Negotiation is part and parcel of business.
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Whether drafting new contracts for employees, trying to secure low prices with suppliers, or discussing new business plans with investors, a business owner's success hinges largely on his or her ability to close a profitable deal.
However, while big business executives may have the money to keep a legal department on retainer, negotiation is generally more of a DIY affair for startup managers.
For novice negotiators, the Best Alternative to Negotiation is simultaneously one of the most misunderstood and the most crucial in the business world.
As much as we might like to think otherwise, not all negotiations are successful. Sometimes, the interests of the various parties are simply so different that they cannot agree on a suitable middle ground. In these cases, it can be quite helpful to know your Best Alternative to Negotiation, sometimes abbreviated BAN.
Simply put, a BAN is the best course of action that you can take without having to resort to negotiating. For example, an investor's BAN in attempting to convince other owners to approve a sale to private equity might be to sell off their personal share in the company.
In some cases, a BAN can also help entrepreneurs determine their exit point in negotiations by indicating the point at which it is more profitable to end negotiations than to continue them.
To better illustrate this concept, imagine a pet-shop owner named Sue. Sue buys all of the gerbils in her store from a supplier named GerbilCorp at a price of five dollars per gerbil. One day, Sue discovers that she can buy Gerbils from a company named Global Gerbils for four dollars per gerbil, so she calls up her contact at GerbilCorp and tries to negotiate a lower price for her gerbils. At this point, Sue's BAN is to switch to Global Gerbils. If Sue can haggle GerbilCorp's prices below four dollars per gerbil, then negotiating has been a success and she will stick with GerbilCorp. However, should GerbilCorp refuse to lower their prices below four dollars per gerbil, Sue will use her BAN and switch to Global Gerbils, as it is the more profitable option.
As important as it is to be familiar with your BAN, don't be too quick to use it.
After all, this voids the very importance of negotiation and renders useless any advantage that can be gained through its back-and-forth dialog. The BAN is in primarily in place to provide entrepreneurs with an exit strategy, not to serve as a primary business tool. The BAN will rarely be preferable, and will often be a "if worst comes to worst" backup plan.
Another mistake which inexperienced negotiators often make is to use their Best Alternatives to Negotiation as safety nets for rather acrimonious ultimatums. These representatives run the risk that, should they bluntly try to use the existence of their BANs to gain the upper hand, other parties will take this tactic as a hint that the negotiator is not serious about coming to an agreement and, as such, may be less willing to come to any type of compromise.
Understood and used correctly, the BAN can be a powerful tool in strategic negotiation.
By understanding our Best Alternative to Negotiation, we can more precisely plot our roadmaps through talks of all kinds.