BATNA – 5 Tips to Master the Art of the Deal
When negotiations get tough, you rely on your BATNA to either get out of it or to at least get something out of the deal. But how does one use BATNA to their advantage?
For this article, we are going to talk about how to use BATNA to your advantage.
After this article, you should be creating BATNA during negotiations like a pro.
What is BATNA?
It’s an abbreviation for “Best Alternative to a Negotiated Agreement”. It’s your backup plan if your negotiation doesn’t lead to a deal. By determining a BATNA you’ll have more confidence because you have a backup plan if the negotiation doesn’t work out. Because of this, you won’t feel forced to make a bad deal.
Being forced into a bad deal will usually give you no choice but to leave the negotiation table. We clearly don’t want that to happen as often as possible!
One of the main reasons for entering into a negotiation is to achieve better results than without negotiating. The stronger the BATNA, the greater the range of alternative courses of action. The stronger the BATNA, the greater the ability to walk away from an unsatisfactory negotiation. When you find an alternative supplier to your current one that can deliver the same goods or service, the option of a ‘no agreement’ deal is not a risk anymore and as a result of having a BATNA, you’ll have more confidence and more choices to make. Having a well-developed and attractive BATNA is a source of great power in any negotiation. By determining a BATNA you’ll have more confidence because you have a backup plan if the negotiation doesn’t work out. Because of this, you won’t feel forced to make a bad deal.
The BATNA is your point of departure. Anything you can ‘win’ in your negotiation makes your BATNA less attractive.
Mark, a procurement manager of a large supermarket is negotiating with a supplier of canned food. The supplier offers to deliver 100,000 pieces for a price of $1.50 within two weeks. The procurement manager knows that a different supplier offers the same product for $1.40, therefore Mark knows this offer is worse than his BATNA and he shouldn’t agree.
Of course, there are other variables that Mark will consider. Is the BATNA able to deliver the same volume? How long will it take the BATNA to deliver? In the end, deals aren’t just closed not on price but on many other variables. Having a strong BATNA will help you to unlock your full power and use it to your advantage.
How to determine your BATNA
Finding alternatives to your current negotiation can be difficult. Sometimes it will take time to identify the alternatives and even more time to make them attractive. You have to establish a concrete value for your alternatives. For example, what is the value of a supplier who is able to deliver within 2 weeks, compared to a supplier who delivers in 2 months, but at a lower price?
However, exploring your BATNA is always a good time investment as having a strong alternative improves your ability to negotiate a good deal in the current negotiation.
Here’s how you find your own BATNA:
- What are your 5 best alternatives to a negotiated agreement?
- Review the list. What alternatives would be the best?
- How can you improve this BATNA?
- Can you make a better arrangement with another partner?
- Is there a way to change the terms of your BATNA?
- Can you remove some of the constraints of your BATNA?
- Can you leverage your current negotiation to improve your BATNA?
How to use BATNA
One of the greatest dangers in a negotiation is being too committed to coming to an agreement. Your negotiation partner will immediately sense this and will get the upper hand in the negotiation.
Before you begin a negotiation, know your options. Are you able to walk away? What are the pros and cons of each alternative? However, don’t stop here. Let’s determine your opponent’s BATNA.
Hi there! My name is Marijn Overvest, I'm the founder of Procurement Tactics.
Want to take your negotiation results to the next level?
How to determine your opponent’s BATNA
Here’s how you find your opponent’s BATNA:
- What are their 5 best alternatives to a negotiated agreement?
- Review the list. What alternatives would be the best for them?
- How can they improve this BATNA?
- Can they make a better arrangement with another partner?
- Is there a way to change the terms of their BATNA?
- Can they remove some of the constraints of your BATNA?
- Can they leverage your current negotiation to improve their BATNA?
- After improving their best alternative, write their new BATNA.
After determining your opponent’s BATNA it’s time to reflect on the results and how they impact your negotiation. Are you able to influence your opponent’s BATNA? Experienced negotiators frequently try to convince their opponent their BATNA isn’t a great alternative as they think it is.
Now you know their BATNA, you should consider the following things:
- What will be their main goal in this negotiation?
- What will be their strategy?
- What competitive pressure do they experience?
- Are they on a tight deadline?
Real life example
In my time as Procurement Manager, I focussed almost 40% of my time on contacting, visiting, and negotiating with BATNA or ‘alternative suppliers’. For me, this is the key driver for getting less dependent on current suppliers, and as a result of this, achieve successful negotiation results with your current suppliers. Why? Well.. No supplier wants to lose business, and having an actual alternative, gives endless power at the negotiation table. Yes, finding the right alternatives takes a lot of time. And yes, you still might not achieve all your goals due to external reasons, but trust me, it will be worth it!
Final thoughts on BATNA
In most negotiation situations you will have a continuing relationship with the other person. That’s why it’s important to come to a mutual feeling of ‘winning’ for both parties. If the other person feels like he lost, he might lack commitment in the execution phase of the deal. Or even worse, he will be after retaliation.
What is BATNA?
BATNA is the acronym for the “best alternative to no alternative”
What is BATNA used for?
It is used to find a good alternate solution to a difficult negotiation.
"Very useful course, many actionable strategies"
Want to close better deals? Prepare faster and achieve deal results you have been dreaming of? This course is a perfect fit for ambitious procurement & sourcing professionals. Enroll now and equip yourself with the full range of skills needed to master the deal.