Succession Planning: Dos & Don’ts For Family-Owned Travel Agencies
by Cheryl Rosen /A strengthened economy and improved travel sales have many travel agency owners thinking about retiring. In family-owned businesses, though, succession planning is a complicated process, and every family has to make its own decisions about what’s best for everyone.
The children of the agency’s owner may seem the natural choice to take over. But not every child is willing—or able—to grab the baton.
“Passing a business down to kids who are not ready to take over is a disaster—especially if you are planning to have the business pay you back,” said Norm Bluth, an attorney in the Travel Group practice at the law firm of McBreen & Kopko in Jericho, N.Y.
“For it to work, the kids have to be ready, they have to really want it, and they have to have the skill set and the drive.”
Family before ego
One offspring of an agency owner who was ready and able was Bryan Leibman. Leibman is the eldest child of Frosch chairman Richard Leibman.
Bryan joined Frosch in 1998 when his father was just 54 years old. Today Bryan is president and CEO of the New York and Houston-based travel management company, which the Leibman family has owned since 1977.
“My dad did something extraordinary,” Leibman said. “He had no ego; he just wanted to make sure the family would be looked after.
“So when he saw that I had the aptitude, the interest, and the ability, he had the confidence to make me president. And that decision really allowed the company to be successful.”
Frosch has expanded an average 30% annually since Bryan took the reins, and last year the firm managed more than $1.4 billion in travel, according to its website.
Choosing one leader
Doing what was best for the family as a whole was paramount in his father’s mind, Bryan said. The elder Leibman was determined to avoid family feuds by choosing one leader and by making the decision early.
“It obviously has to be earned and merited, but if you have the right person, it’s best that the business have one clear leader, so everyone walks to the same beat,” Leibman said.
“You’re lucky if you can identify who that is sooner rather than later, and get the right leadership for the organization set, so everyone can see the plan.”
When to start planning
Experts suggest that owners begin thinking about succession planning 10 to 20 years before the founder is ready to retire.
Bluth, the attorney, suggested agency owners start early to consider details such as:
- How do you protect your assets?
- How will your money come in—in cash or into a trust?
- What’s the best way to deal with Medicaid’s five-year look-back for the transfer of assets?
“To me, the No. 1 thing is always tax,” he said.
For a first step, talk to a team that includes an accountant and a trust and estate expert, Bluth advised.
A family decision
At Frosch, though, while estate planning and legal advice was “very helpful,” it came down to the family sitting down and deciding together, Leibman said.
More than anything else, Leibman’s parents wanted to avoid creating a potential for conflict among the children. So when Bryan’s younger sister wanted to join the business, “we set it up so we don’t clash,” Leibman said.
Today Lara Leibman serves as Frosch’s executive vice president.
The growth imperative
The 21st century business climate also affects succession planning. Where once upon a time an agency owner could borrow against the business and pull money out to live on, in today’s world a company that does not grow starts to die, Bluth said.
“By the time you are 65 the business has changed so much—the technology, the availability of capital, the whole nature of the travel industry—that you have to reinvent yourself; you have to push the envelope.”
That means that in addition to finding a way to keep “the brothers and sisters somewhat happy,” agency owners also have to “put the company in a position to succeed,” Bluth said.
One travel agency client brought in a private investor who knew the business, under the condition that he keep the kids on the payroll and give them equity. Today, the company is flourishing.
Hopes for the future
Every travel agency owner should be talking with legal and financial advisors to lay the groundwork for a smooth shift, including by preparing for the unforeseen.
But that’s a discussion that many small family-owned agencies have not yet had.
“My husband and I do talk about retiring; we talk about how we don’t want to sell the business and will let the kids take over,” said Carol McParland, the 53-year-old co-owner of Superior Travel in Baldwin, N.Y.
McParland said she “definitely hopes” at least one of her children will come into the business, and “it would be great if they’d both take it over.” But, she added, “we haven’t really thought about the details of it.”
Back at Frosch, Bryan Leibman hasn’t mapped out his succession plan either. But, like so many parents who are business owners, he hopes his four children will one day find a place in the business he helped build.
“It would be fantastic if the circumstances allow me to follow my father’s plan,” he said.