Today you will learn: Setting your Limit Price – Calculating your BATNA – Knowing the exact point when to leave a negotiation (with video example for calculating your BATNA in a court case).
There are 2 key forms of negotiation:
1) Collaborative Negotiation (aka Harvard win-win)
2) Competitive / Distributive Negotiation (aka Bargaining)
The best negotiators master both forms and know how to integrate them by first growing the pie with win-win strategies and then securing the bigger piece of the pie with distributive negotiation strategies.
This month I want to focus on how you secure the biggest piece of the pie and share the three key numbersyou need to prepare for any monetary (=distributive) negotiation.
- Limit price
- Goal Price
- Opener
These numbers are so key, that the GC of a Fortune 500 company I work with tells his managers to not even knock on his door before they have them hashed out. And it takes them a day, sometimes two, to do just that. So take good note!
Let’s dive in and talk about the first one, the Limit Price.
Your Limit Price is best determined by your BATNA (Best Alternative to Negotiated Agreement). BATNA is the answer to the question “What will I do if this deal/negotiation tanks?” This needs to be specific! Not just “I’ll just get another job” or “We will acquire another business” or “We will just take it to court if we cannot settle” but which job, for how much, when, under what terms, what is a likely outcome in court?
This always needs to be a specific number! Yes, even and especially going to court! The below video excerpt from our Master Negotiator Course shows how to calculate your BATNA in a business dispute lawsuit.
The bottom line is: The more specific your alternative and the more you work on improving it, the greater your negotiation power.
Knowing your BATNA is critical because it is your walkaway point. Too many times, people overpay or undercharge because in the heat of the negotiation, due to poor preparation, or due to the length of the negotiations (sunk cost principle) they do not realize they would have gotten a better deal somewhere else.
Sometimes the best deal is no deal. You have to know where that walkaway point is for your situation to apply it, regardless of whether this is a settlement negotiation, your salary, a new home or any other purchase or business contract.
Improve your BATNA – give yourself negotiation power!
Keep Negotiating!
Your Negotiation Whisperer
Next Topic: Goal Price. How “let’s do the best we can” NEVER gets you the best you can – setting ambitious goals in negotiations.
PS: Book recommendation for German lawyers who want to dive deeper: Jörg Risse: Prozessrisikoanalyse: Erfolgsaussichten vor Gericht bestimmen. Highly recommend!
