A Parable And A Point On Valuing Price

A Parable And A Point On Valuing Price

Business owners have likely seen this conversation play out before: questioning price.

In this example, imagine a carpenter and a customer discussing what the price should be for a special, custom-built table.

Customer: How much to build a special, custom-built table?

Carpenter: $1500

Customer: Seems expensive for building a table.

Carpenter: How much do you think it would cost?

Customer: $800 max… That’s a simple job, right?

Carpenter: For $800 you could do it yourself.

Customer: But…. I don’t know how. I’ve never done it before.

Carpenter: For $800 I’ll teach you how. So besides saving you $700, you’ll get the knowledge for the next time you want to build a table.

Customer: Seems reasonable. Let’s go.

Carpenter: To get started you will need tools. A table saw, a planer, a top, level, drills, bits, nails, etc…

Customer: I don’t have all that equipment and I can’t buy all of these for one job.

Carpenter: For an additional $250 I’ll rent my tools to you so you can do it. Show up Tuesday and we’ll get started

Customer: I can’t on Tuesday I only have time today.

Carpenter: I’m sorry, but I’m only available Tuesday to teach you and rent you my stuff. Other days are busy with other customers.

Customer: Okay! That means I’m going to have to sacrifice my Tuesday.

Carpenter:  I forgot. To do your job yourself, you also must pay for the production costs: maybe a license, and normal expenses such as electricity, gas, insurance, fuel etc.

Customer: You know, I’ve been thinking, y’all better get the job done. I’d rather pay you the $1500.

It is no secret.  When you pay for a job, especially handcrafted, you pay not only for the material used, but also:

  • Knowledge
  • Experience
  • Study
  • Tools
  • Services
  • Time to go
  • punctuality
  • Accountability
  • Professionalism
  • Accuracy
  • Guaranteed
  • Patents
  • Sacrifices
  • Safety and security
  • Payment of tax obligations

As the example shows, there is often far more that adds to the price of the product. Only by knowing all the elements necessary to produce a certain work can you estimate the actual cost.

Several years ago, I was working with an HVAC owner who was considering selling his business. As is customary in our firm, we held an initial meeting. Before we had learned about his business or in advance of sharing his first tax return or financial statement, his inquiry turned first to our fees. What was the PRICE to sell the business?

Just as the example between the carpenter and his customer, I shared that more information was needed to determine the scope of the assignment, the market conditions that existed for the successful sale of his business long before we would calculate our fee. That would come after thoughtful analysis.

He continued to press about what the PRICE would be. So, I asked a question.

“How much will you charge me to install a new HVAC system in my home?’

“How could I know? I’ve never even seen your house,” he quipped.

And then he paused.  

Price isn’t everything.

Additional benefits that come with our fees include:

  • Step-by-step, turnkey support throughout the sales process
  • Best practices for confidentially selling and marketing your business.
  • Help with transition plans that work for you and your buyer.
  • Screening and vetting potential buyers to identify best-fit candidates to continue your business legacy

Trust a professional who has been in business for an extended period and one who has successfully helped other owners like you, and you know you will get value for your money.

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