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Another Dummy Offer, often made in preliminary
business negotiations, is the “range offer”. Like the
informal offer, the range offer sets expectations in the
mind of the other par ty that are hard to break. I’ll share
an example:
A buyer is looking at a business to buy. The buyer
gets a meeting with the seller and in the course of
conversation, the seller asks her what she thinks the
business is wor th. The buyer, thinking that this is par t of
the normal process of arriving at a price blur ts out, “Oh,
in the range of 5 to 700 thousand.”
The buyer thinks she just told the seller she might be
willing to pay more, but hopes to get the business for
closer to $500,000. But it’s not what the seller heard. All
he heard was: “This business is wor th AT LEAST seven
hundred thousand dollars to her”.
Like the informal offer, the range offer aler ts the seller
to a price, and the seller’s expectations are set based on
what he hears the buyer say. The “range” offer doesn’t
really communicate an estimate of how much the
business is wor th; it communicates a number that is
either at the very top, or at the very bottom, and it
becomes the star ting point for all future negotiations.
This principle of Dummy Offers applies both ways.
The examples above illustrate misunderstandings by
sellers, but in the same way buyers can get the wrong
idea when a seller shares his or her mind prematurely.
Astute buyers and sellers recognize the learning and
implementing of effective negotiation skills involves
knowing when to be silent and when to share one’s
intentions with the other par ty. Doing it properly can
bring significant beneficial results, while ignoring it
might get you stuck with an offer you can’t refuse…
because you already made it.
Rhett Kniep
M&AMI, Centurion 7 Business Advisors
“When you are in a business negotiation, you have to
consider everything you say to be something you would
write, because the opposing parties don’t forget. If it
works to their advantage, they will remember it and
they will surely hold you to it later on.”
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