Travel Agency Worth - Part 3 (Business History and Your Dashboard)
Let's talk about business history and your dashboard as the last of four key items in determining the value of your travel agency - operations/resource management, market position/agency image, financial management and business history.*
Q: How long have you been in business?
A: Buyers will pay for experience and agency posture in the community.
Q: What is your business mix - percentage of commercial, retail and group?
A: Each buyer will assign a different importance to each component. This ratio could have a material impact.
Q: What is your destination/product mix - domestic vs. international in each business mix category?
A: Buyers will find agencies with higher-than-average transactions (international transactions) more attractive.
Q: What are your total gross sales, returns, net sales and commission revenues?
A: Ticket returns and voids should not exceed 15%.
Q: What is your productivity per agent and per employee? Productivity is defined as sales, net return divided by agents or employees, respectively.
A: Target Acceptable Ratios: 3X revenue/salary including benefits or 2.5X without benefits.
Q: What percentage of your total expenses is spent on employee-related costs?
A: Approximately 50% to 60% is normal. If you are above these parameters, there is a problem in your expense area.
Q: What percentage of your total business comes from a single customer, or, asked differently, is any one of your customers contributing more than 10% of your sales?
A: If you depend on one or a few accounts for a large percentage of your revenues, you are more vulnerable than a well-balanced agency, and thus you are a greater purchase risk.
Q: Do you have a clean historic and present bill of health with the ARC, IATAN, any other conferences and ASTA?
A: If not, you should have well-documented explanations.
Q: Do you have a business plan?
A: 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.
Have you monitored for at least the past twelve months:
- How much time is spent per reservation per agent?
- How many in/out phone calls per ticket?
- What is your percentage of hotel bookings versus air bookings?
- What percentage of reservations are changed?
- How much does it cost to produce a ticket?
- How much annual dollar volume is handled per agent?
- How many tickets are produced per agent per hour?
Do you really present a credible picture to a potential 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.
Travel business consultants such as Travel Business CPR will review and prepare your operation for sale on your behalf.
* See article on operations/resource management in http://ezinearticles.com/?Travel-Agency-Worth&id=2904410
Negotiation - Agreement If you are negotiating a buyer/vendor agreement with a familiar partner,...