Free tool · Negotiation
How to Value Your BATNA, Your Best Alternative to a Deal: A BATNA Valuer
Your BATNA, or best alternative to a negotiated agreement, is what you would do if there were no deal, and its value sets the lowest deal worth accepting. To value it, name the best real alternative (going to court, another buyer, another supplier), list what could happen with a probability and a value for each outcome, and take the weighted average, which is the expected value. Then subtract what the alternative would cost, discount for the time it would take (a sum received later is worth less than the same sum now) and adjust for risk, since most people would accept a smaller certain sum than the average of a gamble. The result is your walk-away value. The probabilities are your own judgement, and people tend to overrate their own cases, so test the answer by moving the key probability by ten points either way and see how much the value changes. Count only real alternatives: a buyer who has made an offer is real, a hope that one will appear is not.
Tool · BATNA Valuer
If you walked away, the alternative is worth about 119,945 to you today, after cost, delay and risk. A deal below that is worse than your alternative.
Average outcome
194,000
After cost
154,000
Today’s value
141,111
Walk-away value
119,945
| If | Walk-away value |
|---|---|
| Your chances are 10 points worse | 88,790 |
| As entered | 119,945 |
| Your chances are 10 points better | 151,099 |
- The probabilities are your judgement, not facts. Write down how you reached them, and revisit them when new information arrives.
- The reservation figure is where your alternative stops being worse than a deal. A real walk-away point also depends on non-money matters such as relationship, precedent, reputation and certainty.
Your best alternative to a deal (your BATNA) sets the lowest deal worth taking. Enter what could happen if you walked away and went to court, to another buyer or to another supplier: each outcome with its probability and its value to you. Then enter what the alternative would cost, how long it would take, a yearly discount rate and a risk haircut (how much less than the average you would take for certain). The tool shows what the alternative is worth today and how sensitive that is to your chances. The figures are your judgement, and invented here. Runs in your browser; nothing is stored or sent.
How to use it
- List the outcomes of your alternative with a probability and a value for each.
- Enter the cost of pursuing it, the months until it pays, a yearly discount rate and a risk haircut.
- Read the walk-away value and how it moves if your chances are ten points better or worse.
- Compare the figure with the deals on offer, and note the non-money factors beside it.
Common questions
What is a risk haircut?
How much less than the average outcome you would take for certain, to avoid the gamble. A client who cannot afford to lose will have a larger haircut than a large company with many similar cases.
Where do the probabilities come from?
From your judgement, best based on how comparable cases ended, adjusted for what is specific to yours. Write down the reasons, ask someone with no stake in the answer, and test how sensitive the result is to them.
Does the tool tell me what to accept?
No. It shows what your alternative is worth to you on the figures you enter. A real decision also depends on relationship, precedent, certainty and other matters that figures do not capture.
Learn the law behind the tool
This tool is part of our Negotiation course, with lectures, concept maps, flashcards, interactive exercises and a capstone case. Negotiation Analytics: Valuing Your Alternative.
More free law tools
General information, simplified, mainly on American law, not legal advice. States and countries differ, and real cases turn on facts that a tool cannot capture.