Equipment Appraisal Blog | Understanding Machinery Appraisals

Exactly What's Involved in an Earth Moving Equipment Appraisal?

Posted by Equipment Appraisal Services on Mon, Oct 28, 2019 @ 08:00 AM

earth moving equipment

Whatever portion of the construction industry you're in, heavy equipment is quite possibly a big part of your daily life. Because this machinery can cost a pretty penny, it's important to know how to leverage those assets to your company's best benefit. But how do you know exactly what those machines are worth? Though they may be fully depreciated on your books because of the way business taxes work, they still have value. The best way to learn what your machinery is worth is through an earth moving equipment appraisal. Here's a look at how this type of equipment valuation works.


Exactly What's Involved in an Earth Moving Equipment Appraisal?

You probably have an idea of what your equipment was worth when you first purchased it, and you may have a rough idea of what you can sell it for used at end of life. But in the middle, between these two extremes, there is an entire range of possible values that will need to be carefully calculated. This is best handled by an accredited appraiser who can act as an independent third party, rather than working with an equipment dealer who may have their own interests in the process.

First, the appraiser will find out the basic information about your equipment, including the manufacturer and the model. This is because much like automobiles, different equipment will have a different expectation for total useful lifespan. If you have two pieces of equipment side-by-side, one may only expect to be useful for 5,000 hours while the other is expected to be useful for 10,000 hours. If they were both metered at 5,000 hours and were otherwise comparable, which one would you pay more for? That's the difference in value.

The appraiser will ask if there are any specific options or kits that were added to the machinery, as that will often increase the overall value due to the improved functionality, protection or other benefits it delivers to the equipment. Much like the similar equipment above, would you rather purchase a piece of equipment that has an upgraded radiator to help prevent engine overheating or a standard model? You'd prefer the upgraded equipment, of course, all other things being equal.

After this information is gathered, the appraiser will start a careful inspection of the equipment. Certain signs will be fairly apparent to them if something isn't quite right with the machinery, such as excessive control wear on a low-hours backhoe, dents and scratches on a forklift and new panels that have replaced old ones on a front end loader. These type of signs often show that the equipment may have been abused, which in turn will often shorten its useful lifespan. The appraiser will also go through your maintenance and repair logs to check that the equipment has been maintained regularly, which lengthens its overall useful lifespan.

By taking the time to have an earth moving equipment appraisal performed on your company's heavy machinery, you can discover exactly what these high-dollar assets are worth. This can make it much easier to decide when to update your equipment, how to handle a dealer who is undervaluing your machinery and many other benefits. The appraisal report will also serve as proof of value for insurance, tax, financial and legal circles, providing you with solid documentation of your company's assets.

Tags: Earth Moving Equipment Appraisal

How to Use Merger & Acquisition Fixed Asset Appraisal for Equipment in Your Business

Posted by Equipment Appraisal Services on Mon, Oct 14, 2019 @ 08:00 AM

Mergers & Acquisitions

When you're getting ready to add another company to your umbrella or become part of a larger organization, it can seem as though there are a million tiny details to track and complete before the process can move forward. Though some of these may be options, one vital task that must take place before final negotiations is a merger & acquisition fixed asset appraisal. This process allows you to determine the value of your business' equipment before you enter into the final agreement. Because many types of machinery don't have their real value properly reflected in your accounting books, it's of vital importance that you have these items appraised. Here's more information on how to use this type of appraisal during the process.


How to Use Merger & Acquisition Fixed Asset Appraisal for Equipment in Your Business

Let's start for a minute by talking about how most business owners look at the value of their equipment. To start, they'll look at the accounting books. if a piece of equipment has lasted significantly longer than was expected, it may have a higher value than is shown on the books, such as a truck that has been depreciated over five years, but is still running after ten. The books do not show a value for five years, yet the truck continues to produce value for the company, and lowers the business' liabilities because it hasn't been replaced with another truck that would require a loan to be taken out. The book value is zero, so how do you determine the value of that truck? Do you look at classified ads, see what is offered by the local dealership or just take a guess at what the value is? Any of these methods can be flawed, driven by market conditions that may not favor your vehicle.

The best way to ascertain this value is through an independent asset appraisal, which tells you what the equipment is worth in the moment. This allows you to approach a merger or acquisition negotiation with a solid idea of what that equipment is worth. The appraisal report gives you a position of power from you can negotiate, allowing you to work towards a better offer for your company by establishing which company - the merger or the acquisition - has the stronger or weaker position. With this knowledge in hand, it is much easier to negotiate the best possible deal for your business, whether that has to do with retaining key employees, getting a larger profit share or similar aspects that may be very desirable for both sides. Entering into a negotiation without this information is much like going to a used car lot and expecting that you'll come out on top with no work on your part.

By taking the time to have a merger & acquisition fixed asset appraisal performed on your business' equipment before you get into negotiations, you'll have a much better idea of what these assets are actually worth in today's market. However, it's very important that you only work with a certified equipment appraisal specialist who has experience in your industry. By doing so, you can ensure that you're receiving an independent third-party opinion on your equipment's value, rather than a value that is influenced by the possibility of a sale or similar factor.

Tags: Appraisals for Mergers & Acquisitions