For most of us 2020 has been a precarious year with the pandemic and the economy as a result of the pandemic. However, we think this year presents a great opportunity to acquire a tax and accounting practice for two significant reasons:
1) CARES Act Update on SBA Loans in 2020: The SBA is providing forgiveness to borrowers who close a business acquisition loan by September 27, 2020 (in reality September 25th since the 27th is a Sunday). This forgiveness is as follows:
- All SBA loan fees paid by the SBA.
- All principal payments for first six months of the loan paid by the SBA.
- All interest payments for the first six months of the loan term paid by the SBA.
- These payments made by the SBA are automatically forgiven without any need to request relief.
- These payments made by the SBA will not be subject to debt relief income.
In speaking with our SBA lenders, they recommend you be in full process with them by early August to insure your loan closes by September 25th.
The SBA is also providing relief to borrowers who have an existing SBA acquisition loan.
These steps are unprecedented in the history of the SBA and may never come around again!
2) Client Training: One of the most cost consequential issues in operating a tax and accounting practice is time spent in meetings with clients. Even worse, the clients who tend to take the most time are those with some of the lowest billings. The old 80/20 rule in the negative.
A positive effect of the social distancing rules from the pandemic is that most clients now understand and value the importance of virtual interaction via secure document portals, mail, email and the phone. This year has forced them to trust these systems and not rely on the face-to-face interaction they thought they needed in the past. Many will come to realize that everything went smoothly, the result is the same and it is far easier for them. They will be converted. Some may wish to still have a meeting, but care of clients has been redefined and there are now grounds to limit the number of meetings and the time spent in meeting (once we get back to that level of interaction).
In regard to an acquisition, this is great news for a would-be buyer. Staff efficiency and production can be expected to increase and profitability as a result. Staff capacity that may have been at its limit can now handle more client business and the practice can grow further, again improving profitability without expanding staff.
2020 presents a great opportunity for buyers who understand this and have the vision to continue to expand on it.