BATNA: Your Safety Net in Negotiation Tactics

As stated in the acronym, BATNA is the best option available if the negotiation fails. Hopefully, you’ll never have to use your BATNA, but knowing your best alternative provides a benchmark against which to measure any proposed agreement. If you’re negotiating with a supplier, your BATNA might be switching to another supplier, even if it’s more expensive. Paying more is not ideal, but this knowledge puts the negotiation in perspective, helping you understand what you require to reach an agreement.

BATNA essentially defines the lowest acceptable value you are willing to accept. It helps make informed decisions and avoid agreements that would leave you worse off. This not only gives you leverage but also provides peace of mind, knowing that you have a solid fallback option.

Assembling a Team

In high-stakes negotiations, having a high-end team is invaluable (much like one you’d find at TEC Canada, Canada’s best executive coaching program…). Having a range of perspectives in the preparation phase helps you consider different angles and remain positive. A team will be there to help you avoid tunnel vision: when emotions run high, it’s easy to focus on negative outcomes.

According to Harvard Law School, a negotiation team should include the following roles:

Other Preparation Processes

Preparation is key to successful negotiation. Here are some steps to consider:

Research the Other Party’s BATNA: Knowing the fallback options of the other party helps you gauge their position. For example, if you’re negotiating with a supplier, understand their alternatives, such as finding another client.

Role-Playing: Consider the stance of the other party. How might they react to certain pressures and offers? Role-playing can help anticipate their responses and prepare counterarguments.

In addition to understanding your own BATNA and that of the other party, thorough preparation involves gathering as much information as possible. This includes understanding the other party’s needs, goals, and pressures they are facing. Now you can tailor your approach and make offers that are more likely to be accepted. For instance, if you know that a supplier is trying to increase sales volume, you might be able to use that to your advantage.

An open discussion can lead to endless possibilities for negotiating, while the first two are somewhat limiting. For example, if you’re negotiating a contract with a supplier, you might explore options like volume discounts, long-term commitments, or joint marketing efforts.

Types of Negotiations for SMEs

After laying some groundwork about preparing for negotiations, let’s look at ideal outcomes and scenarios in which you, as a business leader, might come across.

Small Business and Large Supplier Negotiation: It might seem that the large supplier holds more power, but the small business’s ability to walk away and choose a competitor gives it some leverage. Even if the small business contributes only a small percentage to the supplier’s revenue, it still holds 50% of the power because the deal can’t happen without it. David beat Goliath with a well-placed pebble and a bit of nerve.

Mergers and Acquisitions: Smaller enterprises often feel at a disadvantage when being acquired by or merging with a larger firm, but they are crucial to the deal. They bring anything from brand recognition and customer base to products and patents to the table. It’s possible to negotiate for a 50-50 share of rewards, even if the larger company contributes more resources. However, smaller players sometimes accept smaller portions to maintain relationships, which can be beneficial for future deals. But this doesn’t mean letting yourself get pushed around.

In these scenarios, it’s important to recognize the interdependence of the two parties. While the larger party may appear to have more power due to its size or resources, the smaller party’s contribution is still essential for the deal to go through. This mutual dependence should be acknowledged and leveraged to find a fair and balanced solution. Understanding this dynamic can help you negotiate more confidently and assertively, ensuring your interests are met.

Fairness and Transparency

Reputation matters when it comes to long-term negotiations, which often occur in buyer-supplier contract renewals, for example. Forcing your hand or prioritizing short-term gains over the relationship can lead to competitive, rather than cooperative, outcomes.

Some negotiators may choose to withhold information to gain an advantage. Depending on the circumstances, this strategy may undermine trust and future negotiations.

However, being transparent doesn’t mean revealing all your cards at once. Sharing your long-term business goals with a supplier can help them understand your needs better and offer terms that align with those goals. At the same time, be cautious about revealing sensitive information that could be used against you. Striking the right balance between transparency and strategic disclosure is key.

Another way to show your intention to reach a fair outcome is to sit on the same side of the table as the other party, literally. Removing the physical barrier between the two parties shows your willingness to work together and removes the competitive element.

Leveraging Peer Support

Last but not least, a non-biased, non-competitive, peer support group of like-minded leaders can improve your business decisions overall and help you overcome leaders’ isolation.

Negotiating can be challenging, especially when undertaken alone. Many members of TEC Canada have found success by using their peer groups as sounding boards. This collective wisdom can provide valuable insights and strategies, bringing confidence and support to the negotiation process.