What is the Difference Between Price and Value?

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Leverage price and value, and you will make a perfect deal

 

Price and value are two words that many often mix in the wrong way. To start with, the two words describe completely different things. While price is a fixed tangible number, value is very much emotional.

The famous Warren Buffett quote explains it in a nutshell: 

"Price is what you pay; value is what you get."

This Forbes article is focused on the price and value combination when it comes to the financial niche. However, it is valid for any industry.

Let's play with the idea that you come across an ad offering a complete setup of your own business for $1,000. Is it cheap or expensive?

To answer the question, you need to dive into the value part. Here we will simulate two different profiles.

Person No.1:

  • A well-paid executive job
  • Many fringe benefits, like a free car, health insurances
  • An excellent development plan, aiming to become CEO within a few years
  • Flexible working hours
  • Seven weeks of vacation per year
  • Invited to become a shareholder of the company
  • You love your job 
     

Person No.2:

  • A job with a "reasonable" income
  • Working hours 9 to 5, five days a week
  • Must show up in the office daily
  • Stressful job depending on other's performance
  • Two weeks of vacation per year to be duly coordinate
  • Do not like very much what you are doing, but you need the income

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