How tangible are its assets?
If a business has a large amount of assets like property or machinery, but a low amount profit, it can still be worth a lot because of the assets underpinning its value. Other companies have relatively few tangibles assets and are valued based on their profit potential rather than their asset value. Age Younger companies tend to represent more risk for buyers and usually sell for less than established businesses. An older business is more settled and likely to be able to turn a consistent profit over a long period of time whereas younger companies tend to be more unpredictable. Sometimes young companies, despite their instability, can still fetch a good price based on their future earnings potential. Valuation Techniques You should always remember that a business is only worth what someone is prepared to pay for it. Net Profit Multiples (P/E Ratio) Multiples of a business’s net profit are often used to calculate its value. This method is popular for valuing businesses with a low level
