Travel market bouyant but agencies need good technology behind them Travel market bouyant but agencies need good technology behind them

Bouyant market to sell travel business

Travel business owners who have put in the hard yards are being rewarded with good prices when selling in the current market, according to an Auckland based accountant who specialises in the industry.
Paul Davies of TA Accounting Limited says there is a lot of buying, selling and merging activity going on right now and a number of travel business owners are taking advantage.
‘Businesses where owners have been working on them for a few years and are profitable are commanding a good price,’ he says.

He says TA Accounting ranks travel businesses each year. About 75 are in the mix with sales from $1 million to $30 million.
‘Anyone in our top 10 can achieve a good sale price – usually greater than the three times net profit before tax.’
Davies says the average profit in the top 10 in 2018 was 35.2% of income. ‘This compares favourably with 2017, where net profit before tax was 31.7%.’
Davies says 2017 was a great year in its own right. ‘The figures have really gone up. In 2016 the net profit before tax (in the top 10) was 27.6%, in 2015 it was 28.5% and in 2014 24.4%.
‘The last couple of years have been great for the well groomed business and it is good for the buyers too, because they can see a decent return.
‘The market at present is rewarding those who make the effort to work on their business.’
He says TA Accounting is currently working on five purchase and sale transactions, plus assisting with the set-up of new businesses in travel.
‘They can be very profitable if they have the right product, staff and advice.’
Travel business owners should also be taking full advantage of the technology available now to increase their organisation’s productivity – or risk not realising maximum value from the business when they decide to exit.
'Now is a good time for long-term owners and operators to be looking out for opportunities and ensuring their businesses are in good financial health for a possible sale.
‘Some owners in this industry have been in their businesses for many years and investment in technology is required in some of these businesses to increase their productivity,’ says Davies. ‘This in turn increases the value of the business.’
Davies says TA Accounting is keen to put clients’ admin accounting on to Xero, which would save at least two to three hours a week. ‘But this is just one of the systems that is there right now to really help increase efficiency and it also enhances the relationship with your accountant,’
He says any way a business can improve productivity is a real bonus. ‘This provides more time for the owner to do what they want. This could be having some free time or it could enable them to work more on the business to bring it up to its best value level.’

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