Equipment Appraisal Blog | Understanding Machinery Appraisals

Working With Your Business During a Site Visit Asset Inspection

Posted by Equipment Appraisal Services on Mon, Dec 27, 2021 @ 07:00 AM

Machinery and Equipment Appraisal On-Site Prepared Appraiser

When it has been determined by you and your equipment appraiser that a personal site visit will be part of the overall valuation effort, there will be a few things to plan for ahead of time as well as during the inspection to ensure an efficient and effective process. Here are the two most critical items to prepare before the appraiser arrives.

Preliminary Asset Records

For an appraiser to quote a valuation project, they will require an understanding of the asset content of your business. If there are only a handful of assets involved, creating an updated detailed listing of the equipment is feasible. If, however, a complete facility appraisal is in order, involving dozens of items, this option will be very time-consuming.

The most common source of documentation immediately available to you will likely come from your accounting department in the form of a capitalized asset depreciation record. This is a good place to start, however, many companies don’t detail all their equipment on this listing and tend to abbreviate descriptions. The three most important components the listing provides to the appraiser is the asset type, year acquired, and acquisition cost. Once on-site the appraiser can work with you during the inspection to fill in the remaining details and add unlisted equipment as necessary.

Scheduling the Site Visit Inspections

Depending on the reason the appraisal is needed, and the type of equipment being valued, the coordination of the inspection process can be a bit tricky.

If the company is being sold or acquired, employees may not be aware of the situation and may become concerned over why an appraiser is spending the day walking around the facility and taking a lot of photographs. There are a couple of options to consider in an effort to alleviate these concerns. The first is to provide an explanation to your employees that supports the reason an appraiser is on site. The most common ones I see used by business owners are that their insurance company or financial institution they utilize requires this as part of a general compliance audit.

The second option is to complete the inspections after hours or on a weekend when the facility is closed. This option also works well when transportation equipment is involved, such as delivery trucks and trailers. These assets are usually on the road during normal hours and will be stored on-site at night and on the weekends, creating a convenient time to complete the work in a timely fashion.

In summary, ensure you engage with an accredited, experienced appraiser, who is familiar with the steps involved and can assist and suggest the best way to move forward seamlessly. A seasoned machinery & equipment appraiser has been through this process many times and will become an asset to you and your business as you work through the sensitivities involved with an on-site appraisal.

Tags: ASA accredited appraiser, Machinery & Equipment Appraisals, on-site appraisal, prepared

What to Expect When Faced With Liquidating the Assets of a Business

Posted by Equipment Appraisal Services on Mon, Dec 13, 2021 @ 07:00 AM

Machinery Equipment Appraisal Appraiser Liquidation Orderly Sale Auction

Image source: Compactor. (2023, April 10). In Wikipedia.

Whether you own a company or are invested in the business as a principal, financial institution, or related third party, there may come a time when you need to liquidate some or all of the assets associated with the operation. Liquidation is a somewhat more ominous word for resale, typically where there is an urgency to sell the assets or that those individuals involved are not in the business of selling equipment.

As an appraiser, we are asked about this issue quite often, regarding the best approach and realistically what to expect when entering these unfamiliar waters. No single answer covers every situation, however, there are guidelines that can assist the reseller/liquidator who lacks any prior experience in this area.

If your business is reducing operations, or shutting down altogether, and the company owns considerable equipment and personal property, it is important to plan for a liquidation far in advance, where personnel remains available to aid in maintaining the condition of the equipment and can assist in showing the machinery to purchasers.

This will provide opportunities to arrange for the sale of your assets ahead of the actual closure, and allow buyers to preview them while still in operation. In an ideal world, you could effectively sell the assets as part of an ongoing business enterprise, however, if the company can’t sustain profitability, a more realistic scenario would be to locate competitors and other end users who will pay fair market value, based on the machinery remaining in good operable condition until sold.

If neither of these options is feasible, then a comprehensive liquidation effort should take place to realize an orderly (private sale) or forced (auction) liquidation value in a timely fashion.

Communication and timeliness are crucial in a liquidation effort, as the longer it takes to formulate a game plan and ultimately sell the assets, the less value will be realized. If equipment has been neglected for months and begins to fall into poor condition, buyers will no longer be comfortable offering a fair price. It is critical that the assets continue to be maintained, even after they cease operating. Hiring a mechanic to start and run the equipment on a weekly or bi-monthly basis is important to maintaining the condition.

Hiring a private reseller or an auction company who can coordinate the sale of the assets is a good option to complete the liquidation. An experienced third party will oversee the resale effort, while managing the logistics of the sale, including the security of the location, completing minor repairs, and creating a marketing campaign. This will increase the odds of a successful disposition where you pay a commission based on the sale price.

Regardless of the scenario you face, it is important to plan ahead and spend the time and resources needed to maintain the condition of the equipment, leading to a successful outcome in an otherwise difficult situation.

Tags: forced liquidation value, orderly liquidation value, ASA accredited appraiser, Machinery & Equipment Appraisals