The Value Of The Business

June 8, 2016

Why do diamonds cost more than water? This was the question posed by Adam Smith when he observed that water is actually more essential to our life than a useless piece of diamond, yet a diamond will always cost more than water.

The answer lies in what economist call THE VALUE OF THE BUSINESS.

Water is only valuable when you are in a desert and thirsty. But if there is alot more water available and you are able to use the excess water to wash the dog and car, water is almost valueless.

On the other hand, the more diamonds you possess and own, the more it reflects you are wealthy, hence the value of diamonds increase.

Value is therefore subjective and contextual. The Singapore Business Federation has set up the SME committee to look into the issue of “value creation”. SMEs should re-look at their internal business strategies. They must stop competing base on price. Instead, learn to deliver services and goods like “diamonds” which people want and value.

What is the real value of a contract? It cannot be just the cost of the paper and ink. The real value of a good contract is the know-how to structure it in such a way, as to increase the profit you make and reduce the risk you take in making that profit.

Choose VanillaLaw, because we understand your business value.