Negotiation Concepts You Should Know

Posted on October 11, 2011 by

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They say the only way to get better at negotiations is through practice.  I agree completely, but it is important to know and understand some of the basic concepts in negotiations.  In fact, you probably already use them in your daily routine, but just haven’t defined them.  This is especially important for startups because you live and die by your cash-flow, accounts receivable, accounts payable, production and raw material contracts, and revenue agreements.  All of these, at their core, involve negotiating agreements and can mean the difference between a strong start or a hard thud.  Below are just a few important concepts that can help you in future negotiations, but the most important thing to know is always be prepared!

Best Alternative To Negotiated Agreement (BATNA)

In negotiation theory, the best alternative to a negotiated agreement or BATNA is the course of action that will be taken by a party if the current negotiations fail and an agreement cannot be reached. BATNA is the key focus and the driving force behind a successful negotiator. BATNA should not be confused with the reservation point or walkaway point. A party should generally not accept a worse resolution than its BATNA. Care should be taken, however, to ensure that deals are accurately valued, taking into account all considerations, such as relationship value, time value of money and the likelihood that the other party will live up to their side of the bargain. These other considerations are often difficult to value, since they are frequently based on uncertain or qualitative considerations, rather than easily measurable and quantifiable factors.

Zone Of Possible Agreement (ZOPA)

It’s the blue sky range where deals are made, that both parties to a negotiation find acceptable. Whether we’re buying something at a bustling yard sale, a country home, or entering into a complex business venture, the Zone Of Possible Agreement is where an agreement is most likely to occur.

Anchoring

Anchoring is an attempt to establish a reference point (anchor) around which a negotiation will revolve and will often use this reference point to make negotiation adjustments. Anchoring often occurs when the first offer is presented at the beginning of a negotiation.

 

~HAM

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