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Business & Strategy

Next Best Alternative

Model #0625Category: Business & StrategyDepth to apply:
5 min read

On this page

  • Core Idea
  • How to See It
  • How to Use It
  • Founders & Leaders
  • Connected Models
  • One Key Quote
  • Summary & Further Reading

Contents

  1. 1. Core Idea
  2. 2. How to See It
  3. 3. How to Use It
  4. 4. Founders & Leaders
  5. 5. Connected Models
  6. 6. One Key Quote
  7. 7. Summary & Further Reading
·Business & Strategy
Section 1

Core Idea

The next best alternative is what the other party would do if they didn’t choose you — their best option aside from the deal on the table. In negotiation, sales, and positioning, your value is relative to that alternative. If their next best option is weak, you have leverage; if it’s strong, you need to be clearly better or cheaper. Same for you: your next best alternative to saying yes defines how much you can push or walk. Building and scaling require understanding both sides’ next best alternatives — for pricing, terms, and when to commit or walk away.
Section 2

How to See It

Negotiation
You're seeing Next Best Alternative when a party’s willingness to walk or concede tracks how good their other options are — strong alternatives mean less concession; weak alternatives mean more.
Sales
You're seeing Next Best Alternative when a prospect’s “we’re also looking at X” or “we could build in-house” sets the real competitive set; your offer is evaluated against that next best option, not in a vacuum.
Pricing
You're seeing Next Best Alternative when willingness to pay is capped by what the customer would pay for the next best way to get the same outcome — your price is bounded above by their alternative’s cost or value.
Section 3

How to Use It

Before negotiating or selling, estimate the other side’s next best alternative — what they do if they say no. Improve your offer or narrative so you’re clearly better than that alternative on the dimensions they care about. Know your own next best alternative so you know when to walk. In product and positioning, frame your offer relative to the alternatives they’re already considering. Don’t assume you’re the only option; assume you’re being compared. Strengthen their perception of your advantage over the next best alternative.
Decision filter
"What’s their next best option if they don’t choose us? What’s ours if we don’t do this deal? If we can’t answer both, we’re negotiating or selling in the dark."
As a founder
In sales: research and frame against the prospect’s real alternatives (competitors, in-house, do nothing). In negotiation: know your BATNA and theirs; improve your offer so it beats their next best option. In positioning: make the comparison to the next best alternative explicit and favourable. Value is relative to the alternative.
Section 5

Founders & Leaders

Herb CohenAuthor, You Can Negotiate Anything; negotiation consultant
Cohen stressed that power in negotiation comes from the ability to walk away — and that depends on your next best alternative. He taught negotiators to always know their BATNA and to improve it (create options) before and during the deal. Founders can apply this by explicitly identifying the customer’s and their own next best alternative before pricing or negotiating, and by strengthening their position relative to that alternative so the deal is clearly better than the next best option for both sides.
Section 7

Connected Models

Reinforces
BATNA
BATNA is your best alternative to a negotiated agreement. Next best alternative is the same idea from both sides — your value and leverage depend on both parties’ next best options.
Reinforces
Opportunity [Cost](/mental-models/cost)
Opportunity cost is what you give up by choosing one option. The next best alternative is that option — the cost of saying yes is forgoing the next best alternative.
Tension
Perceived Value
Perceived value is what the customer thinks you’re worth. Tension: value is perceived relative to the next best alternative. If you don’t frame that comparison, they will — so own it.
Section 8

One Key Quote

"In negotiation, the side with the best alternative wins. Not the side with the best argument — the side that can walk away and do well."
— Herb Cohen, You Can Negotiate Anything (1980)
Section 11

Summary & Further Reading

The next best alternative is what each party would do without the deal. Your value and leverage are relative to it. Know both sides’ next best alternatives; improve your offer so it beats theirs; know when to walk. Use it in pricing, negotiation, and positioning.
01
You Can Negotiate Anything — Herb Cohen (1980)
Book
Cohen on BATNA, alternatives, and the source of negotiating power.
02
Getting to Yes — Fisher, Ury & Patton (1981)
Book
Principled negotiation and the role of BATNA and alternatives.
03
Never Split the Difference — Chris Voss (2016)
Book
Tactical negotiation; knowing when to walk and what the other side’s options are.

Why this matters next

mental modelsLeverage

Next Best Alternative applied the Leverage mental model

mental modelsNarrative

Next Best Alternative applied the Narrative mental model

mental modelsPerceived Value

Next Best Alternative applied the Perceived Value mental model

mental modelsAlternatives

Next Best Alternative applied the Alternatives mental model

mental modelsCost

Next Best Alternative applied the Cost mental model

mental modelsBATNA

Next Best Alternative applied the BATNA mental model

Frequently asked questions

What is Next Best Alternative?+

Next Best Alternative is a mental model used for better thinking and decision-making.

How do you apply Next Best Alternative?+

To apply Next Best Alternative, identify situations where this framework is relevant, then use it as a lens to evaluate your options and decisions. The model is most useful when combined with other complementary mental models.

What category does Next Best Alternative fall under?+

Next Best Alternative falls under the Business & Strategy category of mental models. Other models in this category can be found on the Business & Strategy hub page.

Why is Next Best Alternative important?+

Next Best Alternative is important because it provides a structured way to think about problems that would otherwise be approached with intuition alone. Understanding this model helps you avoid common reasoning errors and make better decisions.

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On this page

  • Core Idea
  • How to See It
  • How to Use It
  • Founders & Leaders
  • Connected Models
  • One Key Quote
  • Summary & Further Reading

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