Equipment Appraisal Blog | Understanding Machinery Appraisals

When you have manufacturing equipment that you're getting ready to replace due to age or needed upgrades, there's always a concern that you may not get what the machinery is worth. This can lead to financial issues with your company or perceived ideas that the machinery was sold for less than it should have been. How do you get what your equipment is worth when it's time to negotiate? A manufacturing equipment appraisal can provide you with the documentation you need to get a fair price.

Using a Manufacturing Equipment Appraisal for Negotiations

Many people assume that equipment appraisals are simply calculated based on what the market will bear. But what happens if you're only planning on advertising the equipment in your industry, which is currently in a slump? What about the market as a whole? Will there be additional costs for removal that need to be taken into consideration? These questions will all play into your initial asking price and the point from which potential buyers will negotiate. 

If, for example, everyone in your industry is inserting magnets into their plastic molds, does your machine have that capability? Added to the initial value of a machine without that capability, a retrofit or after-market kit may be required to add that feature. Machines that are left without that feature or that are incapable of being upgraded to include it may end up receiving lower final sales prices, because they won't keep up with the latest trends that newer, more expensive machines are able to contend with.

But what if you're not following the latest trends, because you provide more traditional means of production? Many companies find that hiring someone who professionally specializes in equipment appraisals has a finger on the beat of change in the industry. Hiring a well-qualified, certified equipment appraiser can mean the difference between knowing when to sell your machinery and when you're just going to be stuck with it.

Another area where businesses often take a hit on selling manufacturing equipment is by assuming its value is what the tax accountant says it is. The problem with that value is that machinery often ages faster or slower than the depreciation tables issued by your tax agency. If you have quality equipment you've kept in exceptional shape, you may sell it for less than it is actually worth, because it would still operate for several years after the equipment has been fully depreciated and shows a value of zero. If your equipment takes a beating because of your location, environment or manufacturing practices, it will probably fail before it is fully depreciated, which will lead to potential buyers backing out because your asking price is then too high for the expected useable lifespan, another measurement a good appraiser will calculate for you.

As you prepare for negotiations, having a manufacturing equipment appraisal ensures you can negotiate from a point of power, with documentation that your requested price is fair and reasonable. But are you working with a certified equipment appraiser? A certified appraiser uses a standardized methodology in calculating your machine appraisal report. This ensures it will hold up to scrutiny whether you're in the meeting room, the board room or the courtroom.

When you're working in laboratory research, you know just how expensive precision equipment can be. How do you afford the upgrades that are needed for your next phase of research? How do you encourage investors to put their money in your facility if you're not sure you can get the job done for them? Fortunately, there's a better way of raising money for new equipment without having to sign away that spare kidney you haven't quite perfected on the 3D printer. Laboratory equipment appraisal helps you ensure you can make your upgrades at the right time, for the right amount of money. Here's how.

Mad Science: How laboratory equipment appraisal helps you upgrade

When your lab needs an upgrade, there's a couple ways to go. You can sit on the equipment for a long period of time, hoping that someone will get around to finding out a fair value while it loses value sitting in storage. You can sell it immediately for a low price, ensuring it's gone and you've got a little extra cash. Either way can lead to bad outcomes. 

We've all seen it on occasion - labs that are selling out their old equipment at rock-bottom prices. Maybe it's equipment that's so old, they'd be lucky to pay someone to haul it away. Maybe it's equipment that's been seriously undervalued and is flying out of the building as quickly as it can be sold. In either situation, the laboratory business loses. How can you ensure you're going to get a good price for your older equipment? 

Two words: equipment appraisals.

When you have a machinery valuation performed on your lab equipment, you know what it's actually worth. Instead of having Tony the Terrible Intern pricing out your equipment based on prices from last year's College of Science sale, you can set a fair price on the equipment. Instead of it sitting around, taking up space and losing value because you're scared to lose it for less than it's worth, you can sell it on very short order to another company and immediately turn that cash into better equipment for your research. But what's different about getting equipment values from a certified equipment appraiser and what do they have in common with your researchers?

A certified equipment appraiser spends their time using standardized methodologies, much like your researchers do. In both cases, you get a standardized process that provides uniform results at the end of the run. It also takes into account helpful information like how much longer the equipment will probably remain useful, allowing you to prioritize your equipment sales, as well as when it's going to lose value more quickly, so you can get it out of your facility while it's still worth something.

By keeping these tips in mind and monitoring your values through a laboratory equipment appraisal, you can ensure that you're going to be able to make those upgrades that your facility and investors are clamoring for. If you need to determine equipment values and aren't working with a certified equipment appraiser, you could be leaving money on the table. A certified machine appraiser has the knowledge and experience to give you an accurate machine appraisal report that will stand up to scrutiny because they use standardized methodologies in their process.

When you work in grading, working with heavy equipment is just part of the process. But what are your equipment values? Many businesses determine their equity based on tax accounting records, which may not give you an accurate picture of your equipment's value. Smart business owners turn to heavy equipment appraisal services to get the real value of their heavy equipment. Here's why:

How a heavy equipment appraisal is Helpful in Your Business

First off, let's take a good look at where tax accounting isn't helping you get the best out of your business. Tax accounting is focused on getting you the best possible results for your tax return. In most cases, this involves trying to lower the tax liability of the business as much as possible. Because it covers a wide range of industries and businesses, tax accounting is focused on what most businesses face rather than specific industries and businesses. For example, machinery is reduced in value using a depreciation table. This may not reflect the actual value of the machinery, just how much it is expected to lose value according to a table developed by the tax agency.

We've all seen heavy equipment that has been gently used and well cared for, resulting in a machine that continues to perform long after it has been completely depreciated. That equipment is an asset that still has significant value to the business owner, no matter what the tax tables say. Equipment appraisals do a great job of helping businesses recapture that hidden equity that isn't apparent in a tax return. The appraisal report provides you with legal proof if you need to make an insurance claim for a higher value than the adjustor is willing to pay without further proof. This type of documentation is also accepted by virtually every financial institution, because a certified equipment appraiser is able to document the standardized methodology and sources the appraiser used to calculate the value of the machinery.

What about the other side of the coin? We've all worked on sites that were absolute murder on equipment. Unless a machine appraisal is performed, your tax return will reflect a much higher amount of equity in that asset than may be realistic. It's bad enough knowing that the equipment will probably not last nearly as long as you had hoped when you bought it, but having to pay taxes on a false level of equity because a tax table dictates the machine's depreciated value is even worse. Because a machine appraisal from a certified equipment appraiser holds up to scrutiny and uses standard methodology to determine value, the report will stand up to serious scrutiny in court or during an audit.

By getting a heavy equipment appraisal, you're ensuring that you know the right value for your grading machinery. That will help you make good business choices, because you'll know whether you're negotiating from a position of strength or weakness, and whether that new investment is a good idea or a big risk. But are you working with an experienced, certified equipment appraiser? Using a certified appraiser ensures your machinery valuation will hold up to scrutiny in financial, legal and insurance circles.

If you work in plastics production, you know that the condition and value of your equipment is vital to your company's bottom line. But how do you prepare for a plastics equipment appraisal? Is your molding or extrusion equipment selling in the market? What will the equipment appraiser need to look at during the process? Though the process can seem very complicated, knowing what to expect ahead of time makes it much easier on all involved. Here's a quick look at what happens during the process and what kind of access the machinery appraiser will need to successfully complete the inspection quickly and accurately.

What is inspected during a plastic Molding equipment appraisal

• Can the machinery appraiser easily access the machine and remove any panels to inspect the inner workings? Because the appraiser needs to see the machine and its inner workings, the entire machine be accessible. Clear away anything blocking access to the machine. If the machine is being actively used in production, you may need to schedule the appraisal during times when the production line is down.
• How does the amount of usage of the equipment compare to similar equipment used by other companies? If it's been used for fewer hours than similar machinery, it will probably be valued at a higher rate. If it has higher hours, the value will probably be lower than comparable machinery.
• Has the equipment been properly maintained and repaired as needed? Though this can sometimes be apparent by the condition of the machinery, a better bet is to provide access to any maintenance and repair logs or receipts from maintenance and repair parts, supplies and equipment.
• Is the machinery manufactured by a popular company or an unknown one? If the machinery is well known in your industry, it is probably more in demand and will have more parts readily available. This will command a stronger value than an unknown manufacturer.
• Are parts readily available to repair the machine, and are they original parts from the manufacturer or generic replacements? As with the prior question, a well-known manufacturer is more likely to still be and remain in existence with parts available from the machine. Generic parts, though they may work, may not properly interface with all the machine's functions, making it more difficult to operate.
• Has the equipment been abused or neglected? This is a very important part of the process. Abused or neglected machinery will have a lower expected lifespan and will probably have additional parts fail due to extra wear and tear from a neglected repair.
• Does it have any options or kits added that are produced by or approved by the manufacturer? These types of additions increase the value, but kits added that are not approved by the manufacturer may decrease the value if they put additional strain on the machine's systems or compromises safety.
• Can the machinery be operated so the equipment appraiser can view it in action and see what it produces? Sometimes the easiest way to discover a machine's shortcomings is to see whether it is producing quality plastic pieces and how it moves under production.

By knowing what is being inspected when you're having a plastics equipment appraisal performed at your business, you better know what documentation to have on hand and what the equipment appraiser will need to access to complete the machinery valuation.

When you're considering making donations to community or charitable organizations, it's really easy to get caught up in the great feeling that you're doing something wonderful in the world. Unfortunately, many business owners or managers don't fully consider the legal and financial ramifications until after they've completed the donation process. Here are a few reasons why you should always get equipment appraisals before making that donation.

Benefit from Your Equipment Donations: Why a Machine Valuation is Vital

Get a better picture of what you're donating.

Sure, you saw something similar go at auction for about $5,000 last month, but was it really a comparable piece of equipment? Maybe the charity you're working with "knows a guy" who can provide an estimate of value for your receipt. Unfortunately, if you don't have a certified machine valuation, you don't have legal proof of the donation's actual value in many cases. When it comes time to split up a company or deal with an audit, you may be accused of intentionally dumping the company's assets instead of having to split them or pay taxes on them.

Provide documentation of donations to the charitable organization.

Many charitable organizations work with donors who will provide additional funding or matching funds once a particular goal has been met. Instead of providing them with a piece of machinery with an assigned minimum value, wouldn't you rather provide them with the actual value so they can take advantage of what those donors or matching foundations have to offer? Having a certified value gives you and the charitable organization more flexibility in what you do with that equipment appraisal.

Have that important piece of paper when the IRS comes knocking.

Every business owner dreads the possibility: the IRS audit. If you've made a donation of valuable equipment but don't have legal proof of its actual value from a certified machinery appraiser, the IRS can accuse you of dumping assets to lower your tax liability. Unfortunately, this is because companies have done this in the past. If an oil company has a banner year and knows they need new equipment, they can donate the old equipment to show a loss of assets before investing in new equipment in the new year.

If you've already donated, it's not too late to get an appraisal!

Have you already donated that equipment? Don't panic! There are legal methodologies that allow a certified machine appraiser to provide you with a backdated value for equipment that has already been donated. This type of appraisal will take into account market and industry conditions at the time the donation was made, allowing you to take advantage of the tax benefits of your donation without the risk of an IRS audit or of undervaluing your equipment. A past donation like a powered electric wheelchair to the ALS is something that can be handled through this process.  Make sure the appraiser is a Qualified Appraiser in the eyes of the IRS and that they regularly sign off on IRS 8283 forms. 

Now that you know what to expect, make an appointment with a certified equipment appraiser before making donations to that wonderful 501c3 that you've been wanting to help along. By knowing your equipment values and having a certified machine appraisal in hand, you're ready to make a change for the better in our world while documenting exactly what has changed hands.