Building the Foundation for Your Travel Empire

Elizabeth Fulton Foss, CTC

If your goal is to make an extra $3,000 a year selling travel, there’s good news: no matter how you run your business you have an excellent chance of meeting that goal. For you, it’s just a hobby and one that you don’t have to be very good at to hit your target income.

If your objective is to make $100,000 a year or more selling travel, there’s more good news: it’s just as realistic. However, for you, it’s not a hobby or even a part-time job. At this level it’s a full-blown career and it needs to be approached as such from your first day on the job.

If you’re new to the business, you may be holding down another full time job while you get this one off the ground, but resist the urge to take shortcuts. Approach your business as if you’re going to have 50 agents working with you in five years… not because you will or even should have 50 agents in five years, but because it’s substantially easier to build an empire if you create a foundation that will support one in the first place.

If you’re already in the travel business and find that you didn’t approach it correctly from the start because you didn’t know any better or because you thought it would be a hobby and now you want more from it, begin devoting some time every weekend to addressing the issues in this paper to build, rebuild, or strengthen the bones of your business and the foundation on which it stands. It’s never too late, and the earlier you start the better.

There are a thousand things I wish I’d known 18 years ago when I started my agency. I was a homebased lone wolf in a time when there were very few of us in the industry. What follows are the things I most wish someone had tried to tell me when I started out. I’m not sure I’d have taken them all to heart, but I may have recognized the reason for them earlier and saved myself a lot of resources, not to mention sleepless nights.

Legal

This step will cost you some money and as a fledgling business owner with little or no income, it’s tempting to skip over it. However, there are few areas of the operation that can cause you a bigger headache if done incorrectly.

Your business needs to be 100% compliant with all local, state, and federal laws from day one and it needs to be structured in a way that protects your personal assets as well as the potential agents that may one day be working with you.

Start by speaking with an attorney and/or accountant about how best to structure your business, and don’t make choices based solely on cost. For instance, it may initially save money to structure as a sole proprietorship or LLC but if you know early on that may eventually want additional agents it may make sense to start off as an S-corporation. Don’t assume that the business structure used by your friends – even those in the travel industry – is what’s right for your needs. Changing your structure later isn’t impossible, but it’s a nuisance you can avoid if you get it right the first time.

Check out the website of your local tax collector’s office. There’s usually a section for small businesses that outlines what types of business are acceptable to run from your home. (If you were undecided about whether or not to be home-based, that one thing may make the decision for you.) Be sure your business complies with zoning restrictions and pay whatever fees are required every year and on time.

One of the most confusing things about setting up a travel business can be compliance with Seller of Travel laws. At this writing, there are six states which require all agencies offering travel to residents of that state to register, regardless of what state the agency is located in. There are seven additional states that require registration of those agencies physically located within the state. Most require fees. Some require bonds or another type of financial security instrument. Some states have additional requirements for some types of travel as well as exemptions for agents/agencies that meet certain requirements. Search the internet for the term “states with seller of travel laws” and you’ll get a list of resources to start you off in the right direction… but keep in mind that the rules change from time to time, so it’s best to get the basics from general travel law sites and then seek the official site for each individual state to be sure you’ve got the most up to date requirements.

You should not proceed to the next step – financial – until you’ve worked your way through all the legal areas. In fact, in some states (Florida, for instance) you can’t get a local occupational license or even a bank account for your travel business without first providing proof of compliance with the Seller of Travel law. If you’re already in business and you’ve skipped any of these legal areas, make it a top priority to get your legal ducks in a row.

Financial

To some extent, the business structure you chose during the legal phase may dictate some of what your financial operation will look like. If you didn’t speak with an accountant at that point, this would be the time to do it. Your accountant will let you know when and how to pay taxes, if you need to have a payroll, what documentation to have on file for your independent contractors, etc. You may also want to ask for advice on what bank accounts to set up and how to use them. One may not be enough.

Although your business may be a one-man-band at this point, stress to your accountant that you may want to add independent contractors to the mix eventually and that you don’t want to have to recreate your entire banking and payment system if that happens. A system that works for 50 agents will work just as well for one agent. The reverse is most definitely not the case!

Your accountant may tell you that creating a system for a larger organization when there is only one person to start with will cost you more money and that you can get by with something easier for the time being. That’s entirely true, and it’s tempting to take that advice and go with easier, less expensive choices. The problem with that is, if and when you want to grow later on, you’re not only going to suffer through the often-painful process of learning and implementing new accounting systems, but will have to do so while still running daily operations.

You will never, ever regret creating systems, policies, and procedures that will work for a larger organization, even if you never become one. From the very beginning, you’ll be training yourself to function as the owner of a professional, successful, efficient business that is capable of growing if and when you decide to do so and without a complete re-working of your key tasks.

Customer Relationship Management (CRM)

A person new to the travel industry rarely arrives with a sizeable list of potential clients unless they’re coming from a sales position in a different industry. If you’re lucky enough to be in that position, you already know the value of your list. If you’re starting from ground zero, though, you may not realize the true cost of acquiring a potential client’s information. Information about people who have actually booked with you in the past are even more valuable. Why? Because you’ve already invested a great deal into building a relationship with that person. It’s far easier to nurture that relationship than it is to start a new one with somebody else.

Do a Google search on “cost of customer acquisition verses retention” and you’ll see figures ranging from 5% to 30%+ higher for acquisition. This is because acquisition costs include marketing, time spent convincing the potential client that they should do business with you, maintaining a website and/or social media to convince the potential client that you’re legitimate and knowledgeable, etc. Once a client has booked and traveled, and the experience is a good one, they’re likely to book with you again as long as they have reason to believe you’re still in business, know how to contact you, and feel you can provide the service they’re interested in.

Think of each customer as a campfire that you had to build without benefit of matches. Locating dry tinder and rubbing two sticks together to get that first spark is time-consuming and usually frustrating. Growing from a wisp of smoke to an actual flame requires your constant, undivided attention. In the early stages, you don’t dare take your eyes off the fire. Instead, you feed it with progressively larger logs. Only when you’ve got a healthy, roaring blaze going can you afford to divert your attention elsewhere. Tossing a new log on the flames from time to time is all you need to keep the fire going. If you inadvertently let a fire dwindle to little more than embers, stop what you’re doing and tend it immediately. Whatever effort it may take to re-energize the flames is still a far better option than starting from scratch.

The point is that, while it may take some effort to record the information you glean from this potential client each time you talk and some money to maintain the system that you keep this information in, having a great CRM system right from the start and using it to its fullest capabilities will:

• substantially increase your efficiency: you don’t have to collect the same basic information over and over again;
• allow you to keep track of quotes you’ve sent and remind you to follow up on them;
• track when payments are due (and keep forms of payment on file in a PCI-compliant manner);
• set reminders tied to specific reservations: for instance, when you need to send pre- and post-trip communications, call the hotel to request connecting rooms, or ask the client about dining reservations;
• increase client satisfaction and their impression of your professionalism: you’ll have their Crown & Anchor numbers form the cruise they took three years ago at your fingertips and know to remind them that they need to renew their passports;
• enable you to market more easily and more effectively: you’ll be able to segment your database by who likes to golf, who has children under 10, who spends more than $10,000 on their vacations, etc.; and,
• easily create personal service touches that will differentiate you from the competition: for instance, you can set up a greeting card program to recognize birthdays and anniversaries.

These are just a few examples of the ways that your CRM can help you stay on top of things. It’s the single most important tool in your travel business, so you need select carefully and be more concerned with how well it will suit your current and future needs than how expensive it is. Don’t be tempted to use a generic database program, an Excel spreadsheet, or a loose-leaf notebook. Even from the start you won’t be able to adequately track all the information you should be, and such systems are completely and utterly useless when your business grows to a moderate size – even if you don’t have any other agents working with you.

Likewise, don’t feel you need to start from scratch and build your own custom database. Such an undertaking is expensive, tedious, and time-consuming, and no matter how carefully you think it through you’ll eventually run across something it doesn’t do well or can’t do at all – at which point you’re back to having a CRM that isn’t working for you. There are some excellent, travel-industry-specific CRMs available that will be able to handle most of your database needs and you can get them at an annual price roughly equivalent to your commission on one family of four in a balcony cabin on a summer cruise.

Look for a CRM that has as many of these qualities as possible:

• Cloud-based access that works equally well on computers and mobile devices, and for both Apple and Windows users
• A responsive help desk with long customer hours (preferably seven days a week)
• Expansive, “on-demand” training
• Per user pricing that decreases as you add more agents
• The ability to assign different levels of access to each user
• PCI-compliant payment information storage
• An integrated (or available separately) back-office accounting system that easily tracks client and supplier payments and receipts, matches commission receipts to reservations, processes payroll, provides data for tax purposes, etc. The more accounting functions, the better.
• An extensive list of commonly used, pre-formatted reports as well as the ability to create custom reports
• Comprehensive drop-down lists for countries, cities, hotel names, ships, etc. to make building a reservation faster and maintain data consistency across all reservations, and the ability to add to those lists at the administrator level if necessary
• The ability to record personal details about each household member: their hobbies, sports interests, future travel inquiries, etc. Comprehensive pre-set lists for this information (and the ability to add to them) are preferred.
• Ability to link reservations from different households when they’re traveling together and to easily move a client from one household to another
• A reminder system for both reservation-critical tasks (like payments) as well as both pre-set and customizable reminders for other tasks
• Integration with other systems, for instance CruisePro or Engagement marketing

In addition, you need a system that is user-friendly. If it’s too hard to learn, isn’t laid out in an intuitive way, or simply looks cluttered and unattractive, you’re not likely to use it to its fullest potential. It’s better to give up a few bells and whistles if a system is so extensive that you find it intimidating.

Finally, choose a CRM that’s been around long enough to have the bugs worked out and most additional user-requested functions added, comes from a stable company that is dedicating financial and human resources to support and improve the system, and has far more satisfied users than dissatisfied users. Travel agent social media groups are a great place to ask others what CRM they use and what they both like and dislike the most about it.

Education

Travel professionals get into the industry because they personally like to travel; they’re coming into it with a certain amount of knowledge based on their own experiences. Their knowledge is rarely all-encompassing, though – even when it comes to the destinations they know the best – and what they think they know may, in fact, be wrong. Fortunately, convincing agents to learn more about their area(s) of expertise usually isn’t difficult.

What does take some convincing is that learning more about the industry as a whole is never a waste of time, money, or effort. It can be as easy as subscribing to any of the numerous free industry publications and reading them as often as possible. That one thing can expand a travel professional’s knowledge exponentially simply because they’re picking up small facts about a wide range of subjects and destinations every time they flip through one of those publications.

Niche-specific suppliers (for instance, cruise lines) often provide very sophisticated online training which is not only free of charge to agents, but also offers additional benefits such as bonus commission, access to reduced rates, or even a complimentary “graduation” cruise. Even if you prefer to sell only one cruise line, the ability to knowledgeably compare it to others is invaluable, so take the training from anyone that’s offering it.

Strongly consider pursuing industry-recognized certifications early in your career. While your clients may not know what CTC or MCC stands for, others in the industry do. Having those certifications tells them that you consider yourself a professional, that you’ve acquired a certain level of knowledge, and that you consider your own education to be worth the effort. Most importantly, achieving these certifications exposes you to vast amounts of industry-specific information and makes you a more well-rounded professional.

There are numerous travel professional organizations and many (most) have local chapters that hold periodic meetings that give agents the chance to learn from each other, speak with supplier representatives, and experience different travel brands. Join one or two organizations and try them out. If you find that they don’t meet your needs, try some others. Aside from the obvious educational aspect of doing so, the value of the social interaction with others in the industry cannot be overstated. It can be difficult for agents, especially home-based ones, to feel that they’re truly a part of something bigger, but professional organizations can go a long way toward combatting that feeling.

On the grandest level of education there are the national and international conferences. Some are niche-specific (Luxury Travel Exchange, CruiseWorld, GBTA, etc.), some are organization specific (host or consortia events), and some are more general in nature (like ASTA conventions). These tend to be multiday affairs that often require you to pay for airfare, hotel, at least some meals, ground transportation, and so on, making them a big consumer of your limited resources – but go anyway. If you can’t go to every conference every year (and few agents can), then put them on a rotational schedule. You’ll eventually find the ones that are most beneficial to you. It’s nearly impossible to leave one of these conferences not being a better travel agent than when you walked in.

Commission splits

When you’re the only person in your business, every commission belongs solely to you as does every expense. The difference is your profit, and the goal is to make that profit as large as possible.

With a lot of work and a little luck, you’ll (hopefully!) reach a place where it would be difficult for you to take on any more business. It’s a great position to be in because it’s means that you’ve been successful in growing your business, but working to your own capacity doesn’t necessarily mean that you’re making as much profit as you’d like or even as much as you need to.

You may be able to find more efficient ways to work so that you have time to handle a few more bookings. You could do better at adding ancillary products like show tickets and travel insurance. In the end, though, neither of those is likely to put substantially more money in your pocket. Shifting your business to a higher end product would, for the most part, mean ditching many of your hard-earned clients. In fact, it could be more like starting over from scratch!

It makes sense to instead turn to the simplest answer: bring on some independent contractors (ICs). The idea is that they’ll be able to take advantage of some of your resources in exchange for you keeping part of the commission they earn or collecting a monthly fee. Each new IC you bring in has the potential to add as many selling hours to your day as they’re willing to put in. Your financial return on their hours is, of course, less than the return you get on your own hours – but if you’ve got no more hours to give then it makes sense.

The thing is, no matter how experienced the IC or how expansive a client list they bring with them, the new agent will cost you resources. Some will be easy to assign a dollar value to. For instance, $25 a month to add a new user to your CRM. You can easily itemize those costs and show the new agent that the simple fact that they’re now booking under your agency costs you $xxx monthly. This then justifies for both of you the idea that you need to be compensated for that.

The danger lies in failing to recognize the full cost of carrying that IC. For instance, for every booking that agent makes you will be receiving a commission payment which needs to be deposited in the bank, recorded in your system and broken down to allocate the correct amount to both the agent and the agency. Periodically, a report will have to be run so that you can then go through the steps of paying that agent. At the end of the year you’ll need to create a 1099-MISC for that agent. All of that takes time as well as systems to make those things happen, and some of those things will have fees associated with them: bank fees, postage, the cost of forms, an accountant, a back-office accounting system. The cost you’re most likely to undervalue or skip completely is the time you personally are putting into it.

Your own time is the most valuable asset you have. Don’t make the mistake of underestimating the amount of time it takes you to carry an agent, and don’t short-change yourself on the dollar value of that time. You are in business to make money so don’t just cover your costs. It’s okay for you to profit from the agents that join your organization.

Direct costs of carrying an independent contractor may include:

• E&O insurance
• Membership or user’s fees
• Tax form preparation
• Document handling and postage
• Training
• An agent-only web portal
• Bank transfer fees (for paying commission)

Indirect costs (namely, time) of carrying an independent contractor may include:

• Preparing, processing and recording documents to send to the agent or their clients
• Recording receipt of commission and matching it to the correct reservation
• Performing training and answering questions (New agents take significantly more hand-holding, so you may want to retain a larger chunk of their commission until they’re up to speed and/or attain a certain booking volume.)
• Researching commission questions and correcting problems
• Processing commission payments
• Transferring every financial transaction from your CRM to your accounting system if the two aren’t fully integrated (Each agent adds to the load.)
• Redirecting phone calls and emails to the correct agent
• Holding staff meetings
• The time involved in all of these things reduces the time you can spend with your own clients, so factor in that lost revenue.

You need to take all these things into account when setting up your commission split structure. There will be some people that don’t join you because they don’t want to pay you for your time and they don’t want you to profit from their efforts. Don’t sweat it; the last thing you need are people questioning your value to the organization.

There will also be agents that you carefully nurture into real success stories who will then leave you to start their own business. You can either let them go, offer to give them a larger cut of the commission, or set a maximum annual amount that you’ll retain. If you’re going to offer them more money, though, be certain that you’re retaining enough to cover all your hard and soft costs, that you’re compensating yourself adequately for the time involved in carrying that person, and that you’re still making a profit from them great enough to justify the effort. If not, let them go.

What makes your agency unique?

Consumers have choices. Give them a reason to choose you in the first place and then plenty of reasons to stay with you. It’s never too late to take this step, but doing it from the very beginning is ideal.

One of the main reasons clients book their next trip with someone else is because they don’t know your name.(1) It’s not that you’re doing anything wrong; you just aren’t memorable!

Being unforgettable takes some effort, but it doesn’t have to cost a lot of money. A business card that isn’t a rectangle, a creative logo or a clever tagline can go a long way! Send birthday and anniversary eCards. Email city guides for all the ports on your client’s cruise a couple months before they travel.

Think about your own experiences with sales people and ask your friends and family as well. What transactions were truly memorable (in both good ways and bad) and why? What things could a sales person do to make you feel as if you and your business were truly appreciated? And what could they do (or not do) to make you feel as if they were indifferent about you and your business?

Set a goal of finding 10-12 unusual ways to touch base with every client every 4-5 weeks, year round. Ideally, they should be things that can be at least partly automated and cost you little to nothing. Then find one or two things for each type of travel that you can do to make a real impression while your client is traveling. It’s okay to spend a little money on these since you’re making commission on the trip, but don’t go crazy. You shouldn’t need to spend more than 5-10% of your commission on these items unless it’s a special client or a unique situation. For instance, if you’ve got a couple flying out early in the morning for their European river cruise, offer to set up a wakeup call (using one of the free online services) and email them a $10 Starbucks gift card with a “Coffee’s on me. Have a great flight!” note. It’s easy, it’s inexpensive, and you’ll probably be the only travel agent that ever did that for them. They’ll be impressed when you send the email, again when that wakeup call comes, and one more time when they’re sipping their coffee in the airport. That’s a lot of bang for just ten bucks and you’re one big step closer to them booking their next trip with you.

Bringing it home

Business coach Dawud Miracle once likened a business’s foundation to that of a house, noting that you can build a house without a foundation and even live in it for a while, but eventually the weather will change and it will fall down; likewise, your company’s foundation and structure need to be capable of supporting it in all types of weather.(2) No sane person would think to build a house without a good foundation, strong walls, and a sturdy, well-attached roof, capable of standing up to most anything Mother Nature could throw at it. Building your business should be approached with the same mentality. Build for everything that might come your way, even if it seems like overkill for your current situation, so that creating your travel empire is the rewarding experience it should be no matter the size.

 

Notes:

(1) Terraro, Ruthanne. “Five Reasons Clients Don’t Come Back To You.” Travel Agent Central. Questex Media Group. 12 Jan, 2016. Web. 01 Jul. 2016.

(2) Miracle, Dawud. “Why Your House and Your Business Need a Solid Foundation.” Dmiracle. Dawud Miracle LLC. 20 Feb. 2008. Web. 5 Jul. 2016