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BUYING A SMALL BUSINESS

Ready for a Sea Change?

Business for sale: A cruise-focused travel agency.
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Business for sale

THE BUSINESS: Does your job leave you feeling landlocked? Then perhaps you should consider a business that has the potential to be a shore thing: a cruise-focused travel agency based in the metro Washington, D.C., area. Its clientele is split equally between individuals and groups (typically churches and membership organizations), and nearly three-quarters of the company's revenues come from repeat customers and referrals. It's a franchise operation with a top-quality franchisor that specializes in aggressive marketing and comprehensive training. The business has plenty to recommend it, including the franchisor's guarantee that this agency will have exclusive rights to its turf, which features a well-heeled population of about 250,000. Other assets include about $20,000 worth of fixtures and equipment housed in a 2,000-square-foot facility (leased until 2004) in a busy shopping center. The current owner, who works at this business full-time, is disembarking for personal reasons, but her crew of four part-timers and three independent contractors aren't likely to jump ship.

PRICE: $198,000

OUTLOOK: Despite the gloom and doom that surrounds the travel-agency business (shrinking airline commissions, recession anxieties, and so on), the cruise industry is growing at a full-throttle pace, with potential bookings for the next five years estimated at $85 billion in total. This seven-year-old agency could speed up its own growth by launching an aggressive local ad campaign to woo new customers. There's an added incentive: its franchisor's commission pay scale is one of the highest in the tourism industry. As a low-cost expansion strategy, a new owner could invite more independent contractors aboard; they split their commissions with the agency and don't receive salaries.

PRICE RATIONALE: Think it's tough to price your own airline tickets, Ă la Priceline? Try valuing an attractive company in a some-what troubled industry. (There are even more valuation methods for travel agencies than pricing packages offered by the cruise lines!) That means a buyer will need to rely on gut instinct to decide whether this business would warrant a low-end offer (perhaps 4% of the $2 million in gross sales, or $80,000) or a high-end deal (10% of gross sales, or $200,000). Tempted to simply buy a new franchise yourself? At just under $30,000, the price of your own franchise might look like a bargain, but new agencies generally take at least three years to start showing a profit, and they require heavy initial infusions of capital for such things as local advertising efforts, setting up an office, and marketing. This owner put in $135,000 before establishing a solid customer base.

PROS: A shipshape company, a topflight franchisor, and wealthy clientele could turn this into an entrepreneurial honeymoon.

CONS: It's your customers who are going on vacation, not you. If you're not prepared to pursue aggressive growth, invest in a time-share unit instead.

Mid-Atlantic Travel Agency
Revenues** EBITDA*** Owner's
compensation
1999 $242,705 $62,442 $23,400
2000 $268,526 $74,100 $27,625
2001* $268,526 $74,100 $27,625

*Projected.
**Revenues equal gross commissions on gross sales,
which are approximately $2 million.
***Earnings before interest, taxes, depreciation,
and amortization.


Inc has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Marc Dosik of VR Business Brokers, at 410-772-0006.


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