Income School Blog

3 Things You Need to Know Before Any Negotiation


A lot of people think that the best negotiators out there are quick-witted, and that’s how they’re so successful.

But the truth is that the best negotiators are the ones that are the best prepared.  Preparation is the key to successful negotiation.  Which is good news fort those of us who don’t consider ourselves quick witted.  Because how quick or slow we are doesn’t affect our ability to prepare.

Preparation means having a plan for the negotiation before it even starts.  It means knowing what you want to get out of the deal and how high or how low you are willing to go.  Your goal is obviously to get the best deal possible, but usually the other person wants that too.

To be really prepared, there are a lot of things you can research.  You can do some research to find out the outcome of other, similar deals.  You can think through, and even try to research if possible, what the other person wants out of the negotiation.  The more you know, the better prepared you will be.  But at very least, you need to know three things, and you need to have them cemented in you mind.

  1. You need to know your BATNA.  This is a negotiation acronym that stands for Best Alternative To a Negotiated Agreement.  It’s basically the best option you have if you walk away from this deal.  This is really important.  If you don’t know what your best alternative is, then you’re likely to get less out of the deal.  If you really want to be prepared, try to figure out ahead of time what the other person’s BATNA is too.  Even just thinking through their possible alternatives will give you insight into how high or low they might be willing to go.
  2. You need to have a reservation point.  This is the absolute minimum (or maximum) that you are willing to go.  In other words, what’s the lowest price you’d accept for that thing you’re selling, or what’s the highest price you’d accept for that thing you’re buying.  It’s fairly common that this will equal your BATNA, but it doesn’t necessarily have to.  Again, this number is really important to know during your negotiation.  A lot of people get carried away in negotiations and in pursuit of reaching an agreement, they end up going beyond their reservation point.  If you can’t reach an agreement before getting to your reservation point, then it’s better for you to walk away from the deal.
  3. You need to set an aspiration point.  This is basically the absolute best deal you could realistically hope to reach.  I mean, you could set an aspiration point where you get a car for free, but in most situations, that’s not realistic.  This should be a realistic but stretch goal for the negotiation.  In the car situation, you might find one you like that’s priced at $25,000 but you think you might be able to talk them down to $20,000 if you’re really good.  Then maybe that $20,000 is the aspiration point.

In any negotiation, if you can reach an agreement that’s better than your BATNA, above your reservation point, and as close to your reservation point as the other person was willing to go, then you got a good deal.

Now here are some tips for your negotiation.

  • Set your aspiration points high.  If you aim high, then you’re more likely to get a better deal.
  • Be realistic with your aspiration points.  Do some research.  Find out what’s possible so you can set a high aspiration point that won’t just offend the other person.
  • Focus on the aspiration point during the negotiation.  If you focus on your BATNA or your reservation point, then you’re more likely to agree to a deal that’s closer to those points.  If you focus on your aspiration point, however, you’re more likely to get a better deal.
    • There is a downside to this.  If you focus on your aspiration point, then your better deal might feel like a loss, since it’ll probably be below your aspiration point.  Whereas if you focus on your reservation point then any outcome that’s higher than it will feel like a gain.  Keep this in mind as you leave the negotiating table.  I encourage you to focus on your aspiration point while you negotiate, and then look back at your reservation point and BATNA after the deal is done.
  • Make a note of your reservation point and BATNA.  You don’t want to focus on these during the negotiation, but you need to have them handy so you don’t mistakenly reach an agreement that’s worse than your alternative.  You don’t want the other person to see it, though, so write it in some code that only you will understand or something.  Just make sure you don’t forget it during the negotiation.


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