As a continued flat market hits the cash flow and profitability of travel companies, more travel agency owners and small tour operators are looking to sell.
While there is a wide range of sellers, there are not the number of buyers in the market that boosted valuations up until 2008.
The difficulty in obtaining bank loans has impacted on potential trade purchasers leaving fewer deals achieving the expectations of owner managers.
Small agencies and operators can be particularly vulnerable. Margins are increasingly being squeezed and the lack of volume is pushing profits downwards.
To gain a good sale price, a business needs a unique feature such as a destination specialism or niche activity.
Unless you need to sell your business now, then don’t. You may want to delay selling and look to achieve a better return once the economy recovers.
Refresh your business plan, looking closely at your costs, and consider how best to maintain profits.
For most agents, increased volumes are the only effective way of building profits, whereas a specialist can grow margins through destination mix and driving supplier prices down.
If you are still thinking of selling, you need to have a clear and realistic exit strategy. Groom your business to ensure you can cash in on your hard work.
Take the following steps:
- Develop a strong management team to make it easier for another company to take over your trading.
- Review your profit recognition policies to ensure they maximise reported results when compared to your competitors.
- Ensure your staff are well motivated with incentives to boost sales and profitability.
- Don’t scrimp on capital expenditure – buyers will want a well-run, efficient, office. But don’t overspend: you might not get your investment back.
- Keep on top of all financial, tax and legal matters.
- Strive to achieve a strong sales record and growth prospects to attract more interest and enhance the potential value.
This article was originally published in the Business Advice section of Travelweekly.co.uk