Skip to main content

The concepts of value and price are often used interchangeably. Or even worse: considered the same thing.

Value is the result of a valuation process. During a valuation process the value of the company is quantified in the most objectively possible way by analyzing for example:

  • The market in which the company is active
  • Revenue model
  • Durability of products and/or services
  • Workforce buildup and key employees
  • Loyalty and dependency of customers and suppliers
  • Future cashflows

Price is the result of negotiations between a buyer and a seller. The height of the price will depend on a large number of factors, for example: The negotiating positions, the number of candidate buyers, and the interest of the eventual buyer.

Therefore, value and price are different. The difference in resulting numbers is partially caused by the difference in orientation for the future as buyer and seller. The seller sells the long-term value of the past and will base their price on this. The buyer will often base their price on the earning capacity for the future.




Leave a Reply