Be Prepared with Alternatives

Preparing for your negotiations with precedents, or previous negotiation outcomes, can help increase your leverage when you’re seated at the negotiation table. A second important addition to your preparation is creating alternatives.

It’s been said that going into negotiations without alternatives is like going into battle with only one weapon. I’ve seen this happen – not in real life, but in a comic strip: Hagar the Horrible. He and his invading army couldn’t knock the down the castle doors with the battering ram they had brought, so they had no alternative but to turn around and go home.

In any negotiation, there are always alternatives and the more alternatives your counterpart thinks you have, the greater your negotiating leverage. One way to create the perception of having many alternatives is to evoke the competition. Suppose you’re looking for a low-rate mortgage on a shophouse you want to purchase for your business. You meet with one banker who offers you reasonable rates, but before signing on, you make it clear that you’re going to shop around. You step out, maybe visit another bank or two (or not) and return two hours later. By simply stating, “I think you can do better on your interest rate”, you’ve told the banker that you have alternatives and if he or she really wants your business, those rates will come down.

Sometimes, however, you might be in a situation where you’re negotiating with a sole source of some product that you require. “What can I do?” you might ask. “I have no alternative!” Being in this situation can create feelings of powerlessness and dependency.

So let’s suppose, after you look around, you find that there is only one source. Are there no alternatives? Well, could you redesign around this product or come up with a replacement? Possibly. Could you make the product yourself? Since you’re dealing with a sole source, there are doubtlessly other companies in your position. This might be an opportunity for profitable competition. And even if these options seem extreme, you still have alternatives in your attitude towards doing business with this sole source. The way you feel about doing business with them will have a direct effect on how they do business with you.

Dependency reduces your negotiating leverage. Being well prepared with a list of alternatives, however, gives you independence and helps you to negotiate with more confidence.