The travel agencies that have survived are doing mostly cruises, corporate travel and customized itineraries (for which they charge fees). There's so much on the Internet that my husband and I have rarely resorted to one. Once you know where you want to go, what hotels you want, which flights, etc. why do you need someone else to book it all? If you're looking for advice on any of this, then you may need a TA.
Having said that- we have one in town that's been here longer than we have (pre-2003). That's my main criterion- I figure they've been doing something right! I find the European train Web sites user-hostile and have had them get tickets and/or railpasses for us. They get a commission, it doesn't cost us anything extra, and we have the tickets in hand. We just dropped in Saturday with a request to book an Alaskan cruise- we knew the line/date/itinerary/cabin we wanted and she used the same darned Web site we did! It's a small ship so I doubt there are bargains. (I tried CruiseCompete. I got an automated e-mail that said they'd get back to me. That was over a week ago.)
Those are some answers beyond your original question, but I'd sum it up by saying you should figure out what you want them to do that you can't do for yourself, then interview local ones and see if they know any more than you do or if they just push package tours from glossy brochures,