If there were one thing you could do to improve the outcomes of your negotiation, it would be to prepare… thoroughly.
Thorough preparation for your negotiation requires three areas of focus: operations, tactics, and strategy.
Operational prep boils down to logistics. How will things get done? What mode of communication will be utilized? In person or virtual meetings? Who needs to be in the room, and who should absolutely not be there?
Tactical prep has to do with how to be nimble in the moment to obtain your desired outcome. Things like asking open ended questions, using silence, making precise requests are all tactical considerations. We’ve put together a comprehensive guide of 161 Negotiation Tactics, which you can access here.
Meanwhile, strategic preparation is a little bit more in-depth, and requires some digging. It requires you know your desired outcomes for the negotiation, and in what order of priority. Not only that, but you need to be able to understand your counterpart’s desired outcomes. If nothing else, your preparation for strategy should allow you to understand the ZOPA: the Zone of Possible Agreement.
The Persuasion Lab is designed to help you achieve predictable (and repeatable) negotiation results. Anything outside the ZOPA will be a non-starter for one side or the other. So if you want to achieve a positive result (and be able to replicate it again and again), you need to know how to predict what outcomes lie within the ZOPA – and then work towards the options most desirable for you.
This article will provide you with a step by step guide to determine, again and again, where the Zone of Possible Agreement lies for your specific negotiation.
What’s Your Alternative?
First things first – say this deal doesn’t pan out – what’re all the alternatives available? Of those alternatives, which is the most appealing or likely?
Let’s use a small scale, personal example as an illustration: house chores. Say you live with your spouse, and you both work full time. Maybe you have a couple kids in there too, who are in school full time, and have a full slate of extracurricular activities. Life is hectic, everyone is busy, and no one particularly fancies emptying the dishwasher or taking out the trash or folding the laundry or changing the sheets on Saturday. And yet, these things need to be done, ideally not by you.
So you call a family meeting to lay out the issues and get everyone on board to do their fair share of chores.
You’re optimistic, but who knows how this is all going to pan out in the end.
So what’s your best alternative if everyone walks away from the table, no agreement having been reached?
You could
- Do all the things yourself
- Hire a house cleaning service to take some of the load off
- Buy a Roomba
- Get your mother in law over from down the street to help
- Toss the kids out to fend for themselves – less people, less mess
- Make a chore schedule with a reward system
- Turn off the internet until the chores get done one day per week
- Eat takeout exclusively, off paper plates
- Buy new clothes every week…
You get the idea.
Say you have the budget for a maid, but really would prefer the family to pitch in so that you can save that money for a vacation. Maybe your best alternative to a negotiated agreement (BATNA) would be to buy a Roomba and implement a reward system for chores completed – like not turning off the internet until all the housework is done on Saturdays.
Keep in mind: “your BATNA is not what you think is fair… [it] is the reality you will face if you reach no deal in the current negotiation.”*
When Will You Walk Away?
Once you know your BATNA, you need to get clear on your reservation value – the point at which you’d be willing to truly walk away from the table.
In most business dealings, the reservation value is either the most you’d be willing to pay if you’re the buyer, or the minimum you’d be willing to accept, if you’re the seller.
For our example, if the kids start bargaining for money as a reward, your reservation value might be ¾ of the money you’d spend for a service to clean your house (these kids aren’t pros, that’s for sure, and then you can still squirrel away ¼ of the money for a vacation).
What’s Their Alternative?
Not only will you have to face an alternative if no agreement is made, so too will your negotiation counterparts.
What might that look like for them? Some of this you can likely determine simply by assessing where the value lies for the other side – i.e. if you’re selling something, and the buyer doesn’t close the deal, they’ll have to figure out somewhere else to buy it.
Some alternatives you may need to dig a little deeper for, by talking to folks in the industry or who are familiar with the matters at hand. For example, if you’re looking to buy a business, talking to your contacts who also know the owner of the business you’re looking to acquire might be a good thing to do to gather additional information. Perhaps they’re staring down debt if the sale doesn’t go through, or they have a new home they’ve built out of state they won’t be able to occupy as soon as they’d like. All of these tidbits play into the best alternatives for the other party, and give you a better idea of how desperate they may be for the deal to close.
In our example of a complex family system negotiation, you could consider each family member individually. Maybe your spouse’s best alternative is to do all the chores themselves to keep you in good spirits, or to start a kickstarter to get a professional in to do the job. Bobby and Sue’s best alternative might be to spend some more time at a friend’s house to avoid both chores and the subsequent home internet embargo.
When Will They Walk Away?
You may never have a clear awareness of all the factors that go into your counterpart’s reservation value before the fact. Probably they’re not going to lay out a line-item budget out on the table for you to study.
But, you can do some good research and gain key intel by leveraging the sources available to you. What are the market rates currently for the commodity you’re dealing with? Are prior deal prices published? If a similar sized company was sold in the last few years, can you find out for how much?
Evaluate the ZOPA
After you’ve determined the alternatives and reservation value for all parties concerned, you can then evaluate the zone of possible agreements, or ZOPA. This is the zone of overlap where all possible agreements that will lead to a closed deal lie.
Graphically represented, it looks something like this:
The better you know the other side’s reservation value, and alternatives to a negotiated agreement, the better able you’ll be to leverage specific tactics with laser-like precision. You’ll know how extreme of an anchor you can get away with, what kind of undesirable alternative to use as leverage with your counterpart, and which open ended questions to ask as you go along to get them in the zone.
Voila, repeatable negotiation success.
*From Negotiation Genius, by Deepak Malhotra and Max H. Bazerman