Understand Your Next Best Alternative when Negotiating

When talking about negotiating I want to stress that keeping the big picture in mind is very important. It is easy to get caught up in a highly emotional situation and lose sight of what is really important.

One way to avoid losing sight of the big picture is to understand what your Best Alternative To a Negotiated Agreement (BANTA) is. If the negotiation you are currently engaged in does not work out what will you be left with? The answer to this question will generally inform how large of a range the two parties will negotiate over.

UNDERSTAND THE OTHER PARTY’S BATNA

It is important to understand what your counterpart has for a best alternative to a negotiated agreement. If one party has a very strong BATNA they will be unlikely to compromise during the negotiation, whereas if a party has a terrible BATNA they will be strongly incentivized to compromise and work out a deal.

LOOK TO IMPROVE YOUR OWN BATNA

In any situation there is always room for improvement. The same goes for negotiating. You should always be on the lookout for ways you can improve your own position.

For example, if you are trying to sell someone your used car for $3,000 dollars you would start with a BATNA not selling and holding onto your car. This is a pretty bad BATNA when you want or need to sell your car. Through the process of trying to sell your car, you find out a friend of your relative would like to buy the car, but they are hoping for the reduced price of $2,500. This doesn’t sound as bad as the previous BATNA, but you were trying to do better. This this case your BATNA has improved from 0 to $2,500. A week later you get a phone call from someone who would like to come look at the car. When they come to look at the car you already know you won’t take anything less than $2,500 because you have an alternative.

From the perspective of the person coming over to look at the car they would also want to improve their BATNA by finding other cars that will satisfy their needs. Now if they come over and tell you they absolutely must have a car by tonight to drive to their job in the morning or else they are going to get fired and this is the only car they’ve looked at. Well then you can be pretty sure that they are going to pay the full $3,000 price tag. It isn’t always in your best interest to reveal your BATNA.

Title Image Credit: Pat Mouhan via http://unisci24.com/

Leave a Reply

Your email address will not be published. Required fields are marked *