How to Prepare For a Negotiation

How will you know whether to say “yes” or “no” to a deal? Allan Stitt shows how to prepare effectively for a negotiation to get great results.

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How to Prepare For a Negotiation

Here’s the video link of the transcript below: https://www.youtube.com/watch?v=eBfuEThGcfM

{Transcript}

What’s the best way to prepare for negotiation? Well, the first thing is—it is important to prepare. One of the mistakes that people often make is they look at the overwhelming nature of a negotiation and say, “It’s too tough to prepare. It’s going to take too long. It’s going to take too much energy. I have to do too much research, too much work—I’m just going to go in and wing it.” And that’s the first mistake people make about preparation.

Preparation is not a lot of work. It doesn’t have to be a huge effort. You don’t have to spend a huge amount of time. Preparation for negotiation can be a very reasonable exercise.

So what do you do to prepare? What’s the best way to prepare?

Well, actually, to think about how you need to be prepared, I think you actually need to go to the very end of the negotiation. At the very end of the negotiation, you’re going to have to make a decision. The decision you’ve got to make is: am I going to say yes, or am I going to say no? Am I going to walk away from the table, or am I going to shake hands, sign on the dotted line, and have a deal?

So the question is: how do you know how to make that decision? How are you going to decide whether you should say yes or say no—and when you should say yes or no?

Well, there are really two theories about how to know whether to say yes or say no.

There’s the common theory, and that is—you should say yes if the deal feels right. If it’s good for you, if you feel like it’s comfortable, or if you like what the other person’s had to say, it seems to be fair, it seems to be reasonable. It’s what you thought going in. It’s better than what you thought your bottom line was. That’s conventional wisdom.

But actually, conventional wisdom can cause you to make a number of mistakes. For example, let’s say you go into a negotiation and say, “This deal is fair. This deal is reasonable. This is a good deal. It’s better than my bottom line. It met my needs.” And you say yes. Then you walk away from the table and realize—wait, if I had said no, there’s something much better I could have done way out there. That would be a mistake.

On the other hand, probably an even worse mistake—suppose you look at what the other person is offering and say, “It doesn’t meet my needs. It doesn’t meet my interests. It’s not fair. It’s not reasonable. It’s worse than my bottom line. I don’t feel comfortable with it. I’m going to say no.” Then you walk away from the table and it’s a disaster—because what you walk away to is actually worse than what you could have agreed to at the table.

So the real test for whether you should say yes or no isn’t: does it feel right? Does it feel reasonable? It’s: how does it compare—compare to what I’m going to do away from the table?

So in order to be well prepared for the negotiation, you really have to know—what will you do if you don’t reach a deal? What’s going to happen if you say no to the other person, or if they say no to you? If you walk in and say, “Good morning,” and they say “No,” and walk out—what are you going to do?

So in order to figure out what you’re going to do, first of all, you have to figure out—what are all the things I could do? What are all the paths I could go down? What are all the courses of action I could take?

And those paths, those courses of action, are what are known as your alternatives to a negotiated agreement. And to prepare, you have to figure out: what are my alternatives? What are the different things I can do if I don’t reach an agreement?

But that’s not the end. Some of us do that, some of us don’t—and those of us who do it sometimes stop there. But we can’t stop there, because if we don’t reach a deal, we can’t go down all of these paths. We can’t choose each one and do them one after the other. We’re going to have to choose which path to go down.

So you need to think: based on the information you know now, based on all the facts you have, if you had to choose—which of those paths would you choose? Which of those paths is the best?

Which of the alternatives is your best alternative to a negotiated agreement?

Best Alternative to a Negotiated Agreement—the acronym is BATNA (B-A-T-N-A). A BATNA comes from the book Getting to Yes by Roger Fisher, Bill Ury, and Bruce Patton. BATNA refers to the best path you can take if you don’t reach an agreement.

So to prepare, you need to think about your BATNA. But that’s not the end either.

What you want to do with your BATNA is two things: you want to make your BATNA as good as it can be, and you want to make it as clear and concrete as it can be.

You want to make it as good as it can be because the better your BATNA, the better the deal has to be on the table in order for it to make sense for you to say yes. So if your BATNA is this good, the other person only has to present a deal to you that’s this good in order for it to make sense for you to say yes. But if you can make your BATNA better and make it this good, then the other person has to make their offer this good in order for it to make sense for you to say yes.

If you can improve your BATNA, you can improve your power in the negotiation because you know that if you walk away, the thing that you’re going to is better than what it otherwise was.

The second thing you have to do with your BATNA is make it as concrete and as clear as it can possibly be. That just means understanding what it means to go down that path—that is, your BATNA. Understand what will likely happen if you go down that path. What are the consequences of going down that path? The reason you want to make your BATNA concrete is that when you’re comparing the deal on the table to your BATNA, you want to be able to clearly know what your BATNA will mean and say, “Is that better or worse than the thing that’s on the table?”

Okay, so we’ve got all of these paths—all of these alternatives. We’ve chosen the one that’s best: our BATNA. We’ve made it as clear and as concrete as it can be. And then—then we put it away. We don’t necessarily use it in the negotiation. We may want to tell the other side about our BATNA if it’s better than the other person thinks it is, but usually we would just put it aside and use it at the end of the negotiation to pull out and to say, “Is my BATNA better or worse than what’s on the table?” If it’s better, we go with our BATNA. If it’s worse, we accept the deal that’s on the table.

So the most important part of preparation is: figure out your BATNA.

A couple of other things I would recommend for preparation: First, instead of thinking about how you should start with your position, think about what are your underlying wants and what are your underlying needs. What are your goals? Think about what your interests might be. Think about what the other side’s interests might be—because thinking about how they see things, trying to look at the situation from their shoes, will help you reach a better deal in the negotiation.

Also, instead of thinking, “I know the answer, I know the right answer, I know where this negotiation should end up,” you may want to think about: What are some possible answers? Where might this negotiation end up? I can still have my first choice for where it ends up, but what are some possible places it can go? How might this negotiation play out? What are some ideas the other person may come up with that could make sense for me?

So if you prepare for negotiation by first of all figuring out your alternatives—”Which one is the best? My BATNA: my best alternative to a negotiated agreement”—make it as good as it can be and as concrete as it can be, and then put it away. Then you’ll be all set in knowing when you should walk away and when you should stay.

If you also prepare by thinking about your interests, your wants, your needs, thinking about the other side’s interests, and thinking about a number of possible options—you’ll be well prepared to negotiate.