Purchase Price

Definition

The price for a business that is either agreed to in a Letter of Intent or purchase agreement. Differs from asking price.

Example

A seller could ask $100 million for his hot dog stand; however, the actual purchase price is an altogether different matter.

Tips

Asking price is the price that the seller initially asks, whereas purchase price is the price that the parties actually agree to. Some sellers mistakenly attempt to estimate the value of their business based on asking prices for similar businesses on the market. This is a fallacy, as anyone can solicit any asking price they want.