What does it cost to start a travel agent business?Published on 23rd July 2019 2019-07-23T11:00:00+00:00 - Last update on 4th July 2020 2020-07-04T21:28:27+00:00
Millions of Britons jet off to the sun at least once each year, tens of thousands head for the ski slopes in winter and many take long weekend breaks closer to home.
It can mean big opportunities for travel agents to share in a business worth more than £80 billion each year.
Of course, the travel industry has seen major changes over the past few years. The financial crisis and Brexit may have not had the disastrous effect many feared, but the internet has changed the way travel businesses run. The traditional high-street travel agent may be giving way to an online business model - and the package deals and off-the-shelf trips that used to be the mainstay of the industry are giving way to unique experiences and tailor-made holidays.
The one thing that has not changed is that - like any other business - there will be costs to deal with if you are going to set up and run a successful travel agency.
The costs you need to deal with
There will be several different types of cost you will have to consider. Here are the most common ones your new business is likely to face:
It may be possible to work as an online travel business without dedicated premises and work purely online and via the telephone. However, many people still prefer to deal with a friendly face and to arrange their holidays with someone they can feel they can trust. A shop on the high street may no longer be essential, although many of the remaining big chains still have them. Many smaller agents work from easily-accessible office space where customers can call in.
The cost of retail premises on a busy high street will vary across the country, however, leasing a suitable unit may cost £24,000 a year in a small market town and £60,000 or more in London.
An office suite - perhaps over retail space - could offer the space you need for half the cost, so it's worth thinking outside the box when it comes to all your options.
Even if you will do business in person, you will also need a web presence. Your website will probably be how most of your customers find you - and it can act as a sales channel, letting customers book online, automating your business and driving up your productivity and profitability.
You need your website to score heavily on SEO to get seen first when potential customers come online and search for your destinations or offers. It must look professional because people will make decisions about whether or not to do business with you based on the impression it gives about your service. And it must be 100% stable and secure if people are going to trust it with online bookings.
It also needs to be mobile-friendly. These days more people use their smartphones than traditional laptops and PCs to access the web and Google will look on you negatively if your site isn't mobile optimised.
A website that meets all these needs with multiple pages to showcase destinations, interactivity to help people enjoy planning their holiday online and secure payment and booking facilities could cost £10,000 or more. You will also need to support it with content marketing - details about trips and destinations - and social marketing. This will help drive site visitor numbers, but will require further external support. Realistically, you should expect to pay a minimum of £1000 each month to provide the fresh content and social links you need.
Getting the right staff will be crucial to running and building your business. Travel agency work tends not to be highly paid - salaries may around £20,000 as a basic rising to £25,000 for people with languages or a few years experience. Remember that you will have extra costs too, such as National Insurance and Auto-enrolled pensions on top of your basic salary bills.
Whether you're starting up or ready to move your business operation on, you will need office equipment. Your IT set-up, computers and printer will be expensive items, and you may need specialised software with operating licenses and renewals, training and maintenance.
You will also need a fast and reliable internet connection, supported by a watertight service guarantee - your business will depend on it.
You will also need to furnish your office - especially if you intend to welcome in customers.
The costs will depend on the scale of your business and how many staff you need to equip, but expect to pay £1500 for each employee's basic kit of computer, chair and desk, plus all the extras they need - from business cards to software licences - to get down to productive work.
Travel businesses tend to be quite seasonal and, although your commission will be coming through at peak travel times, the overheads - staff costs, utility bills and marketing will be draining your reserves all year round. It is important to ensure that you have year-round finance in place to ensure you can maintain a positive cash flow. You should be able to calculate all your funding needs as part of a detailed business plan. You should look at all your likely outgoings for a minimum of a year, and for a start-up, it might be necessary to have a reserve of £50,000 to call upon.
You will need to arrange legal fees and insurance and arrange membership of all the relevant organisations such as ATOL and ABTA - and these costs can actually be quite high. The application fee for ABTA is £600 plus VAT - payable with your completed application form, there is a joining fee £1,000 plus VAT - payable once you have been accepted and an annual subscription fee of £1,066. You may also be required to provide an insurance bond.
Raising the funds you need for your travel business
Profit margins may be small when your business is establishing itself, and watching the costs will be crucial to your success.
But you can’t afford not to make the investments you need to establish your business. However, one solution is to call on Rangewell. We are experts in business funding, including finance for travel agencies and other types of leisure funding such as finance to start adventure holidays and outdoor businesses. We can search the entire lending market to help you find the most cost-effective solutions for each of your business needs. If necessary, we can also arrange Jigsaw Funding, a bespoke lending package made up of the most appropriate funding for each purpose.
Our service is independent - and absolutely free for you to use. So call us now to find the solutions to provide the funding you need for your new travel business.
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