However, there are a number of common factors that valuators will typically consider. As part of the process, valuators look at the company's past financial performance. However, this does not provide the full picture of a company's value. The business's potential for growth is a critical factor in determining an entity's value. For example, consideration should be given to expectations of future growth of the industry, recent technological developments, or federal regulatory activities likely to have an affect, not only on the business, but the industry as a whole.
Every business is subject to some degree of risk.
For this reason, valuators will look at numerous risk factors in arriving at a valuation. Operating risks - How much risk the company is exposed to as a result of the commitments and costs associated with business operations. The amount of leverage the company uses and the company's ability to cover its debt payments. Technology risks - A company's ability to use technology effectively can make or break its bottom line. For example, a company that lags in using new technology may lose its competitive advantage over other companies in its industry.