A couple of years ago I attended Harvard Business School, and from the Strategic Negotiation Course, perhaps one of the hardest courses I have every attended, but enjoyable, we learned the model BATNA, standing for “best alternative to a negotiated agreement“.
From their book Getting to Yes: Negotiating Without Giving In, Roger Fisher and William Ury created the term BATNA.
A BATNA is determined by knowing each parties upper and lower points at which they would walk away from an agreement, and will result in a course of action that will be taken by a either party if the current negotiations fail and an agreement cannot be reached.
In basic terms, when in negotiation, if the proposed agreement is better than your BATNA, then you should accept it, whereas if the proposed agreement is worse than your BATNA, you should walk away, or reopen negotiations. If you cannot improve the agreement, then you should at least consider withdrawing from the negotiations and pursuing your alternatives.
When in negotiation, one should also consider the other party’s BATNA, to come to an agreement that is a Win Win situation. That is to say that neither party looses in the agreement.
The BATNA can protect you both parties from accepting terms that are too unfavorable and from rejecting terms it would be in your interest to accept.
Many considerations should be made in constructing a BATNA, not just money or value, maybe payment terms, add-on value such as guarantees, delivery, suitability, needs, etc.