How to Secure the Best Deals

Daily Reckoning
Nilus Mattive

This post How to Secure the Best Deals appeared first on Daily Reckoning.

Want to know how to get the best deal every time?

Know your BATNA.

BATNA stands for “best alternative to a negotiated agreement.”

The term was coined by Roger Fisher and William Ury in their 1981 bestseller, Getting to Yes: Negotiating Without Giving In.

BATNA is simply the best you can do if the other person refuses to negotiate with you – if they tell you to “go jump in a lake!” or “Get lost!” So it’s not necessarily your ideal outcome.

But understanding this concept is important if you want to save money since a lot of times the bulk of money made or lost is in the initial agreement.

Buying a car, negotiating a real estate deal, pushing for a raise all require a basic understanding of BATNA if you want to get the highest return.

Another way of looking at BATNA is you can think about it like your limits.

What is your BATNA if you don’t purchase or sell?

What is their BATNA if they don’t purchase or sell?

Once you know both parties limits, or at least have a rough estimate, it makes negotiating easier.

Having a good BATNA increases your negotiating power because you don’t need to concede as much if you know you have a better alternative. This puts you in a position where you can push the other side harder.

However if your options are slim or non-existent, the other person can make increasing demands, and you’ll likely have to accept them – because you don’t have a better option.

Therefore, it’s important to improve your BATNA whenever you can. If you have a strong one, it’s worth showing your opponent. If you have a weak one, you’re likely better off hiding it.

Negotiating is a lot like playing poker: sometimes you make the other players at the table think you have a good hand in order to back off, other times you lure them into thinking you don’t have a great hand so they overcommit and expose themselves.

Selling a Car

Let’s look at a common example, selling a car:

Jack needs a car and is negotiating with Cindy to purchase her car. Cindy offers to sell her car to Jack for $12,000.

Jack searches on Craigslist and finds a similar make and model which he believes he could pick up for $10,000. Jack’s BATNA is $10,000 – if Cindy doesn’t offer a price lower than $10,000, Jack will consider his best alternative to a negotiated agreement.

Jack is willing to pay up to $10,000 for the car but would really like to only pay $9,000. If Cindy offers a price higher than $10,000, Jack will walk.

What we don’t know yet is Cindy’s BATNA. If we assume Cindy can sell her car to someone else for $11,000, $11,000 is Cindy’s BATNA. If …read more

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