Is Adding An IC the Right Strategy for Your Business?
By: Sandy Saburn, CTIE

Right now, most travel agents have a lot of time on their hands. While they are waiting for a return to some sort of normal business operations, they are looking at their business and strategizing. That’s a great thing! One of the things that is coming up often in travel agent forums is the idea of bringing on other agents as “independent contractors” (ICs) or “subagents” to work with them. The logic is pretty straightforward: Since they are ICs they don’t cost you anything, but if they sell something you get a cut of it. Makes sense, right? The reality is a lot more complicated than that. Let’s take a look.

When you have a service business it seems to make sense to bring on more people when you are going to receive a cut of what they sell. After all, you only have so many hours in a day and at some point, your revenue is capped. Even if they are new you can teach them what you know, and it will be more incoming revenue for you. You can pass off the bookings that you no longer want to do so they can learn like you did.

The truth is that bringing on new ICs takes a lot more time than most people realize because there is a lot they need to learn. And every moment you spend helping them with their business is time you don’t have to work on your own business. That’s why we so often see an agent’s sales decrease (sometimes dramatically) when they bring on new agents. Unfortunately, the new IC’s sales are never sufficient to offset the experienced agent’s sales which leads to an overall decrease.

If this were a short-term problem while you got the new agent up to speed, then it would be worth it. But the failure rate for subagents is very high. There are probably a lot of reasons for that, but I think the fact that they often aren’t really that invested in this new business is a big part of the problem. They just see the fun glamorous part of being a travel agent. Very few of them can tap into an existing pool of frequent travelers, and most aren’t interested in business-building activities. They end up booking their own travel and that’s it. They don’t put time into actually building a business but just look at it more as a hobby.

This brings up a concern I have about how we add people to our industry. Simply put: the travel industry doesn’t need any more hobbyists. Having people who dabble in travel damages the overall image of the industry. If anyone can become a travel agent, it dilutes your value. Career fields that you can just start with no education and no investment don’t pay as well as those that are more competitive. We want to see the travel industry flourish, not just survive. And if you have read many articles I have written, you know I think you all need to make more money!

At this point, you may think I am totally against adding ICs. That’s not the case at all! I just think you need to consider all the facts.

The best reason to add ICs to your business is if you love to teach and mentor. People generally either love the idea of teaching and mentoring or they hate it. If you love it, you may even go so far as to create a “Queen Bee” business where you have lots of advisors affiliated with you and you spend a significant portion of your time helping train and mentor them and less and less time selling. If you find this rewarding, then it can be a great strategy for you.

Regardless of whether you are adding one IC or a dozen to your business, make sure you consider these things:

  • Understand the difference between an IC and an employee. I have heard travel agents talk about bringing on a subagent and what they actually want is an assistant. They can’t afford to pay someone a salary so they figure they will just bring on an IC and have them do some of these other tasks while they are learning. You are wading into dangerous territory here and can wind up on the wrong side of the IRS if you aren’t careful.
  • You will have to process commissions. You are now going to have to keep up with what commission belongs to which agent and that makes reporting more complicated. If you have a host agency, they will pay you and you will be responsible for paying your subagents.
  • Make sure they cover their own costs. There are costs associated with having an IC. Make sure you know what they are and that the IC covers those costs. If they aren’t willing to invest in the business, that should be a big red flag for you. Ideally, they should not only cover their own costs but help offset other costs as well.
  • Whose brand will they use? If you allow people to affiliate with you, are you going to allow them to use your brand? There are good reasons to do that and good reasons not to do that. Make sure you think through the consequences.
  • Make sure you are protected. Consultant with an attorney to be sure you are protected should the IC do anything wrong. You will also need a contract that spells out everything you do, what they do, and how all financial issues are handled. Update your errors & omissions insurance and encourage them to have their own insurance.

One other thing I would encourage you to consider before bringing on an IC: do you really like interacting with this person? Because you are going to spend quite a lot of time with them – whether that is virtual or in person. This isn’t a role where you just hand them a book and say, “Best of luck”. Further to that point, I’ve seen lots of friendships dissolve and family members stop speaking to each other because of working together. Think about this before you jump into a business relationship.

The bottom line: Bringing on an IC is a step that requires thought and planning. It isn’t for everyone, so make sure it makes sense for you before you commit to this strategy.