Equipment Appraisal Blog | Understanding Machinery Appraisals

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. 

When you work with lumber, it's not uncommon to deal with fluctuating values. The lumber you use changes cost after a major hurricane makes prices skyrocket. Your finishing materials change when a manufacturer goes out of business. Your tool costs can even change value when they're put on sale. But what about your woodworking equipment after you've paid the bill? As one of your shop's most expensive assets, appraising woodworking equipment should be at the top of your list when it comes to recording asset values. Here's a quick look at some common reasons why woodworking equipment is appraised.

Why is it important to consider appraising woodworking equipment?

When you know how much your equipment is worth, you're in a better position in a number of different circumstances. Here are a few to consider:

• A fellow woodworker visits your shop and notices your rarely-used shaper that has been sitting in the corner for the past five years. They ask how much you want for it. If you don't know, you could be asking far too much and costing yourself the opportunity or losing significant value by asking far too little. How do you determine a fair value for your equipment in this situation?
• A rag is left with finishing products on it and spontaneously combusts, starting a workshop fire that causes significant damage to your high-end cabinet saw. When the insurance adjustor comes out to inspect the equipment, he quotes you a much lower reimbursement amount than you feel your saw was worth. How do you prove the saw's value to get appropriate reimbursement for your broken equipment?
• After declaring that you're spending too much time in the shop, your spouse states that they want a divorce. Whether you live in a community property state or not, your woodworking equipment is brought into the debate. Your spouse has found the latest models of your equipment with the highest possible values, even though your machinery has been in use for over 20 years. How can you prove what your equipment is really worth and avoid being taken to the cleaners in the settlement?
• Following years of operating your woodworking business, you're ready to expand. But because of a couple questionable financial issues on your credit report, your bank is balking at approving your new business loan without any collateral. You're willing to put your existing machinery up against the loan, but the bank isn't certain of the value. How can you document it's worth?
• With a need to increase tax funds through the county, your local tax assessor makes a mistake and determines that your bandsaw is worth significantly more than you paid for it in the first place. They don't want to back down and aren't even willing to make a concession that they could be wrong. How do you fight the bad assessment?

By appraising woodworking equipment in your shop, you'll gain a much better idea of what those assets are worth. This allows you to make better decisions about whether you should invest in repairs, replace a piece of machinery or upgrade to a different model. However, not all equipment appraisals are the same. Make sure you take the time to work with a certified equipment appraiser. This ensures that you're getting machinery values from an independent third party that will hold up well to strong scrutiny.