Home Based Business Definitions
July 3, 2008 – 1:16 pmWith regards to technology, the type of Home Based Travel business significantly impacts the technology capability required by the Home Based Travel Professional. Thus, it is important to define the different types of Home Based Travel Businesses in use today. They are:
Referral Agent
The Referral Agent is the most simplest of home based travel businesses. The Referral agent generally works with an official travel agency and gets paid for customers of whom they refer. In essence, they get paid a finders fee. The Referral Agent has no “official” responsibility for the booking. Thus, they are not required to register with travel suppliers (cruise lines, tour operators, airlines, etc), purchase insurance, purchase bonds, etc. The referral agent may elect to simply record income as miscellaneous income for tax purposes or, may define oneself as a sole proprietorship and file accordingly.
Independent Contractor (Outside Agent),
The Independent Contractor is an official business unit that sells travel. However, the Independent Contractor works with a parent travel agency (host agency) and thus conducts business under the parent travel agency’s name. The parent travel agency officially assumes all responsibilities for the booking and it is the parent agency that must comply with all state and local licensing guidelines.
The Independent Contractor does not register with the travel suppliers nor does the Independent Contractor have to purchase insurance or bonds to do business. However, states do consider them as official business entities (sole proprietorships, limited partnerships, S or C corporations) and thus they must comply with state and local business law.
Independent Contractors do book travel packages for consumers. Independent Contractors do interact with customers. In fact, Independent Contractors perform all the tasks that “official” travel agents perform. They are service providers to the host agency. Independent Contractors get paid a percentage of the total commission on a booking with the host agency keeping the rest. The Host Agency may or may not charge the Independent Contractor administrative fees on a monthly or per booking basis.
Independent Contractors do not report to the host agency for employment and business related matters. By definition, their relationship with the host agency is purely contractual, much the same as any service provider is to you.
And lastly, Independent Contractors may utilize other Independent Contractors and Referral Agents to assist them in booking travel product.
Independent Contractor (Mult-Level Marketing)
The Independent Contractor who is part of a Multi-Level Marketing company has all the responsibilities of the Indepent Contractor (Outside Agent). This type of Independent Contractor works for a host agency, the owner of the MLM, and books travel under the umbrella of the Host MLM Agency. Again though, the MLM Independent Contractor is it’s own business and there is subject to federal, state, and local laws.
The difference between the MLM Independent Contractor and the Outside Agent Independent Contractor lies in monthly or periodic fees. The MLM Independent Contractor often has a periodic financial liability to those businesses or entities upstream in the chain and also as receivables from those businesses or entities downstream.
Commissions received by the MLM Independent Contractor are decreased by the Host Agency take and the percentage take of those businesses or entities upstream. Note that the MLM Independent Contractor often receives a portion of the commission of those businesses or entities that sell downstream.
MLM Independent Contractors may have referral agents and other independent contractors with whom they associate. In addition, MLM Independent contractors may have subordinates as defined by their MLM chain.
Independent Home Based Agent / Agency
The home based agent is an individual who by all definitions, meets the definition of a traditional travel agency. The home based agent registers with the travel suppliers, purchases insurance, purchases the appropriate licenses and bonds, market the business, supports a website, etc. The only difference between the independent Home Based Agent and a traditional travel agency is the location.
The traditional home based agent often works out of his or her house. They do not have a retail storefront. Traditional home based agents are often Home Based Agencies. In this form, other home based personnel come together to form a virtual agency. Note that the skill level of the home based agent is very advanced. These are usually true travel professionals who have been in the business for a number of years and have elected to go it on their own and thus reap full reward for their work.
Home based agents keep the full commission earned from their bookings. The suppliers credit them with volume, etc. Again, it is just like a traditional storefront travel agency except for the need to pay rent.
Conclusion
With all the above forms of independent home based travel professions, there is a need for technology such that a consistent stream of clients is available. In some cases, especially in the case of the Independent Contractor, the host agency will provide technology. They even might provide leads. However, for the referral and Independent Home Based Agent, well, they are often their own for generating business.
In any case, the needs differ but one constant remains. Each home based business entity needs to generate business, i.e. find those retail consumers who wish to travel. And that fact alone, often requires an advanced technological solution that performs accounting, marketing, contact management, and reservation tracking.
-Paul
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