FORTUNE Small Business:
The FSB 100 2006 Full coverage
Ambassadors Group
Only 400 students toured within the U.S. in 2002; 6,500 did so last year.
Ian Mount, FSB contributor

(FORTUNE Small Business Magazine) -- The past three years have given American parents many reasons not to send their precious progeny overseas: terrorist bombings, bird flu, and a tsunami, for starters. But Ambassadors Group, No. 78 on the FSB 100, shows that small firms can overcome a world of obstacles.

Ambassadors leads teens on three-week People to People cultural exchange trips that might, for example, include an intimate talk with a British MP, a London home stay, and tours of Stonehenge and Big Ben. The company has a valuable connection to People to People International, a nonprofit founded by President Eisenhower in 1956 that has been lending its name--for an undisclosed sum--to Ambassadors and its predecessors for decades.

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The NGO works to foster international understanding via programs such as land-mine eradication and peace camps, and approves every trip that bears its name.

Based in Spokane, Ambassadors (Charts) (ambassadorsgroup.com) has spent the past five years recovering from a post-9/11 contraction when CEO Jeff Thomas, now 39, was forced to lay off 65 of his 200 employees.

By the end of 2002, annual revenues had dipped from $43.4 million to $36.1 million. But the company has rebounded, turning in a record year in 2005 with 37,800 travelers yielding $64.3 million in sales. Thomas and his executive VP, Peg Thomas - who married in 2005 after working together for nine years - realized that if Ambassadors was going to get middle-class families (average client income: $70,000) to pay a typical trip pricetag of $4,000 to $5,000, strategic changes were in order.

In 2002, Ambassadors rolled out software to personalize its pitch letter to prospective travelers. "Our objective is to know something about every person to whom we mail a letter," says Thomas, 39. What once was a form letter now might read, "Jeremy's history teacher recommended our London trip for him because of his Model UN leadership."

At the same time, Ambassadors began offering tours to new destinations, largely in Asia and the South Pacific. A third of the company's travelers now select trips introduced during the past three years. And while only about 400 students toured within the U.S. in 2002, around 6,500 did so last year. These one- to two-week sojourns appear safer and bring in more travelers during the year, not just during summer vacation.

But safety continues to be the biggest obstacle to selling trips. The company has been beefing up the crisis-response system it began developing in 1999, running disaster-response drills, increasing chaperone training, and emphasizing those facts to parents.

The July 2005 London Underground bombings gave the system a chance to shine. When the bombs went off at about 1 A.M. Pacific time, an employee who was watching CNN notified Thomas. By 3 A.M., the office was fully staffed, and employees had set up an informational website and had awakened the families of 2,500 students who were in Britain or on their way there to tell them how to reach their children.

Jeff Thomas worries about his company's safety too, keeping plenty of rainy-day cash on hand - $116.7 million at the end of 2005. "If there's a recession and no one travels, it'll still be standing," says Andrew Boord, a research analyst with Fenimore Asset Management in Cobleskill, N.Y., an Ambassadors shareholder.

Even in 2001, the company turned a profit. "We always ask what people worry about. Most management teams have a scripted answer," says Boord. "[But] the last time we talked, Jeff had just seen a show where the magnetic poles of the earth were reversed, and he was even worried about that. I like that. Worriers tend to stay out of trouble." Only 400 students toured within the U.S. in 2002; 6,500 did so last year.

Next FSB 100 company: No. 94: Lifeway Foods

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