What you need to know about managing your BATNA

January 14, 2021

Your Best Alternative to Negotiated Agreement (BATNA), is defined as the most advantageous alternative that a negotiating party can take if negotiations fail and an agreement cannot be made. In other words, a party’s BATNA is the true measure by which any proposed agreement should be assessed.

Used in negotiation tactics, it is never wise to enter into a serious negotiation without knowing your BATNA. The value of knowing your best alternative to negotiated agreement is that it provides negotiating power, determines your reservation point (the worst price you are willing to accept) and provides an alternative if the negotiation falls through.

We have listed below some of our top tips that will assist you in managing information about your BATNA:

  1. Never share your BATNA with the other party.
  2. Be aware that your counterpart may discredit your BATNA. It is important that you recognise they have very real incentives to convince you that your outside options are beneath what you’d like to achieve.
  3. If the other party enquires directly about your BATNA, explain clearly and truthfully that you are working on various possibilities but want to concentrate on the deal on the table for the time being.
  4. Hold off on revealing your rock solid BATNA. It could prove to be a useful bargaining chip during the final stages of a negotiation after you’ve exhausted all other strategies.

The following diagram illustrates each party’s best alternative to negotiated agreements (seller and buyer):

Key terms

  • ZOPA (Zone of Potential Agreement) is the overlap between the seller’s and buyer’s settlement range.
  • Seller’s Settlement Range is a biddable range acceptable to the seller.
  • Buyer’s Settlement Range is a biddable range acceptable to the buyer.
  • Buyer’s or Seller’s Worst Case is the reservation point of the respective parties.

Your situation is unique, and we recognise that not ‘one size fits all’. If you require support in developing legal strategies for your business negotiations, please seek advice from our caring team of professionals at Chris Sheath & Associates Solicitors. We can partner with you in reaching your BATNA.

Contact us by phoning 07 4638 5541 for further information.

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