Planning to Sell Your Agency? Don’t Wait Too Long
by Norman Bluth, Esq. /The following is a guest column.
As the saying goes, "A goal without a plan is a wish." This saying could not be more true than in the context of succession planning by travel agency owners.
And it’s especially relevant for agency owners who intend to wait another five or 10 years before selling.
Questions to consider
If you own a travel company, whether a retail shop on main street or an OTA, you must plan for who will run or own the company when you leave. Is it your son, daughter or relative?
If not them, then who? Maybe a travel company you work with or compete against (a strategic buyer)? Or a person or company outside the travel industry looking to buy into the industry?
These are just a few of the questions business owners must ask themselves in developing a succession plan.
The baby boomer factor
But if you are thinking of selling your travel company in the next five to 10 years, there are a few exceptional factors that you should take note of.
The greatest fact to consider in exiting a business in the near term is the enormous number of baby boomers who are set to retire over the next five to 10 years and the impact this will have on owners looking to exit their business during this period.
Some statistics to appreciate:
• Approximately 40% of family-owned businesses in the U.S. are expected to have a leadership change in the next five years due to baby boomer retirements.
• An estimated 65% to 75% of small businesses in the U.S. (some 10 million) will likely hang up a for sale sign during the next 10 years, again due in large part to baby boomer retirements.
• The oldest members of the nation’s baby boomer generation started turning 65 on Jan. 1, 2011, at a rate of 10,000 people per day. This trend that will last for the next 19 years.
These baby boomer statistics alone should compel a business owner to revisit his or her exit strategy.
Glut on the market
The laws of supply and demand still very much apply, and baby boomer retirements will result in a glut of businesses on the market. So, timing is critical.
Other, more traditional factors also indicate that it is time to reconsider the timing of your exit. To name three:
1. The overall economy continues to grow.
2. There is plenty of capital waiting to be invested. Private equity firms still have approximately $350 billion to invest, and strategic buyers have roughly $2 trillion in cash.
3. The costs and complexity of doing business today – including forever-changing technology and foreign, federal, state and local regulations – are putting a lot of pressure on smaller companies, including small travel companies.
Recommendations
Based on these factors (and others not covered here), I strongly recommend that travel agency owners revisit their exit strategy.
I also strongly recommend that you do so with a team.
The team should include your financial planner, accountant, legal counsel and select members of the company. With this team in place, an owner should have all the information and advice she or he needs to make the right decision.
Let's plan – not wish!
Norman Bluth is an attorney with the Travel Group of McBreen & Kopko, a multi-state law firm. The Travel Group is a team of lawyers with extensive legal and business experience in the travel industry.