How to value a business:
- project the future cash flows that the business (the asset) will produce over its lifetime (think carefully about things like declining prices due to new competition, realistic growth rates, etc.)
- discount these cash flows back to the present at an appropriate rate
- ask yourself: does it possess an economic castle (i.e. does it have good business economics) that’s surrounded by a wide moat (i.e. a durable competitive advantage)?
- is there good, honest, and able management?
- is it available at an attractive price?