(Second in a three-part series on smart succession plans. For part one, see A Tale of Three Succession Plans | Travel Research Online. Stay tuned for Part 3.)
When you’ve been in the travel business all your life and you’re getting tired of the 60-hour weeks, it’s tempting to just throw up your hands, sell your client list to a friend and say “enough.” But many travel advisors are hoping to do more than that—to keep some cash flow coming in, to leave a legacy for their children, to ensure a smooth transition for their clients and employees. Their goal is to carefully choose the perfect successor and plot a path forward together, slowly and over time.
Some advisors are taking their succession planning beyond just what to do with the business. After watching her own mother fall prey to Alzheimer’s, Vicki Everhart has spent years lining things up for her heirs. And for heaven’s sake, says Margie Lenau, get a CRM to store your data, and a file to keep all your important information—your passwords, your CLIA and frequent flyer numbers, contact information for your financial advisor and lawyer and CPA. “If you are in sales, your value is your book of business—and your book is in your CRM,” she says.
In Grand Traverse, MI, John Schmitt is an old hand at valuing agencies—and an expert at downsizing. After 40 years in the business, he started selling off his six storefront locations and letting go of his 20 employees at the remaining one, Grand Traverse Travel, an Affluent Traveler Collection affiliate. Now his business is luxury only and appointment only, and his staff comprises just himself, his daughter and a bookkeeper.
Like a surprising number of travel advisors with whom I have spoken lately, Schmitt credits Covid with holding a blessing in disguise. When three of his advisors left, he “just rolled my sleeves up and literally did the work of three people—and that really improved my bottom line. I got my asking price for each agency I sold and here’s why: When buyers look at an agency they are looking at the profit. It’s always a multiple of the profit, typically 1.5 to 3 times the profit over three to five years. So if you have $150,000 profit for three years, your value would be $225,000 to $450,000.”
Also helping his bottom line, he found, was another lesson he learned during Covid: be careful when committing to long-term contracts like leases on equipment and storefronts. When it comes time to sell, buyers may want to move the agency or shut it down, and those commitments are an obstacle.
Schmitt recommends using a broker when you want to sell. He used Innovative Acquisitions, and feels “I got more than I would have otherwise, so it was money well spent.” He chose a buyer they recommended for a number of reasons: “he had 10 years’ experience in the industry, he wanted to grow, his personality was the right model, and he’s very energetic and puts in a lot of hours, so I was confident the business would be sustainable. He had purchased two other agencies and I talked to both owners to make sure he was the real deal.” If you are to get paid out over time, as he did, Schmitt notes, “you want to make sure they have the brains to keep the doors open.”
Over the next two or three years he will focus on teaching his daughter Abby Schimke, who has been working with him for 10 years, how to run the business, how to understand P&Ls and taxes and the administrative stuff, and hopefully find another person or two to work with her. In the luxury niche, “staffing is the most difficult thing and it is no fun,” he says. “But I will transition out only if we find the right person.”
In the meantime, Schimke does most of the heavy lifting while he services just a handful of clients, “doing the fun stuff, the more challenging higher-end type of vacations.”
The Rainmaker Model
That’s what Sandy Lipkowitz is doing these days as well. She just merged her agency with Sterling Journeys, where she will remain as an independent contractor (IC) while she sunsets her clients and slowly moves them over.
Lipkowitz began her succession plan looking for a bright young person in the industry, maybe someone coming out of the Gifted Travel Network MBA program, to bring in and eventually become a sweat equity partner, she says. But post-Covid she has been too busy to interview and hire and mentor someone. Her Covid silver lining came when her friend in the GTN top-producer network Lise-Marie Wertanzl was looking for an IC with a book of business to help her build her business, and at the same time brought in her daughter Sterling. “So I’m looking for freedom and she’s looking for more sales. And I thought this is perfect, a top producing person and now a second generation to hand my business off to. So now I have this fabulous team that frees me to do what I want to do, with two successors in line.”
The two agencies merged in June; Lipkowitz is keeping existing bookings that haven’t traveled or been paid, and everything that was booked but not yet traveled, plus all new bookings, belong to Sterling Journeys. They considered her becoming an employee, but her CPA noted that the IRS does not allow employees to deduct travel expenses, so she kept her S Corp. status and became an IC. All my bookkeeping continues as is, and all she has to do is add a DBA, she notes.
Lipkowitz is bringing along her admin and her air specialist, and for now is still handling her existing clients, though she brings Lise-Marie into client meetings and introduces her as the business development manager. “My goal is to just have the initial meetings, maybe start the itinerary, and then have Sterling take it over.”
Tony Logan at Virtuoso once said “travel advisors are the product, not the destination,” Lipkowitz says. “It’s us the client is buying, not Italy—and my clients want a Sandy Trip. This way over time they will know everybody. I will continue to get 100% commissions on my clients, and then depending on how much work we’re each doing we’ll decide what the split will be. I’m not in this to pay every single bill I have, I just want some extra income to pay for all the travel I want to do, and I want my travel credentials so I can bring in the big groups and then let Sterling run with them. I want to represent Sterling – to be a rainmaker. That’s where my skills are.”
Anne Scully, too, is putting her rainmaking skills to good use. In fact, one could say she’s focused on the “success” part of “succession.”
Realizing that she and many of her peers were aging out of the business, Scully gave up selling and joined Embark Beyond in New York as a partner. Her role is to mentor new advisors—and give them any business she brings in.
“Rainmakers can always get new business,” she says. “But I’m also a trainer, and what I really love is to teach and to support advisors. So I said let’s hire people and train them and mentor them, and every time I get more business I will shift it to them and then go out and get more business.”
Among her trainees are three PhDs, a scientist and someone who’s worked at the White House, whom she will begin training in September. Some of her advisees have sold $1 million or more in their first year. But most important to Sculley, “when I leave this industry, I’ll leave a legacy of helping others.”
Cheryl’s 40-year career in journalism is bookended by roles in the travel industry, including Executive Editor of Business Travel News in the 1990s, and recently, Editor in Chief of Travel Market Report and admin of Cheryl Rosen’s Group for Travel Professionals, a news and support group on Facebook. As an independent contractor since retiring from the 9-to-5 to travel more, she has written regular articles about the life and business of travel agents for Luxury Travel Advisor, Travel Agent, and Insider Travel Report. She also writes and edits for professional publications in the financial services, business, and technology sectors.
