Shihan Weekly Travel

I agree with the experts that a shakeout is taking place due to the current economic downturn. If you have not positioned your agency at this time either to be a part of the larger travel organizations or to become a “boutique,” then you might want to start thinking about your strategies for the future. Your key starting point is determining your agency’s net worth.

There are four critical areas that comprise an adequate and accurate agency valuation plan -

- operations/resource management,
- market position/agency image,
- financial management, and
- business history

Future articles will include financial management, market position/agency image, and business history. Today let’s consider -

Operations and Resource Management

Automation – Computers and Telephones

As a general rule, the more automated you are, the higher your productivity per employee and consequently the higher your profitability. Additionally, more time for agents to have face-to-face or voice-to-voice contact with customers means better service. Bear in mind that if you’ve been computerized for at least three full years, you are over the start up pains and the equipment is part of your routine.

What computerization was to a travel agency five years ago, telephone systems will be for the next five years. Your phone system will make or break you. Chances are if you have an old-fashioned key button system, your productivity is low and your ultimate valuation will reflect that. You should at least have PBX and ACD systems.

Personnel

Regardless of whether a buyer will be managing your business himself or hiring you to stay on as a contract manager, your personnel are the absolute key to success under new ownership. I have seen agencies sold and then watched half the staff leave the next day with their “following” because they were offered a better deal by another agency. The result is usually a bonanza for lawyers and the disintegration of your former business. You can generally avoid such a crisis if your turnover is low, staff experience levels are high, and you have a strong incentive program supplemented by a solid portfolio.

Other Resources

The travel agency business requires an incredible amount of detailed data and consistent, logical operating systems. The question is: Have you been able to maintain an organization that cuts smoothly through all these ancillary materials and procedures? For example:

- the latest work flow changes in your agency;
- staff telephone manners and the way you present your agency to the public;
- your quality control processes before documents go out to the public;
- updating the mailing list; and
- your system to follow up on hotel commissions

And what about your space? Naturally, a buyer will want to see his new business grow. If your space restricts that, or if your lease is about to be renewed at double the cost, any future projections will be impacted and your agency is worth less. Therefore, prior to sale you might want to check with your landlord as to a potential new arrangement with the new owner.

Good management

The common thread in the criteria above is organization. If historically and financially you have done well, but if the key to your success has been your absolute and autocratic management – i.e., all of the company’s records are in your head – obviously, a new owner will not succeed. Therefore, good management not only shows in the results but in the ability to turn the reins over to new management.

Obviously a potential buyer is far more impressed by an organized, well-planned operation in which you can show your original business objectives, the current variances or changes in plan and your rationale behind it.
In all of the criteria above let me stress the most important common element – consistency – as crucial.

Do you really present a credible picture to the buyer? Do you have a dashboard that measures your activities and allows you to make mid-course corrections in the event one of your “instruments” indicates a problem?

Your answers to these questions will help determine your agency’s net worth – and its value in the marketplace.