Mark Pestronk
Q: 2025 turned out to be a record-breaking year for my travel agency, both in terms of sales and profits. Would now be a good time to look to sell the business? If so, I have a series of follow-up questions.
A: The best time to try to sell a travel business is after you've had a highly profitable year. Experienced buyers consider profits to be the most important factor in setting a price for the business.
More precisely, sales prices are generally set at a multiple of recast profits for the most recent 12 months. By "recast profits," I mean net income on your income statement plus expenses for depreciation, amortization, interest, taxes, one-time expenses and personal-type expenses that a much larger agency would not allow a manager of your agency to take.
If you have low or no profits, my advice is to wait a year before looking to sell. During that year, you should do your best to maximize revenue and minimize expenses.
Q: Do buyers pay the purchase price in one lump sum at closing, or do they typically pay in installments?
A: Buyers almost always reserve a portion or even most of the purchase price for installments to be paid monthly, quarterly or annually for one or more years after closing on the sale. Most of the time, the installments are geared to future performance of the agency or the book of business sold.
In general, the larger the seller, the less the sale price is geared to future performance. For deals between the largest agencies and the largest buyers, less than 20% of the purchase price is generally geared to future performance. For the smallest sellers, 80% of the purchase price will probably be geared to future performance.
Q: What other steps should I take to prepare my agency for a sale?
A: First, you should refrain from signing any long-term contracts, as they limit a potential buyer's choices. For example, if you sign a long-term office lease, the buyer may be unable to close your brick-and-mortar location. If you sign a long-term GDS contract before a sale, buyers with other vendors' GDSs will be less interested in buying your agency.
Second, put key personnel under employment contracts with restrictive covenants to the extent that they are allowed in your state. Buyers are always concerned about employee attrition right after the sale, and an employee with a contract is less likely to leave.
Third, be cheap without cutting corners. Refrain from unnecessary expenses and eliminate nonessential staff that you have long known you needed to eliminate.
Fourth, if you have a corporate agency, try to put all of your topic accounts under written contracts. Although the contracts will probably be terminable by the accounts on short notice, it is still more likely that the accounts will stay after closing if you have them under contract.
Fifth, make yourself dispensable by recruiting or training a general manager who could take your place in case of your retirement. Your agency will be much more attractive if it is clear that it can run well without you.