Every travel advisor should have a succession plan, whether they are an agency owner or an independent contractor. Without one, your business and all the years of hard work you put into it could come to a disconcerting end, and even leave your heirs in the lurch. Let’s take a look at the whys and hows of this critical business planning process.
“Many agents think that the idea of succession planning is primarily for the large agency owners, those with multiple agents and the need to care for ICs/agents. However, I urge all of us solo agency owners out there to think about the big picture,” said Suzy Schreiner, owner of Azure Blue Vacations, LLC. “Life changes on a dime - all we have to do is read the news and know that we do not have the guarantee that we will be able to retire at a ripe ol' age. We must be responsible business owners, whether we are an agency of one or 101.
“Think about your clients. You do not have to think of the extreme idea of 'what if you die,' but rather what would happen to your clients and their trips if someone crashed into your car and you were hospitalized? Or if you are diagnosed with a serious illness? Start with the idea of maintaining a viable business if you are not available, and see how that leads you to the future succession of your business.”
Mark Pestronk, P.C., an attorney who specializes in the travel industry, noted why a succession plan is so important: “Baby Boomers want to retire, and others could die or be disabled at any time. ICs need to have succession planning for the same reasons. In fact, succession planning is more important for ICs because they need to designate someone to take over on short notice.”
What exactly is a succession plan?
Pestronk explained that a succession plan can be any of four things: 1) a plan to structure your business so that it will sell when you want to sell, and at the highest price; 2) a plan to leave the business to your children; 3) a plan to give or sell the business to your employees; or 4) a plan to expand through acquisitions and recruitment of executive talent.
It most often involves either passing ownership of the business to descendants or selling the business in order to pull out its assets for personal retirement or perhaps to pass them along.
What can happen if I don’t have one?
The consequences of not having a succession plan can be far-reaching. “You could leave employees with no way to keep their jobs. You could leave your clients with no way to finish their travel planning. And you could leave your heirs with a business in chaos,” said Pestronk.
Paul Ruden, an attorney and columnist for Travel Market Report who writes regularly about legal concerns affecting travel advisors, told this story: “The worst case was a relatively young man, let’s call him Andrew, who called me in a panic. Andrew’s father had unexpectedly passed away and left the agency business to him. The business was a sole proprietorship, lacking any formal corporate structure to separate his father’s personal assets from the business. Within days of his father’s death, a cruise line (which shall remain nameless) contacted Andrew to inform him that a payment deadline had been missed and that a huge amount of penalty money was due immediately. Andrew knew nothing of the business and was led to believe that, as the ‘new owner,’ he would have to pay the penalty himself.”
How do I get started with succession planning?
Schreiner described her process: “There were two key things that I had to plan for: 1) Who will care for my clients should something happen to me (illness, death, etc.); and 2) How could I be sure that my clients and business will be cared for with the same quality of service?
“Originally, I figured that I would plan in a more traditional way by bringing in agents to train. However, I found the best way for me to care for my clients and my business was to think of it as a successful family business. I wanted to build something that I could pass down to my children.
Then, she said: “I made an outline of what it was that I and my agency needed, followed by the skills/training required. I sat down with my daughters and talked about the responsibilities of the business outside of simply the sales aspect, and made a plan for training and education. Both of my daughters grew up around the travel business, so they are not novices to its pros and cons. I have been advising them on the best classes to take to help them with owning a business, caring for customers, and education in travel. Additionally, they are learning on the job by taking care of data entry and commission tracking as a part-time job while in school.”
As for choosing a successor, Pestronk offered that passing the business along to an employee hardly ever works out, so that would best be a last choice. And “if you want your business to run successfully after you leave, find someone whose tolerance for risk is equal to yours.”
Overall, he explained, the best way to start preparing a succession plan is to decide which of the four kinds of plans you want to pursue. Then, determine the dollar value of your business; or, for the fourth type of plan, determine the value of a potential seller.
When should I set up my plan?
Experts have traditionally suggested that business owners start thinking about succession planning 10 to 20 years before it’s time to retire. But with the uncertainty in today’s world, it’s just smart business to get a succession plan in place as early as possible.
One of the hardest parts is taking the first step … getting out of your very busy, day-to-day tasks of being a travel advisor and a business owner, in order to look at the big picture.
The intricacies of succession planning can, in no way, be covered in this brief article. Be sure to contact an attorney in your state to assist you in building a plan to protect the legacy of your travel business.
And finally, Pestronk said, “Don't just close your successful business, no matter how small. It always pays to have it continue under a successor.”
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