Equipment Appraisal Blog | Understanding Machinery Appraisals

When Could a Laboratory Equipment Appraisal be Needed?

Posted by Equipment Appraisal Services on Thu, Oct 29, 2015 @ 02:30 PM


There are many types of labs which form an integral component of the manufacturing, research, and business world. Some are looking for new ideas or testing possible advances, while others are used to search for diseases or verify production processes. Whatever the purpose, these labs are all equipped with a variety of specialty equipment such as analytical instruments, glassware, microscopes, optics and photonics equipment, a mass spectrometer, centrifuges, and more. A laboratory equipment appraisal is often required to place a fair market or insurance value on these assets. Some of the many situations where these equipment appraisals might be needed include:

  • Asset sale: According to the Global General Laboratory Equipment Market Report 2014-2018, the market is expected to grow at a compound annual growth rate (CAGR) of 10.75% during the period from 2013 to 2018. Included in this estimate are reagents and kits and chemicals, as well as instruments and equipment. The need for automation, however, has to be balanced against economic factors, especially for those institutions associated with academic or governmental research. Those that need to purchase equipment may be looking for used equipment because they are dealing with restricted budgets, while labs which are purchasing new equipment will want to sell their current inventory to make room for the new. If the lab owner wishes to sell the assets, the first step is obtaining a laboratory equipment appraisal to make sure that the equipment is offered at the highest price possible, given current market conditions. For individual pieces of lab equipment, an online equipment auction allows owners to sell their equipment with maximum exposure by combining assets with like items from other participants.
  • Business sale: A profitable lab may be sold off as an independent operation, or it may be sold as part of a complete business package. In either case, an equipment appraisal is needed to justify the highest purchase price possible.
  • Bank and SBA financing: Labs are frequently in need of financing to purchase raw materials for long-term experiments, expand research capabilities, or upgrade existing equipment. Bank or SBA loans for these purposes may require some type of collateral, which could be the existing lab equipment. A professional equipment appraiser can establish an equipment value that might make the lending authority feel more comfortable about providing the requested amount.
  • Legal proceedings: From time to time the lab might be involved in some type of legal proceedings such as a partnership dispute or divorce litigation. Equipment appraisers help the lawyers and litigants place a realistic value on the business so that all parties are treated fairly.
  • Insurance: It might be difficult to replicate all of the existing reports or experiments if some type of accident or natural disaster occurs in the lab. There might be a certain value on a medication that was close to being introduced in human trials, or a water quality testing facility could lose years of results. An insurance valuation may include both a tangible machinery and equipment appraisal, as well as the intangible benefits of the any ongoing experiments and research.

If your business needs a laboratory equipment appraisal for any reason, make sure the report is assembled and reviewed only by an accredited equipment appraiser. These professionals are experienced and well-trained in providing accurate equipment appraisals. If the appraisal report is not in compliance with Uniform Standards of Professional Appraisal Practice (USPAP) guidelines, it is not a “qualified appraisal,” and will not hold up to scrutiny by buyers, the IRS, courts, or lenders.

Tags: equipment appraiser, laboratory equipment, lab equipment appraisal

An IT Equipment Appraisal Can Support Higher Business Valuation

Posted by Equipment Appraisal Services on Mon, Oct 26, 2015 @ 09:00 AM


In today’s digital world, IT equipment plays a crucial role in the efficient functioning of any business office or manufacturing facility. It helps people and machines to communicate, controls production demands, and manages inventory or shipping needs. When determining the value of a given business, an IT equipment appraisal can support a higher valuation.

The business may need a valuation for a number of purposes. The owners may be considering a sale, some type of incident might have resulted in an insurance claim, or the valuation may be needed to justify a request for additional capitalization. Whatever the reason, a professional equipment appraisal service can make sure that the IT equipment is properly accounted for in the valuation.

IT equipment often serves as the backbone of any type of industry today. The modern office cannot function properly without it, but manufacturing concerns also rely on technology to operate at their highest capacity. There are two types of classes involved in IT equipment - tangible and intangible. The tangible items are those things which are more visible - servers, printers, desktops, laptops, and computer-aided manufacturing assets, for example - although such things as computer software and networks may also fall under this category.

The intangible aspects of IT equipment can be more difficult to monetize. This might include a proprietary programs that have been developed to address specialized manufacturing for a particular plant, or other digital systems which contribute to the plant’s flow. An IT equipment appraisal may include the value of not only the hardware, but also the software associated with these systems. Factors an equipment appraiser might take into consideration when evaluating IT equipment include:

  • Value of the equipment itself: A machinery and equipment appraisal will include the actual value of the IT equipment itself. This takes into account the purchase price, depreciation, condition, and open market value to determine a fair equipment value.
  • Value of the software: This may be harder to place a value on. Can the operation run without the proprietary software its engineers developed to enable one piece of machinery to run in conjunction with another? Is there a specific program that gives this particular operation an advantage over its competitors? In a sales situation, this might very well be tangible topics for negotiation that are of crucial interest to a potential buyer. In an insurance situation, this could help determine how difficult it might be to replace this information.
  • Value in the business: A business that is already set up with the latest in servers, networks and mobile communication technology has more appeal to a potential buyer or lender than one without these capabilities. Companies that have not invested in technology are often looked at as being behind the times and inefficient.
  • Impact on performance: How important is this equipment and information to the smooth functioning of the operation? If the shipping department cannot operate without a full schedule of all trucking operations, then productivity and sales could decrease. Anything that lends to the ability to produce, manage, control or ship has an impact on the entity’s overall performance.

If a business can prove that there is a value to the IT equipment and underlying software, it could result in a substantially higher sales price, insurance settlement, or bank loan. That is why an IT equipment appraisal is such an important part of a business valuation.

Tags: Equipment Appraisal, valuation, IT equipment appraisal

What does economic obsolescence mean?

Posted by Equipment Appraisal Services on Thu, Oct 22, 2015 @ 08:30 AM


You may have a piece of equipment that is in good working order, yet be shocked to hear that a machine appraiser tells you the equipment is obsolete in economic terms. To understand and act upon a machinery appraisal, you must have working knowledge of the concept of economic obsolescence. Let us explain it for you. 

What is Economic Obsolescence? 

The American Society of Appraisers notesthat economic obsolescence is a difficult factor to explain. It refers to a situation where a piece of equipment loses either its usefulness or its value for factors unrelated to the object itself. 

For example, a typewriter was highly useful until computers came along. The typewriter became obsolete once computers displaced typewriters in the majority of offices.

Odds are, if you are a niche retailer, you have specialized equipment in your business that is or will become obsolete. 

A machinery valuation can help you determine whether to repair or replace outmoded equipment, help you conserve business profits, and show you where you should invest additional capital.  

An appraiser performing a machinery valuation will examine the item, determine whether economic obsolescence is occurring, and identify the factor or factors that are causing it. Finally, an appraiser will provide research materials to support their appraisal and go through the results of the valuation with you. 

You will have a good understanding of your equipment value at the end of the process. As a result, you can make informed decisions about business growth.

Factors Affecting Economic Obsolescence

An equipment appraiser will review a broad range of factors when appraising a piece of machinery. During the equipment appraisal, the appraiser may notice one or more factors that could suggest obsolescence. These include: 

  • Increased cost in materials and supplies related to usage of the equipment
  • Reduced demand for products made utilizing the machinery
  • Changing governmental or environmental regulations that affect the use of the equipment
  • Over supply of product in the marketplace 

Any these factors reduce the profitability of the product and viability of the equipment. When the equipment is no longer cost effective, or the market does not require the products made with the equipment, it can become obsolete. 

If there is a better opportunity to invest staff time or money, the conditions may be right for economic obsolescence. 

While appraisers agree on the circumstances that might suggest obsolescence, they disagree on when the condition is actually present. The concept is highly subjective, so one appraiser may see decreased demand as a blip in the market while another may perceive it as the new reality going forward.  Machine appraisers can use several methods to quantify the degrees of obsolescence, including gross margin analysis, inutility, supply and demand analysis, industry return on capital or equity, market-derived approach, and income or earnings shortfall examination. 

The subjective nature of the concept can make it difficult for business owners to accept a machinery valuation or take the appraiser's word that equipment may in fact be obsolete. 

Before winging it, take the time to talk with the appraiser and make sure they have the necessary knowledge. When you select a professional who knows your business model, you will feel more comfortable with their judgment and all equipment valuations.

Tags: Asset Depreciation, economic obsolescence, American Society of Appraisers

What is the Normal Useful Life of an Asset?

Posted by Equipment Appraisal Services on Mon, Oct 19, 2015 @ 03:00 PM


If you are selling your business, financing or refinancing, or auctioning old equipment, you may need the services of a machinery appraiser to determine the value of your business assets. During an equipment appraisal, a skilled appraiser will use a variety of factors to determine fair equipment values. One factor typically considered is the asset's normal useful life. Learn what it means to get the most insight into your machine appraisal and business valuation

What is Normal Useful Life?

The useful life concept originates in accounting, where accountants used a formula to determine the relative useful life of an asset for business and tax purposes. Appraisers have developed their own handbook by category. This gives appraisers a common ground to use when evaluating enterprise assets. 

The normal useful life refers to the physical life (in terms of years) that a piece of equipment will be used before it is retired from business. The normal useful life is typically a conservative measure that accounts for the useful life of the item before you might elect to retire it from business. 

A useful life of a tablet might be 24 months. Even though the tablet still works after 24 months, a reasonable business owner might elect to upgrade to a new tablet and use the old one at home, or the owner may decide to upgrade after 6 months and sell the tablet to another business. 

To calculate an object's useful life, an appraiser looks at similar items and calculates how long those items would reasonably be used in business. Taking into account the ways the piece of equipment being appraised differs from these comparable items, the appraiser then determines a reasonable lifespan. 

Appraisers can utilize the useful life concept to determine the remaining useful life of an asset already put into use by the business. For example, the business may have a large-format printing press that is three years old. An appraiser might determine that such an item has a useful life of seven years. Thus, the business would be expected to use the item for four years and then retire it. 

This concept helps businesses determine an asking price for an item they wish to sell or auction so they can receive a fair price that reflects the item's market value. 

The useful life concept is also helpful when it comes to proving the value of leased equipment. A farmer who is leasing a tractor would want to have peace of mind that the tractor was worth more than the sum of the twelve-month lease agreement, or they might want to lease a newer tractor that offered a better deal. 

Appraisers use a number of factors to determine the value of an asset so that buyers and sellers have a fair place to begin negotiations. The useful life concept is just one factor that can help determine an asset's value on the market. An appraiser will also take an item's uniqueness and historical significance into account, since these variables can effect value. Before setting an asset's estimated value, an appraiser will also research how much similar items have sold for, so market fluctuations may play a role in machinery valuation.


Tags: Asset Depreciation, normal useful life

How an Industrial Equipment Appraisal can Help You Sell Your Assets

Posted by Equipment Appraisal Services on Thu, Oct 15, 2015 @ 02:00 PM


There are many reasons that you might want to consider an industrial equipment appraisal or machinery valuation before selling or auctioning a piece of equipment. When you're preparing to auction old equipment, an appraisal can help you get an idea of how much it may be worth to another party - and set your expectations for the auction process. Learn more about how machine appraisal can help you auction your equipment.

If you own a piece of heavy machinery, such as a printing press or a bottling line, you know how much you paid for it and how much you have spent to repair or refurbish the equipment. Would you know how much that piece of equipment would fetch if you were to sell it or auction it off? Equipment appraisers can give you a solid, updated idea of your equipment's current market worth before you sell, so that you do not undervalue or overvalue your equipment, derailing a potential sale.

An equipment appraiser will evaluate your industrial equipment by type, age, history, uniqueness, useful life, and market value to give you an estimate of how much that equipment would be worth to a neutral party. When you have this information, you can then make decision about auction reserve values or determine whether to make repairs to the equipment before putting it up for a heavy equipment auction

When you have an updated understanding of your equipment's value, you can then put it on the market in a forum where it will be appreciated and have the best chance of selling. Better yet, you will also be able to display the appraisal with the item's auction listing. 

This can give buyers the confidence that the item is a good value and encourage bidding. As a result, you may be more likely to sell your item for a higher price. If a simple appraisal could generate multiple bids and a higher selling price to a satisfied customer, and no appraisal could mean a lowball sale to a lucky risk-taker, wouldn't that be money well spent?

Additionally, if you've taken the time to get your item appraised, it may attract more interest at auction than similar items that weren't appraised. If it's a buyers' market for industrial equipment like yours, and you want to increase your chances of selling something quickly and at the right price, an appraisal can make all the difference. 

Having the equipment appraisal also gives you quick, decisive insight into the value of your machinery. Face it: Appraisers are experts on industrial equipment value and you are not. To try to value your equipment on your own, you would need to spend a lot of time researching its worth. Even then, you would be making an educated guess at best. When you want to generate the highest possible return on investment from the sale or auction of your unwanted machinery, you need an appraisal.

Whenever you are seeking the services of an appraiser, you must make sure that person is certified to appraise items and knowledgeable about your niche. This way, you will have the confidence that the item you have appraised will receive a fair and honest appraisal that reflects its value on the market. 

Equipment Appraisal Services provides machinery and equipment appraisals. If you need a piece of industrial equipment or machinery appraised, or if you would like to learn more about what you can expect from an appraisal, please contact us. 

What Happens in a USPAP Compliant Appraisal?

Posted by Equipment Appraisal Services on Mon, Oct 12, 2015 @ 01:00 PM


When you're looking at having a machinery and equipment appraisal completed on your equipment, you may hear the term USPAP thrown around or hear the machine appraiser refer to a USPAP compliant appraisal. But what does it mean and how does it affect your equipment values? Here is more information on USPAP, what it requires of equipment appraisers and how it affects your machine appraisal.

What is USPAP?

USPAP stands for Uniform Standards of Professional Appraisal Practice, a set of standards devised by the The Appraisal Foundation and, from there, The Appraisal Institute in the 1980's after the savings & loan crisis. The standard provides quality control, legal documentation and standardized values for equipment appraisals performed by a qualified machine appraiser. It is typically updated every two years, with an effective date on January 1 of every even year, such as January 1, 2014 or January 1, 2020. 

How is a USPAP compliant appraisal different?

Unlike appraisals performed by an unqualified appraiser, USPAP compliant appraisals can be used in legal and financial circles. If you need to pick up used equipment and require financing from your financial institution, your bank may require a USPAP compliant appraisal be performed to verify the machinery value. Because USPAP appraisers go through a qualification process, it's assumed that they will use the proper methods to complete the equipment appraisal and that those values will hold up if there are problems with the loan down the road.

What does it require of the equipment appraiser?

USPAP controls how the appraisal is completed, but not how the equipment appraiser goes about the process. As an example, it doesn't require the machine appraiser to use a specific methodology, because an equipment appraiser who is qualified to provide an appraisal to USPAP standards already has the knowledge of what type of method should be used in that particular situation. This falls under the "Scope of Work" rule that requires the machinery appraiser to list out specific data including the kind of project, the type of property being valuated, what kind of value basis is used, the interests that are appraised, assumptions or theoretical conditions, and when the valuation is effective. With this information, the appraiser can use peer-reviewed methods to complete the appraisal.

How does it affect my equipment value?


Having a qualified appraiser perform a machinery valuation for you has benefits beyond just knowing what the equipment is worth. If you need to expand your business, it can act as a proof of value for financing if you need to secure a loan using that equipment as collateral. It can be used as legal documentation to support an insurance claim when you've suffered a loss and your insurance company is fighting you for every penny. It helps you keep your accounting records accurate, allowing you to know at a moment's notice what your business' exact financial picture is, so you can move quickly to take advantage of new opportunities as they become available, giving you a competitive edge over your competition.

There's no doubt that having a USPAP compliant appraisal will provide a great basis for your business to succeed, and that using qualified machine appraisers helps you secure that success against future problems. Your company's success depends on the knowledge you'll gain from the process. Why not look at what it would take to have your equipment and machinery appraised to lock in these benefits?

Tags: Equipment Appraisal, USPAP appraisal, USPAP compliant appraisal

Actual Cash Value, Stated Amount, Replacement Value: The Differences

Posted by Equipment Appraisal Services on Thu, Oct 08, 2015 @ 09:00 AM


When you're working with financial terms, it can seem like a maze of confusing and often contradictory terminology is employed to keep you in the dark. One of the issues many business owners run into is determining the difference between stated amount, replacement value and actual cash value, and how having one type of value in a machinery and equipment appraisal can prevent you from collecting after a loss. Though a machine appraiser is almost always happy to help explain the differences, here are the basics to help keep you informed and your equipment appraiser getting the job done.

Stated Amount

Using the stated amount means simply that instead of basing your insurance policy premiums on the actual value the equipment appraisers determine, the policy owner is responsible for reporting the equipment's value. After you specify the value, the insurance company adjusts your premium according to your valuation. Though this works well if you have equipment that changes hands frequently, it can also cause problems if there is a loss and you've undervalued the machinery. Once the loss has occurred, the claims adjustor figures out the equipment's value when the loss happened, and if the insurance company finds the equipment has been covered using a much lower machinery valuation than the market will bear, certain clauses may come into effect that will reduce the insurance payment significantly, leaving you in a bind.

Replacement Value

Replacement value refers to how much it would cost to replace the equipment. It doesn't take depreciation into account with equipment values, but instead looks at what it would cost to replace the machine's capability. Though that sounds great, you'll pay a higher premium for replacement value in insurance situations. Why? When equipment appraisals are performed, the insurance company knows what the equipment value itself is and wants to pursue a claim based on that machinery valuation. But if you take good care of your machinery, it can be difficult to find similar equipment. Therefore, the insurance company wants a higher premium, because you're replacing a piece of equipment with a lower machine appraisal with one that would have a higher machinery valuation.

Actual Cash Value 

Actual cash value can save you a lot of money on insurance premiums, especially if your equipment is fairly average, easy to come by and won't be hard to replace by purchasing additional used equipment. Because actual cash value deducts depreciation, your insurance company isn't as worried about paying out more than the original equipment valuation, so they can offer a lower premium. Though a few courts have translated actual cash value to represent fair market value, the most common legal interpretation is replacement value minus depreciation. If you're not expecting to take a loss and think it will be relatively easy to replace your equipment, having actual cash value will help you with that process.

To get the best possible result from your machine valuation, it's important to work with a reputable appraisal service specializing in machinery and equipment appraisal that can provide you with highly trained equipment appraisers. By finding out the proper value of your machinery, you don't need to worry about problems with the insurance company, because a valuation performed using the Uniform Standards of Professional Appraisal Practice by a machine appraiser certified through the American Society of Appraisers provides legal documentation to your claim for the value of the machinery or equipment that has been lost.

Tags: Equipment Appraisal, Insurance Loss, actual cash value

4 Details Potentially in a Heavy Equipment Appraisal

Posted by Equipment Appraisal Services on Mon, Oct 05, 2015 @ 03:00 PM


When you own heavy equipment, knowing the equipment value is an important part of your business' financial situation. But what does a machine appraiser look for when they're performing a heavy equipment appraisal? In this post, we'll take a good look at what details an equipment appraiser looks at during a machinery and equipment appraisal and how it affects your equipment values.

Excessive Wear That Doesn't Match the Meter Hours

When an equipment appraiser is performing equipment appraisals, one of the biggest signs that something may not be right with the equipment is when there's wear on the machine that is far too excessive for the hours shown on the meter. Much like an odometer reading that shows very few miles on an old, beat-up vehicle, a mismatched amount of wear compared to the amount of hours on the meter is often a sign of tampering. This raises a red flag for most appraisers performing a heavy equipment appraisal and can lead to a much lower appraisal. If you have equipment that has excessive wear, documenting what has happened with the machinery will help the equipment appraiser get the whole story and value the equipment accordingly.

Legal Title Issues

When a machine appraisal is taking place, one of the areas that is looked into is the title for the machinery being appraised. Because issues with the title can affect your ability to sell the machinery or legally claim financial rights on the equipment, it's an important part of the appraisal process. A title that has the wrong name, a co-owner who is not part of the business or other legal issues can impact your ownership of the machinery, which means that you can't depreciate it in your accounting. A salvage title can raise questions about whether the machinery can be safety operated or if there is hidden damage or other problems that could affect its value. If there's any possible way to clear up any title issues prior to your heavy equipment appraisal, it will help the process go more smoothly.

Poor Maintenance or Nonexistent Repair Records

When you own machinery and times are difficult in your industry, it's often less expensive to repair or maintain your equipment on your own or put it off instead of hiring the work out. But a lack of maintenance, incomplete repairs or nonexistent records can make it appear that the machinery has been neglected and will often devalue the equipment. If you can document the maintenance or repairs you've done on your machinery, including any receipts for supplies or parts, you can help avoid this potential appraisal pitfall.

Excessive Abuse

This is different than the excessive wear mentioned above, because it's a sign that the machinery has been abused and may have been taken well beyond its safe limits in daily use. Machinery that falls into this category can include serious dents in the body panels, welds, bends or cracks where the machinery has been taken well beyond its original specifications or rips, cracks and tears in the cab and safety equipment that compromises operator safety. By taking the time to properly train your workers and stay on top of any repairs or safety issues, you're ensuring that your equipment will receive a great appraisal value.

If you're ready to have a heavy equipment appraisal performed on your machinery, take a few minutes to get your records together and make sure any needed repairs or maintenance is performed. Then contact a qualified machinery appraisal service to get a quote

Tags: machinery valuation, equipment appraiser, heavy equipment appraisal

Benefits of a Forklift Appraisal in a Business Sale

Posted by Equipment Appraisal Services on Thu, Oct 01, 2015 @ 03:30 PM

When you're considering selling your business or undergoing a merger, how do you protect your business interests? Do you want a low valuation so you pay less in taxes over the transaction or a high valuation to get the most out of the sale or merger? Let's take a good look at the process through the eyes of the seller and the buyer using the example of a forklift appraisal.

The Seller's Standpoint

When you're selling your business, you want to get as much as possible out of it without having to pay more in taxes. This means you want a lower machinery valuation. If an equipment appraiser "offers" to give you a lower machinery appraisal, then they're probably not using the proper standards to meet legal requirements for a variety of applications. Even worse, if you suffer a loss during this time, you may have a hard time justifying a replacement cost that is significantly higher than your forklift appraisal has shown. Getting quality equipment appraisals will protect you from these types of losses by providing an unbiased equipment appraisal based on the Uniform Standards of Professional Appraisal Practice (USPAP).

The Buyer's Standpoint

By comparison, the buyer wants to have high equipment values because it gives them a significant amount of cash to depreciate from fair market value on their tax returns. A machinery and equipment appraisal that is unusually high also has drawbacks, however. If a machine appraisal is performed that gives too high a value and is not backed up with USPAP appraisal methodology, it may not stand up in legal circles. If you had a similar loss as mentioned above and the forklift appraisal reflects too high a price without the backup of the proper USPAP methodology, your insurance company could refuse to cover the loss. Also, because depreciation is being used on tax returns, you could face charges of being guilty of tax fraud because you've chosen to use inaccurate methods.

How a Proper Forklift Appraisal Meets the Need

A machine appraiser who is ASA certified provides proper documentation of the machinery's actual value in a method that will stand up legally for a variety of uses, whether it's business financing, tax assessment appeals or lawsuit requirements. It also provides a valid point for negotiations during a business sale or merger. Having a proper forklift appraisal provides an accurate point to base financing on, to back up a personal property tax assessment appeal or show accurate bookkeeping and accounting to have a solid picture of your business' financial health.

Though we have discussed the needs from a "forklift" standpoint, all the reasons above apply to an type of machinery and equipment.

Tags: property tax, forklift appraisal