“We’ve got your son. Give us one million dollars, or he dies.” This is how Chris Voss author of Never Split The Difference starts his negotiation training class. He pulls a student up from the classroom and tells them they have one minute to negotiate on behalf of their son.
Chris is an former hostage negotiator for the FBI. Most of us will never have to hear these words (thank goodness), but it does demonstrate the seriousness of negotiation skills. In business, like in life, you are constantly negotiating. And the impact of negotiating effectively (or failing to negotiate effectively) can be enormous to your deal, your company, and your career.
Negotiating a business deal is very different from negotiating for someone’s life. We negotiate every day without even knowing it. Let’s say you want to wear black shoes to a party, and your spouse wants you to wear brown. Do you split the difference? Of course not. You would not wear one black shoe and one brown shoe would you? This exchange usually results in a negotiation. Just as you are trying to sell a million dollars worth of software to a company and they offer you $250,000 for it. Do you split the difference? Maybe or maybe not.
The answer lies in a concept called BATNA, invented by Roger Fisher and William Ury in their book Getting to Yes. BATNA stands for Best Alternative To A Negotiated Agreement. The concept is pretty simple yet extremely powerful. Wikipedia defines BATNA as “the most advantageous course of action a party can take if negotiations fail and an agreement cannot be reached.”
For example, you are offered a new job by your competitor. The job has perks you do not currently have and pays more. You decide to go to your current employer and ask for a raise and a few more perks. The offer from your competitor becomes your BATNA. You have an alternative to staying at your current employer. It is very important to know your BATNA before you enter into any negotiation because it gives you leverage.
The best negotiators go one step further and try to figure out the other parties’ BATNA. For example, if you begin to negotiate with your employer for a raise, wouldn’t it be great to know beforehand what their alternatives are to replace you? When you do negotiate, make sure you are prepared to discuss all the value you provide. Because the more value you bring to the table, the harder it is to replace you. This is true in any business negotiation, too. The more value you bring to the table, the harder it is to replace you.
There are three basic steps to creating your BATNA: first, identify all of your alternatives to the current opportunity you are negotiating. Second, try to figure out what the value of each alternative is to you. Third, calculate what you believe to be your walk-away price (in other words your best alternative).
The walk-away price is a key result of taking the time to figure out your BATNA. Assuming you took the time to identify one or more alternatives, you must figure out what each alternative is worth (step 2 above) to you in “real dollars.” Then in step three, look at each alternative and select the one that provides the most value to you. The one you select is your walk-away price.
Let’s say your current employer pays you a total compensation package of $100,000. You also have offers from two other companies. One is offering a total package of $125,000, and the other $110,000. When you return to talk with your current employer, your walk-away price should be $125,000. After all, that is the best alternative you currently have.
There are many techniques you can use when negotiating. I am a big fan of BATNA because it forces you to think through alternatives if the negotiation fails. Next time you are negotiating that million dollar deal, or asking for a raise, make sure that you prepare your alternatives beforehand.
This has been a high-level summary of a more detailed and rich topic for professional growth. Technology Finance Partners offers customized training courses in negotiating the complex sale, among other critical skills for sales professionals. The course agenda includes preparing for a negotiation, anchoring, BATNA, planning for a negotiation, and a customized strategy worksheet. We provide a workbook, exercises, audio/video analysis, and role-play activities. Courses range from two to six hours and class sizes are limited to 25. Please contact us for more information.