What is a BATNA (Best Alternative to a Negotiated Agreement)?
BATNA, or the best alternative to a negotiated agreement, is a position used in negotiation theory. It’s the best outcome that a negotiator can expect if they walk away from negotiations without a deal.
The term was first coined by authors Roger Fisher and William Ury in their 1981 book, “Getting to Yes: Negotiating Without Giving In.”
A BATNA can be used to strengthen one’s own negotiating position while calculating an opponent’s likely bidding range. It can determine a zone of possible agreement (ZOPA), which is where a buyer’s and seller’s settlement range overlaps and where an agreement can be reached.
A seller’s bidding range falls between their desired price and their worst case. For example, a seller trying to sell their motorbike deems that it’s worth $12,000. They receive several offers that fall short of this figure, with the highest offer being valued at $10,000. This is their best alternative to a negotiated agreement. If negotiations with another prospective buyer fall through, $10,000 is the amount they can still receive from existing prospects.
Seller’s bidding range: This puts the seller’s bidding range between $10,000 and $12,000.
A potential buyer, on seeing an advertisement for the bike, saw a similar make and model for $11,000, their BATNA, but, ideally, prefers to purchase the bike for $9,000. If the seller wants more than $11,000, the prospective buyer can walk away and still acquire a bike for the $11,000 figure. Therefore, the buyer has no reason to go above this amount.
Buyer’s bidding range: This means that the buyer has a bidding range between $9,000 and $11,000.
The zone of possible agreement
The negotiators have a zone of possible agreement (ZOPA) between $10,000 and $11,000, and this is the range in which the two parties likely can reach an agreement.
Here are a few strategies you can employ to leverage BATNA to your advantage:
- Having a strong BATNA gives you the confidence to negotiate. You know that you have a strong position, which means that you can demand more during negotiations. If your opponent refuses to concede any ground, you can walk away and still benefit from your best alternative.
- As a negotiator, you should identify your opponent’s BATNA. It gives you a starting position for negotiations and a point at which you know a deal can be reached. In the motorbike example, you can check out local motorbike listings to determine the price and demand for your bike.
- Negotiators typically attempt to weaken a BATNA. If your counterpart manages to diminish the value of your BATNA, in your mind, it enables them to break out of your bidding range. Thoroughly research your alternatives before negotiating so you have confidence in your alternative. The seller might try and point out flaws or problems with another motorbike.
- It pays to have at least two alternatives to a negotiated agreement, where possible. Deals and proposals can fall through, especially as some alternatives might take offense if they find out they’re being used as a bargaining chip. If one alternative falls through and you have a backup alternative, this puts you in a very strong negotiating position.
- Don’t reveal your BATNA unless it benefits you to do so. At the very least, avoid revealing a weak position. Even if your best alternative is strong, there are benefits to retaining this knowledge and not sharing it with your counterpart. If you do divulge your position, avoid bluffing or exaggerating. If you get caught out, you risk your reputation, as well as your bargaining position.
- That said, if your opponent declares their position, be prepared for the possibility that they may embellish or exaggerate their BATNA.
Calculating your BATNA
In their book, Fisher and Ury describe the process of identifying your best alternative to a negotiated agreement. They suggest the following approach:
- Write a list of all possible outcomes if no negotiation is reached. These should be both positive and negative outcomes. You can also use this list to determine your worst alternative to a negotiated agreement, or WATNA.
- Expand on the most favorable and the most likely outcomes.
- Choose one or more of the outcomes that seem the best.
You can attempt to expand on your identified BATNAs further. You may look for ways to improve these alternatives to give yourself an even stronger negotiating position.
Know your best alternative
Whichever side of the negotiating table you’re on, you should identify and expand on your BATNA while researching your counterpart’s best alternative. It can help you achieve the best possible deal.