Recently, a friend of mine retired from the Federal government. He was 57. To me, retirement always seemed so far away; and now I realize that it could be right around the corner. Maybe. Like many of you, I do not see myself being able to kick back, sleep in, and spend my days on the couch anytime soon. But there will come a day when it is inevitable. Are you ready for it?
Another friend is going through a “forced retirement.” He owns a cigar shop and the new Federal law bumping the age to buy tobacco to 21 has given him a 35% drop in sales—he caters to the 18-21 crowd of two local colleges. He is closing his shop and the future looks uncertain. What would you do?
These are two very different scenarios to be sure, but there are some common elements and considerations.
First off, never simply close. You have worked hard to establish what you have, and it has provided a living (or a part time income) for you for a long time. There is value in that. There may not be any value in the filing cabinet or laptop, but your clients are indeed valuable and a marketable asset. There is an agency (or an agent) that is anxious to have your clients. And there is nothing inherently wrong with selling your access to that client. Of course, the client ultimately decides if he or she is going to stay with a new travel planner; but it is an asset not to be overlooked. Who wants your clients? It may be the guy who just entered the industry and is trying to establish himself. It may be the agency across town that has been struggling to get to a higher level of commissions if they could just get a few more clients. It could be the big online booking farm that just wants another e-mail address. Never assume your client list is not valuable. It is one of the MOST valuable assets you own.
Other considerations before executing your exit strategy. What are your liabilities. You need to make sure you have the cash on hand to handle them. Do you owe any employees any earned PTO or vacations days? What is the cost to get out of a lease? GDS agreement? Any long-term agreements for software rental. Did any suppliers offer a bonus based on continued business? What are the costs of closing or transferring the business—legal, accounting, advertising, etc.
Our industry is getting older and exit strategies are bound to come up in the coming years for you. If this is a consideration, begin the investigation and preparations now. There are a lot of moving parts that need to come together for a successful transition. Over the years, I have bought and sold several agencies and from experience, the ones with intense, advance preparation were a dream. The others–an abject nightmare.
The people you need to enlist include your financial planner, an attorney, and an accountant. And I would also strongly recommend that you look to two other professionals to make sure you are getting the most from your hard work—an attorney that has specialized in travel agencies (there are about half a dozen across the country), and a business broker that has experience in the travel industry—again, there are about half a dozen there as well. The attorney knows the ins and outs and the hidden pitfalls of the transaction. He or she will be expensive, but worth it. The business broker will know the value of your business and more importantly, will have access to those who may be looking to acquire it. Again, his or her expertise comes at a cost, but generally that will be covered by an acquiring party.
Think any exit strategy through completely. Realize that while your business is indeed providing a living to you and any employees, there is an additional significant value in what you have built.