Understanding BATNA

BATNA is a well known negotiation acronym that stands for “best alternative to the negotiated agreement.”

If you’re familiar with the concept of opportunity cost, then BATNA will sound very familiar. The idea behind opportunity cost is that the price of something isn’t just the number listed on the tag. There’s an opportunity cost involved and that cost is the price of the next best alternative. Let’s say you have two potential events you can attend this weekend. You can either go to a movie or go to a concert. The opportunity cost of going to the movie is the enjoyment you would’ve experienced if you went to the concert instead. The opportunity cost of going to the concert is the enjoyment you would’ve experienced if you went to the movie instead. So the cost of the movie is not only the ticket but concert enjoyment. Got it?

BATNA is a similar idea. When you’re negotiating anything, it’s important to know the other side’s BATNA. You’re trying to create a win win situation, so you have to create wins for the other side. If you know their next best offer is worth $10, you can offer a $9 solution. They would simply say no and go to their BATNA. You want to know how much their next offer is worth and offer something better.

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