels. As a single location, you barely registered on the radar of some suppliers. With an acquisition, you may inherit enough business to become a big blip. Or, you may inherit business with a whole different (perhaps better) group of suppliers.
Greater Purchasing power. Most suppliers offer a tiered commission structure. With the increased growth from an acquisition, you will likely have access to higher base commissions and higher overrides. While this is assuredly good for your bottom line, it also places you in a great place to attract top-of-the-line agents who are seeking to increase their own bottom line!
Eliminate competition. Face it: the less competition for you the better. That’s an easy one!
Growth to receive higher multiple when selling. We have been talking about acquiring an agency, so why bring in selling? You always need to be thinking ahead. Are you approaching retirement age in the next decade? Are there health concerns? Maybe you want to get out and just travel as a traveler for a while. All smart business owners will have an exit (and succession) strategy. Key acquisitions can aid that strategy by increasing the value of the multiples that are used when calculating the value of an agency. All agencies are for sale—for the right price.
As you can see, there are many reasons for considering an acquisition to grow your business. Certainly not all of these will apply to you, but hopefully they get your thought process going. It may not be now; it may not be soon; but eventually your agency will be sold and the smart business owner will do what they can to maximize the value of one of their largest assets!
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 email@example.com.