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Expanding Your Business

February 1, 2007 By: Joe Pike Home-Based Travel Agent
 

When to Seek Assistance to Grow Profits and Alleviate Workload


SO, YOU'RE A HOME-BASED AGENT AND BUSINESS IS GOOD. The inquiries are pouring in, networking is becoming old hat and sales are going through the roof. You've made a name for yourself, your clients trust you and recommend you to their family, friends and colleagues.

The "price tag" for many successful home-based agents can include 12-to-14 hours of work, along with possible hair loss—either from stress or from pulling it out yourself.

Is it time to expand? If so, what does expanding mean to you—seeking out independent contractors or hiring actual employees? If you're committed to asking for some support, how do you find it, how do you know you can trust it, and how do you know when to stop? Do you expand based on alleviating workload, or should your decision be solely based on increasing profits—or both for that matter?

Home-Based Travel Agent recently talked to agents and experts in the field to tackle these questions and to help you understand the strategies involved in growing your business. Gary M. Fee, president of OSSN

"Expansion is a function of productivity measured in profitability," says Joanie Ogg, president of the National Association of Commissioned Travel Agents (NACTA). "Expanding without an immediate increase in profitability does not make sense. Continuing to expand with increased profitability makes tons of sense.

"Ideally, a home-based agent will expand when their incomes will allow for more efficient use of resources by adding staff," Ogg says. "Success is defined by overall revenue, rather than workload. Most home-based travel agents focus on areas of complex leisure transactions, and when their client base grows, they may find that adding staff to handle specific aspects of their business may be a desirable thing to do. Many independents find that working with other independents is the best way to expand their business."

Gary M. Fee, founder and president of the Outside Sales Support Network (OSSN), says that the risk of expanding as a home-based agent is no different than in other businesses.

"There's always a chance that it could fail," he says. " You have to know when. You can't move too soon. If you get too anxious, you're going to fail. Look at your profits, look at your needs. A good agent spends 12-14 hours a day working. But if you find that during that time you're doing other things (such as responding to e-mail or handling expenses) that take away from your main goal—selling travel efficiently—then seek other employees."

The Magic Number

Fee gives a range of numbers as a guidepost for knowing when to expand. He says home-based agents should consider recruiting outside help when they make between $650,000 and $700,000 annually in gross sales.

By "recruits," Fee is referring to independent contractors. And when an agent reaches the $1 million mark, he or she should start seeking administrative assistance, which could mean more fees.

Most mega-home-based agents who have made the transition into a host agency pay for insurance with a policy value of as much as $2 million to $3 million, since errors and omissions insurance is now practically mandatory for all hosts in this day and age, Fee says.

It should be noted that there is a big difference in the type of help you can seek. If you hire full-time employees, you need to pay taxes, whereas if you seek help from independent contractors, you don't.

"By nature, home-based travel agents have made a conscious decision to operate a one-person (or one-couple) agency focused on handling profitable business," Ogg says. "These are usually complex leisure transactions that require the specific expertise or knowledge of the agent. Many do not want to expand, but will constantly high grade their clientele to maximize profitability. Because of this reality, suppliers of yield-sensitive, sophisticated (luxury, international or otherwise detailed) products and services with finite inventories find these specialists quite rewarding." Joannie Ogg, NACTA president

The financial obligation that usually goes along with independent contractors is sharing commissions. On average, a 70–30 percent share is the agreement made between an agent and an independent contractor, although Home-Based Travel Agent spoke to some agents who took part in an 80-20 percent commission share.

Inquiring Minds

Sue Pisaturo is great example of what Ogg means as far as an increase in inquiries is concerned. Pisaturo, an avid traveler to Disney resorts, decided to use her extensive experience at both the Florida and California destinations to start her own home-based business, Small World Vacations.

Selling only Disney, she started her business five years ago and received only about five inquiries a day. Then she became involved with www.mousesavers.com, which now gets about 6 million hits a month, and soon she saw her business blossom.

Pisaturo now receives more than 200 inquiries a day. When she was spending nearly 15 hours a day working, she decided to seek help. She now has 40 independent contractors located throughout the United States working for her.

"Home-based agents tend to work with other independent agents that are skill- or knowledge-specific," Ogg says. "As an example, if an agent markets cruises on a web site, he or she may refer leads outside their area of expertise to other independents that have the specific expertise required to successfully convert the lead. Most one-person or one-couple home-based operations have relationships with other home-based agents that will handle their clients if they are traveling out of reach."

Pisaturo offers a 70-30 percent share of commissions, and says the help was much needed. She also hired several employees—someone to keep track of commissions, and another to handle the mail.

"It was a dream that I never thought would happen." Pisaturo says. "I can't believe I am where I am today. Just five years ago it was just me. Expanding worked for me, but you really have to be careful. You can't expand too quickly; you don't want to be thinking too far ahead too quickly. You have to be patient or you will implode."

Ogg agrees. "An agent must understand all aspects of the proposed expansion," she says. "There are inherent risks in expanding using independent contractors (especially if the agent is ARC appointed) and the agent must understand them and have complete control of their operation. The only reason to take the risk is for offsetting profitability generated in a safe environment with risk minimized."

Pisaturo says expanding a business should be taken in baby steps. "I would say the perfect analogy would be to view your business as a building," she says. "You have to make sure the first floor is all set before you move to the second floor. Try to go as slow as possible or the building will collapse."

Who Do You Recruit?

There are various resources for finding help. The main players are OSSN and NACTA, two great sources for independent contractors.

OSSN was founded in 1990. Today, the association has more than 60 chapters, including its international chapters, with more than 5,800 members. The members-only section of its web site, www.ossn.com, has more than 5,500 pages with information to help your business prosper. OSSN provides a search engine that allows easy navigation to help members find specific information by use of key words or phrases. The members-only section of this web site is updated almost every day to keep members informed about current industry information and new business opportunities.

NACTA is the travel industry's first and best-known association for independent travel agents, cruise-oriented agents, home-based travel agents and outside sales travel agents. A 21-year-old association, NACTA offers its travel agent members numerous benefits and services. Its web site, www.nacta.com, links to host agencies, and the organization also operates a number of web sites of interest to its members.

If you can pull yourself away from the computer and do a little face-to-face networking, a business relationship might materialize. "Almost always, a relationship ensues after agents have spent some one-on-one time, usually at an industry trade show, seminar or familiarization event," Ogg says. "Agents looking for connections with other agents can also use industry associations such as NACTA to find one another."

Pisaturo says she only recruits contractors who have little experience selling travel and more experience traveling, especially to Disney.

Sharon Emerson, Cruise & Tour Planners, on the other hand, says she doesn't trust anyone she hasn't first met face to face.

"Sure, you can see their credentials, but you never know if someone is going to adjust the way you want them to," she says. "I only recruit people I know are willing to adapt to my style, the way I look to sell."

She is not on the same scale as Pisaturo, only having about six contractors working for her. And unlike Pisaturo, who sought out her contractors, Emerson says she had hers fall into her lap, whether it was someone she met at a trade show or a neighbor who expressed interest.

"They need to be local," she says. "They need to be close enough to meet with them whenever possible. I try to meet with contractors at least once a day just to make sure we are all sharp and all on the same page."

Other Resources

Pisaturo recommends The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It by Michael E. Gerber. The book tells you how to franchise your business and when you know whether or not you are ready for the move.

Emerson, on the other hand, says books on expansion are a waste of time. "The only effective way to have an independent contractor trained is to do it yourself," Emerson says. "Deep in my heart, I have always wanted to someday start a school and teach home-based agents and independent contractors everything they need to know. One thing I learned is training people yourself is the most effective method, since it ensures that you are all on the same page. You have to be very specific and tell them exactly what you want them to do. They might come in with their own system, their own method, but they have to adapt to mine. And [contractors] can't just change everything overnight; they need special instructions, intense training. Who better to learn from than the person they are working with?"

"For both the agent and the suppliers, it is the underlying yield productivity that drives the business model," Ogg says. "As an example, when a cruise ship is sailing at or above 100 percent occupancy, the challenge becomes one of maximizing passenger yield, rather than selling cabins. Home-based travel agents have been consistently recognized by this type of supplier as generating the highest yields of any distribution channel. These suppliers have the ability to manage the thousands of relationships created by this displacement of the distribution network."

"As long as things proceed well and it feels right, it can be very rewarding to work with other talented agents," says the eponymous owner of Tony Salamone Travel Company. "The ultimate reward is to step back and be thankful for the fabulous organization that you create."


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