{"id":88440,"date":"2025-02-14T21:31:03","date_gmt":"2025-02-14T21:31:03","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/why-building-your-batna-is-the-ultimate-business-power-move\/"},"modified":"2025-02-14T21:31:03","modified_gmt":"2025-02-14T21:31:03","slug":"why-building-your-batna-is-the-ultimate-business-power-move","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=88440","title":{"rendered":"Why building your BATNA is the ultimate business power move"},"content":{"rendered":"


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BATNA:<\/strong> <\/span>Best Alternative To a Negotiated Agreement. \n<\/p>\n

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\n You\u2019re out of free articles for this month <\/p>\n<\/div>\n

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My professional and personal worlds<\/strong> \n<\/p>\n

In my professional life, I spend almost all my time with business owners or past business owners. These people fall into three major categories: \n<\/p>\n

    <\/p>\n
  • Slipstream Group Clients<\/strong> <\/span>who own Accounting and\/or Financial Planning businesses in Australia that turnover between $1M\u2013$25M.<\/li>\n

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  • Slipstream Coaches<\/strong> <\/span>who have all owned their own versions of the above.<\/li>\n

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  • CEO Groups and Masterminds:<\/strong> <\/span>I\u2019m part of several different coaching organisations as a client, and these business owners can be from any industry, running businesses that range from about $3M to $500M.<\/li>\n

    \n<\/ul>\n

    What I realised over my Christmas break, was that my personal life mirrors my professional one. I naturally gravitate toward business owners, founders and serial entrepreneurs. \n<\/p>\n

    A New Years’ Eve conversation<\/strong> \n<\/p>\n

    So on New Year\u2019s Eve (technically early New Year\u2019s Day) at a bar on the Mornington Peninsula, Victoria, I find myself having a conversation with a business owner who is on the cusp of selling his business in a significant eight-figure deal. \n<\/p>\n

    It\u2019s a super interesting time of life, almost regardless of the size of the deal or the mindset of the business owner. I’ve had this conversation a lot. In fact, I estimate over 100 similar discussions in the past 18 months. <\/span> \n<\/p>\n

    I get calls from people I haven\u2019t spoken to in years that might start with: \n<\/p>\n

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    • \u201cHey, do you know a business broker?\u201d<\/em><\/li>\n

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    • \u201cHey, this is super confidential, but I just got an offer to buy my business and didn\u2019t know who to call. Got time for a chat?\u201d<\/em><\/li>\n

      \n<\/ul>\n

      There\u2019s a universal truth for all business owners preparing to sell: <\/span> \n<\/p>\n

      Your BATNA is your most powerful asset\u2014not just during negotiations, but throughout the life of your business.<\/strong> \n<\/p>\n

      5 Anti-BATNA building moves that undermine your position<\/strong> \n<\/p>\n

      Here are five common mistakes I see ALL the time (warning: this gets dark before we end on a high note): \n<\/p>\n

        <\/p>\n
      1. Relying solely on your business for retirement:<\/strong> <\/span>\u201cMy business is my super.\u201d This mindset results in no investments in appreciating, off-farm assets. It\u2019s an \u201call eggs in one basket\u201d approach that\u2019s risky.<\/li>\n

        <\/p>\n

      2. Prematurely increasing personal spending:<\/strong> <\/span>One to five years before the business is going to (hopefully) sell, the owner, or often their spouse, starts to increase the family spending beyond their current annual income, eroding their net wealth on the daily. Listen for phrases like: <\/span>\u201cWell, John\u2019s business is worth a lot of money, and he\u2019s thinking of selling it soon so we can afford to buy X (car, boat, house, luxury holidays, casual retail overspending, etc.).\u201d<\/em><\/li>\n

        <\/p>\n

      3. Neglecting team and systems investments:<\/strong> <\/span>The business owner doesn\u2019t invest or stops investing in building the team, systems, and business resilience because they are concentrating on the exit. This might be in an effort to get lean and boost the profit; usually, it\u2019s just a shift in focus from the <\/span>main game<\/em> <\/span>to the <\/span>end game<\/em>.<\/li>\n

        <\/p>\n

      4. Not keeping up to date on the valuation game:<\/strong> <\/span>Not understanding the valuation methodology for your industry and the potential shifts in the way your business could be valued in the future. I could not count the number of financial planning firms a few years ago that were chasing exclusively revenue because <\/span>a<\/em> <\/span>major acquisition player\u2014aka buyer of last resort\u2014would pay 4x revenue: <\/span>\u201cSo this $3M business that has a negative EBIT after I pay myself a commercial salary is worth $12M \u2013 TA DA!\u201d<\/em> <\/span>\u2026Until they weren\u2019t, and now the market is moving towards a multiple of EBIT valuation, and zero multiplied by any number \u2260 <\/span>TA DA!<\/em><\/li>\n

        <\/p>\n

      5. Neglecting personal health:<\/strong> <\/span>Generally, not taking care of their health. Not taking quality breaks away from the business to recharge, not prioritising health (both physical and mental), and operating in a highly stressed state for long periods of time\u2014or virtually permanently. I\u2019m not sure of the stats on businesses that \u201cfire sale\u201d due to the owners\u2019 health but I\u2019m going to suggest that\u2019s not how you want it to play out.<\/li>\n

        \n<\/ol>\n

        \u00a0 \n<\/p>\n

        A realistic scenario<\/strong> \n<\/p>\n

        So let\u2019s explore this in the scenario of all five of these anti-BATNA moves: \n<\/p>\n

          <\/p>\n
        • You approach the sale of your business where this deal is the total make-or-break for your financial future.<\/li>\n

          <\/p>\n

        • You have a declining personal net wealth\u2014so bad that the sale of the business is essential to maintain your current lifestyle.<\/li>\n

          <\/p>\n

        • You are really not enjoying running the business. It feels heavily reliant on you, and you have critical people that, if they left, you haven\u2019t got their successor.<\/li>\n

          <\/p>\n

        • The systems are not working the way they should, and every day you are fighting fires.<\/li>\n

          <\/p>\n

        • The valuation for your business was a complete shocker; you were caught off-guard that it wasn\u2019t just based on X like you thought.<\/li>\n

          <\/p>\n

        • Your health is on the decline. It\u2019s noticeable, and you feel it.<\/li>\n

          \n<\/ul>\n

          In this scenario, your best alternative to selling the business is not pretty. In fact, it\u2019s scary, and likely the feelings of shame about the whole situation are present at the negotiating table. This seller is in a highly vulnerable position, they have eroded their leverage and options. \n<\/p>\n

          5 BATNA-building power moves<\/strong> \n<\/p>\n

            <\/p>\n
          1. Invest outside of your business:<\/strong> <\/span>Your business might be the main game, but you have built a diversified, growing portfolio of likely passive investments that represent an increasing proportion of your net worth.<\/li>\n

            <\/p>\n

          2. Live within your means:<\/strong> <\/span>Regardless of the likelihood or the proximity of the deal, avoid spending based on the anticipated sale. Do not start spending the money or uncorking the Grange until the transaction is done.<\/li>\n

            <\/p>\n

          3. Focus on long-term sustainability:<\/strong> <\/span>Continue to make decisions in the best interest of the long-term success and sustainability of the business. Make decisions that mean you enjoy your role in the business and the freedom it provides you.<\/li>\n

            <\/p>\n

          4. Understand valuation trends:<\/strong> <\/span>Understand the transaction landscape in your industry and be across the trends. If there are multiple valuation methodologies, build your business so that either methodology results in a win.<\/li>\n

            <\/p>\n

          5. Prioritise your health:<\/strong> <\/span>Maintain physical and mental well-being for resilience in life and business. Now, always, and forever.<\/li>\n

            \n<\/ol>\n

            \u00a0 \n<\/p>\n

            A different negotiation experience<\/strong> \n<\/p>\n

            Ok, so now we are entering a conversation about the sale of our business feeling very differently: \n<\/p>\n

              <\/p>\n
            • You are financially secure regardless of this deal.<\/li>\n

              <\/p>\n

            • The business brings you joy and freedom.<\/li>\n

              <\/p>\n

            • Strong systems and a resilient team are in place.<\/li>\n

              <\/p>\n

            • You know the transactions that have happened recently for similar businesses and enough about the valuation particulars to be dangerous.<\/li>\n

              <\/p>\n

            • You\u2019re fit and healthy, just back from a great holiday, and looking forward to several more.<\/li>\n

              \n<\/ul>\n

              If this deal doesn\u2019t proceed, life is still amazing. In fact, it would have to be a hell of an offer to make it worthwhile\u2026. \n<\/p>\n

              Final thoughts<\/strong> \n<\/p>\n

              The most valuable asset is the one that you don\u2019t need to sell. \n<\/p>\n

              You can build your future BATNA today and every day. Building your BATNA will not only create future leverage, options, and power but it will also enhance your business and improve your life! \n<\/p>\n

              Told you we\u2019d finish up strong. Let\u2019s go 2025!<\/p>\n<\/div>\n