BATNA Calculation

BATNA — Best Alternative to a Negotiated Agreement — is the foundation of negotiation power. If this deal does not close, what happens? If your pipeline is full, your BATNA is strong — you walk away and close the next deal. If your pipeline is thin, your BATNA is weak — you need this deal, and the prospect will sense it. Calculating BATNA is not abstract. It is a specific number: the expected value of your next-best pipeline deal, adjusted for probability. If your alternative is a $150K deal at 60% probability, your BATNA is $90K in expected value. That number defines your walk-away point. Below $90K in expected value from this deal, you are better off walking away.

The prospect has a BATNA too. Their BATNA is the cost of doing nothing or the cost of going with a competitor. If doing nothing costs them $500K in annual inefficiency and your solution costs $100K, their BATNA makes your price look like a bargain. If doing nothing costs them $120K and your solution costs $100K, the margins are tight and they have leverage. Understanding both BATNAs — yours and theirs — defines the negotiation range. Every outcome will fall between the two. Your job is to move the outcome closer to their BATNA than yours.