Have you ever purchased or sold something and later asked yourself, “why in the world did I agree to that?” I have both personally and professionally. In every case, I made that agreement because I had not first developed my BATNA.
BATNA is a term first published by Roger Fisher and William Ury in their book Getting to Yes. BATNA is your Best Alternative to a Negotiated Agreement. While a simple concept, it is not often used except by professionals in the purchasing or sales professions. However, it is applicable for anyone buying or selling anything, especially if the cost or importance is large.
Your BATNA is different from your reserve price or walk-away position in a negotiation. Your BATNA is your backup option if you need to walk away from the negotiation. When working to develop your BATNA, you need to:
- Develop a list of alternatives (brainstorming), regardless of cost or feasibility that could be considered if negotiations fail.
- Evaluate and identify the best alternative and look to develop them into practical and attainable alternatives.
- Identify the most beneficial alternative to be kept in reserve as a fallback position during negotiations.
BATNA is also a psychological tool in negotiations. While having a strong BATNA does not guarantee success, it does help prevent you from agreeing to something you would later regret. Having a strong BATNA allows you to demand larger concessions from the other party, because you know you have another alternative if that negotiation is unsuccessful. It is very difficult to walk away from a negotiation if you do not have an alternative.
Regretfully, many people in purchasing and sales believe they are locked into a supplier or client because the supplier is the sole source, or the client represents a significant investment in either time or money. If you go into any negotiation with this attitude, you have essentially already agreed to whatever terms and conditions the other party demands. If this is your belief, do not negotiate. Merely accept the first offer presented and save yourself both the time and energy involved in attempting to negotiate a better offer.
I have been in the purchasing and supply chain profession for well over 30 years. During this time, I only had one true sole source supplier. This was because there were only two companies in the world that operated at this level and since the contract was a classified project, I had to select the U.S. Corporation. In this negotiation, the problem was not the price, but getting the company to agree to perform the work. After getting them to agree to perform the work, we completed the negotiation over a period of three days and the project was an outstanding success.
Always know what you want to accomplish prior to entering any negotiation situation. This includes identifying and developing your BATNA.