Recently someone gave me a silver Canadian coin with a face value of $5. The gifter mentioned that I should look up the real value and try to find someone willing to buy it from me because it's actually worth more than that. A quick internet search confirmed that currently a coin like this goes for around $19 US. That got me thinking about value. There are different types of value and each one can be important to your small business. Today, we're going to discuss the different types and what they mean to your future success.
Investopedia.com defines the following types of value thusly:
- Intrinsic Value - Also known as fundamental value, intrinsic value refers to the actual value of a company taking into account both tangible and intangible factors.
- Market Value - Is the amount that a good or service would fetch in the current marketplace. This figure is often influenced by outside factors such as supply and demand.
- Perceived Value - The worth of a product or service in the mind of the consumer.
- Full Value - The total worth of a company including both intrinsic and extrinsic factors.
As you can imagine the same company would be valued differently depending on which type of analysis was being used to determine worth. Being aware of your business's valuation can be a very useful tool in determining your business strategy. For instance, the intrinsic value of your company might be $500,000. If you market your product or service well and are able to convince consumers that your product is worth more that could raise your perceived value. If your product is suddenly in high demand and the supply is low, your market value could skyrocket. Suddenly your company is seemingly worth quite a bit more.
My experience with the coin brought another key point to mind as well. The coin was in mint condition. It was a gift from a beloved friend. Regardless of its market value I decided that I would rather keep it as a memento of our friendship. It was, in fact, worth more to me as a keepsake than it was as a monetary instrument or an investment. The point is with any business decision you need to consider what it is worth to you personally. There will be instances when buying or selling an item, or offering a product or service means more to you personally than it does as a business decision. You will face the moral quandary of deciding whether to focus on your beliefs or your bottom line. You will need to decide what each outcome is worth to you.
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