When you're buying a business or a large lot of equipment, it can be difficult to determine how to allocate value across the assets. How do you determine how much of the value you've paid for the equipment should go to each piece of machinery? One of the easiest ways to make this work is through an equipment appraisal for asset allocation, which uses the values from the appraisal report created by a certified equipment appraiser to determine the overall value and how it should be spread across a number of different pieces of machinery.

How to use an equipment appraisal for asset allocation

Let's take a look at a possible scenario that is fairly common when a large lot of mixed equipment is purchased. A business needs to expand quickly and so buys out a bunch of equipment from a competitor. Though the equipment is worth a particular amount as a lot, it's hard to determine the value of each type of equipment, never mind each piece. How do you divide the cost of all the equipment up among the different pieces of machinery in a fair, equitable fashion?

One of the easiest ways to determine how to allocate asset value is by having an equipment appraisal performed. When an overall valuation is performed, the valuation specialist looks at all the equipment you've purchased, which allows them to pick out differences between not only different types of machinery, but also individual pieces of equipment within that model. They can tell you when a particular piece of machinery has a lower value because it has damage or excessive wear. They're able to mention when a particular part of a lot has a higher value because it has an optional feature that wasn't included in the other machinery.

Once the appraiser has had the opportunity to review and examine all the machinery, they can create an overall report that sums up the total value as well as the individual value of each piece of machinery. A certified equipment appraiser used a series of standardized methodologies to calculate the exact value of the machinery. The certification process ensures that a certified appraiser has the knowledge, experience and expertise to determine the machinery's value accurately.

An equipment appraiser deals with nothing but machinery all day, allowing them to see how one piece of machinery compares to another. This gives them a unique insight to see every possible item that may affect its value, whether it's a stain from liquid that indicates a leak or drip, a bit of metal scraped free of paint that indicates a pulley out of alignment or a slightly different sheen to the paint that indicates repaired damage. Any of these signs can show you where any number of issues can come into play in the future use of your equipment, allowing you to make repairs as needed.

The process of allocating assets in your business can seem like a complicated process, but using an equipment appraisal for asset allocation provides you with a fair value for your equipment, making the process go much more easily. It also provides you with a background value for your machinery, providing you with a solid proof of value should you suffer any losses for your insurance company or need to prove the value of the machinery for legal, financial or tax purposes. 

Natural disasters are getting more costly for businesses—and scientific studies suggest these disasters will only be more prevalent going forward, with this century forecast to see a 40 percent increase in tropical storms rated Category 3 to 5. The best way to protect your business assets from a natural disaster is to purchase sufficient business insurance—and this means getting your industrial equipment appraised. Find out how industrial equipment appraisals protect your valuable assets during a natural disaster. 

If you don't have insurance that covers your industrial equipment, you will be forced to pay for replacement equipment out of hand. Many businesses are forced into bankruptcy after a devastating event, such as a fire or flood, because they do not have the capital to replace the equipment they need to fulfill orders. Studies estimate that 40 percent of small business never reopen after a natural disaster. 

Before you can purchase insurance for your assets, you need to understand your risk. What types of natural disasters occur where you do business? Are there other incidents that are uncommon, but may happen? 

Consider that hurricanes typically affect coastal areas, but they don't always stick to the seaboard. While you may be at low risk of a hurricane, since these storms are relatively rare, it may make sense to buy hurricane protection because a single storm could wipe out your facility overnight. 

Next, determine your tolerance level for risk. Would you prefer to protect your business against all foreseeable hazards, or do you want to stick with coverage for the most common incidents that affect your area? 

Review your insurance coverage, paying special attention to policy exclusions. Insurance policies often exclude earthquakes for facilities that lie near fault lines. With hurricanes, some damage may be covered by business property insurance while other types of damage are excluded. For instance, policies treat hurricane rain differently when it's falling and on the ground. Once rain hits the ground, insurance companies consider it flood water, rather than part of the hurricane. They may then refuse to cover damage to your industrial equipment unless it was damaged before the rain hit the ground (for instance, if it came through a broken window). 

You may purchase supplementary insurance to cover these gaps or exclusions, safeguarding your assets and ensuring replacement in the event of disaster. 

To buy insurance, however, you need to know how much insurance you need—and that's where the industrial appraisal comes in. An industrial appraisal provides an accurate valuation for your equipment so you know exactly how much it would cost if you needed to replace, say, a hoist. 

There are different ways to value equipment. An appraiser might determine what it would cost to replace your industrial equipment by comparison shopping for used equipment of a similar make and model or by gauging the new replacement cost of a similar asset, then factoring in the indirect costs of ownership (e.g. maintenance, labor, and tax). 

Recent sales transactions shine a light on market value for a given item, so some appraisers take the market value by looking at recent sales databases or auction houses. 

Any method that delivers an accurate cost estimate of your critical equipment is acceptable. 

You never know when your area will be hit with fires, floods, or storms. To be safe, get all of your mission critical industrial equipment appraised as soon as it's convenient to get losses covered during the next natural disaster that affects your area. 

In a divorce, spouses split marital assets. While you may think of this in reference to personal assets, it also refers to business assets. If you own a business, your spouse may be entitled to up to half of the business's worth. To determine this worth, equipment valuation for divorce purposes is essential. Here's what you can expect when getting business equipment valued in cases of divorce. 

Why Appraise Equipment Before a Divorce

During a divorce, you must split the marital assets with your soon to be ex spouse. While it may be easy enough to assess the value of your home or car, gauging the worth of your business assets is trickier. An appraiser can estimate the value of your business by comparing it to your closest competitors. Equipment valuation methods help an appraiser determine the fair market value of business equipment. From this valuation, a judge or mediator can determine how much money your spouse is entitled to, by law. 

Valuing equipment for divorce purposes is the easiest way to determine your spouse's allotment, but it also benefits you. You want lower appraisal values for equipment where your spouse will want higher values. An appraiser can fairly assess business equipment without favoring either side. 

Divorce cases often turn acrimonious as partners fight over division of property, child custody, and other matters. As these cases drag on, legal fees mount. So do stress and tension. By letting an appraiser determine the worth of your business and equipment, you can reduce your stress and save both time and money. 

What to Expect When Valuing Equipment for Divorce Purposes 

When you schedule an appraisal, a certified appraiser will come out to your business. They will inspect the premises and take photos or videos of your equipment. An appraiser might ask to see a maintenance log or note the make, model, and condition of your business assets. A skilled appraiser will be thorough in their inspection, taking even the small tools and furniture into account. 

The appraiser will then review this information, perform independent research, and deliver an equipment valuation which you can use for divorce purposes. 

You may use a single appraiser for divorce purposes or each party may retain their own appraiser. It depends on how amicable the divorce process is. 

It is essential that you hire a certified appraiser when taking equipment values for divorce, as an appraiser who is not certified is viewed as suspect by the court.

A dealer, auctioneer, or other party should be avoided for valuation as well, as they may not have an independent, unbiased opinion of equipment value. Consider that an auctioneer who lowballs your construction business assets -- reducing the amount of money you have to give your soon to be ex spouse -- may hope to make a tidy profit by buying the equipment off you for a song. 

Certified appraisers have experience conducting appraisals for legal purposes, and many have previous experience testifying under oath. If your appraiser has to take the stand, this comfort can make the difference between a valuation that stands up in court and one that crumbles under cross-examination. 

Start searching for a certified appraiser who understands your industry as soon as you know you will be getting divorced. This gives you time to identify the right person, who can value your equipment fairly and assist with the division of marital assets as required by law. 

When you work in the oil and gas industry, you know that market fluctuations can have a strong impact on your bottom line. As prices change, you decide what equipment But did you know that appraising oilfield equipment can help you make smart decisions for your company's future? Here's a quick overview of why it's important to have your oilfield equipment appraised regularly and how this information can provide strong benefits for your business.

Keep on top of changes in the market by appraising oilfield equipment

When market prices change, you may choose to put assets into or out of use based on a wide range of factors that impact cost and price. But when you don't know the value of your equipment, it can be very difficult to determine when that machinery should be put into action or held back to preserve value. But that's not the only area where your machinery values should be considered.

What about when the next big oilfield is discovered and you're in a good position to take advantage of the situation? If you need to quickly take advantage of the situation,  what assets can you leverage to ensure you can secure the financing you need for fast growth? A financial institution may not see the full value of your equipment or may take time to determine the value, costing you valuable days or weeks before you can take advantage of the opportunity. However, having a valuation report already on hand from a certified equipment appraiser allows the financial institution to move more quickly in approving your loan, giving you more time to position your company and start production.

Another area where equipment valuation can help in a boom is by providing you with a solid value for that particular piece of machinery. Instead of being gouged by an equipment sales rep who is inflating prices to take advantage of the situation, you can come to the negotiating table with a firm grasp of exactly what the equipment is worth. This allows you to negotiate from a position of strength, even though you may end up paying a slightly higher price instead of waiting on equipment to arrive from across the country.

Once you're on the oilfield working, can you sustain your production levels or will equipment failures cost you your profits? Many people are not aware of a very helpful aspect of equipment valuation. When your equipment is appraised, its value is based at least partially on its condition. That means the appraiser, who spends their time inspecting equipment, can often provide you with a good idea of where the machinery is having issues such as excessive wear, pressure issues and similar problems.

By appraising oilfield equipment regularly, it's much easier for you to make smart decisions about your business, no matter what the market may bear. But who should you have perform the equipment valuation? Though it may be tempting to simply request one from your local equipment dealer or use your last property tax assessment, keep in mind that these sources will not provide you with a solid valuation report that will hold up in legal, financial, insurance and tax circles. Make sure that the appraiser you use is certified, which will provide you with an honest, independent report of your equipment values. 

What's your machine shop worth? If you don't know, perhaps you need an appraisal to get the market value of your machine shop. Explore common reasons for appraising a machine shop today to learn when and why to get an appraisal. 

Keep Up With the Times 

If your shop is not keeping up with market trends, you may not be able to handle your customer's changing needs. Getting a valuation can help you tune-up your machine shop, because it will show you your shop's current value, your equipment's condition and remaining useful life, and current market demand for your assets.

When you know this information, you can stay current with the times by investing in the right pieces of new equipment. For instance, many machine shops understand the demand for additive manufacturing technology, yet few have made the investment in this technology. If you've been thinking of purchasing a 3D printer, a valuation can help you compare your existing assets' value and demand, so you can decide whether to sell underutilized equipment and buy a 3D printer or keep your existing assets and take out a loan for the new equipment. 

Lower Tax Liability 

Are you concerned you're paying too much in taxes? An appraisal can provide an up-to-date valuation of your machine shop, which can lower your tax liability. The money you save on taxes can then be reinvested in your business.

Protect Your Investment

Your machine shop is your livelihood, and if your equipment were damaged in a natural disaster or other incident, you would suffer. In order to protect your investment for business insurance purposes, you need to know the total value of your assets -- and this means you need equipment appraisal for all the big-ticket items in your machine shop.

For smaller items that you may not want appraised, you will need documentation to demonstrate your assets and their condition. Think photos of your equipment, serial numbers, make and model information, and even service records for your equipment. 

An appraisal can show your insurance company exactly how much everything is worth and help you determine how much insurance to purchase. By preparing ahead, you'll be covered whether there's a flood at your facility or an unexpected crash. 

Sell Your Shop 

With the economy doing so well, this is a great time to consider selling a successful machine shop. Maybe you'd like to retire, or maybe you're thinking of moving to another state. A machine shop appraisal will help you understand the worth of your shop so you can take it to market and sell for a fair price. If you're thinking of selling down the road, having your shop appraised now helps you make informed decisions for the next few years. For instance, you'll know whether it makes financial sense to repair or replace old equipment given the equipment's value in the appraisal. If your shop isn't valued as highly as you would like, you can make changes to the business to boost its value so you can earn more at the time of sale. 

A machine shop isn't something that you set up and leave alone. It's always changing. So while there are many reasons to consider appraising your machine shop, know that an old appraisal isn't necessarily reflective of your shop's current business valuation. If it's been a while since you've had your machine shop appraised, or if you've never appraised it, search for an appraiser with demonstrated experience with machine shop appraisals today.