Equipment Appraisal Blog | Understanding Machinery Appraisals

When you're in the oil industry, the changing market means  you might be looking at black gold or just a plain crude mess. How can you compete with rapidly changing market conditions? Fortunately, current market projections are looking favorable to the gas and oil industry. But are you in a good position to take advantage of this market upswing? Here are some more details on how an oilfield equipment appraisal can help you gain ground faster.

How an oilfield equipment appraisal helps you compete in a changing market

The past few years have been hard on roughnecks, roustabouts, drillers, operators and just about everyone in the industry. The low barrel prices of the past few years have moved many oil companies from the boom years of the best of Bakken's offerings to the most stripped-down survival mode. Many companies have been bought out by competitors or sold off at auction to the highest bidder - not very high with low oil prices. But if 2016 was a year of making tough decisions, as summarized in a recent Deloitte report, 2017 is expected to be the beginning of the long road back to productivity and profitability, especially following the election of President Trump, who has made strong promises to bring back domestic energy production.

But how can you get there? If your business is like many oilfield companies, you've had to make major sacrifices to get by during the tight years. Equipment that was sold for pennies on the dollar during the worst of times may now have an increased value as the market recovers and begins to climb once again. Having your equipment appraised provides you with a wide range of information beyond the simple price you can expect to receive for it. For example, a good equipment appraiser will look at the overall industry and adjust the equipment's value accordingly. Just as you might see equipment priced sky-high during the peak of a boom, that same equipment may be significantly lower when the market is flooded with used machinery during a severe downturn.

But what else do they look at? What condition is your equipment in overall? Because an experienced oilfield equipment appraiser spends significant time every day looking at equipment, they can often see issues that your mechanics or other personnel may have missed. This in turn allows you to catch problems earlier on, before they become much more expensive problems. Has your equipment been well maintained or has it been abused or neglected? Well-maintained equipment will often last significantly longer and enjoy a higher value than poorly-maintained machinery. This in turn can give you collateral when you need to secure financing for additional expansion during a boom year.

With the expected improvement in the market, having an oilfield equipment appraisal performed ensures that you'll know the value of your assets. This knowledge, in turn, can give you a strong leg up on the competition when it comes to financing additional equipment, operations or manpower. But don't expect that your local equipment dealer is going to just give you an appraisal that represents fair market value.

As the economy continues to lumber on, a wide range of markets and industries are being impacted in the process. But what about heavy machinery? Current projections are showing growth in the heavy construction equipment market as global economies continue to crawl out of the last downturn. What does that mean for your machinery values? Here's some insight into how heavy equipment appraisal values will be impacted in the upcoming years.

How is the changing market impacting heavy equipment appraisal?

A recent report issued by Markets and Markets created a global forecast of heavy construction equipment by type, end-use industry, application and region out to 2021. It's projections estimate that the industry will grow by a compounded rate of 7% per year, from $121.46 billion in 2015 to nearly half again that at $180.66 billion by 2021. This is in line with estimates of growing government spending on infrastructure projects, increasing population needs and increased construction in developing countries. Earthmoving equipment is expected to lead the charge as new projects break ground. In all aspects of heavy equipment, the heavy hitters in the industry are already positioning themselves to take advantage of this construction boom. Where do your equipment values stand in the process?

As demand for construction equipment rises, some portion of that will be taken up by new equipment produced by industry leaders. But in many circumstances, the demand for used equipment will actually rise as well. In developing countries, many governments would rather invest in second-hand equipment that will allow them to achieve the same amount of work without having to make as much of an investment in the beginning of the development process. Construction companies that are forming to take advantage of the projected growth will want to maximize the value of their capital, making used equipment an excellent investment. As demand for this equipment rises, so does your equipment values.

As the market grows, you'll want to be in a position to take advantage of the opportunities that growth presents. Part of being able to do so is tied up in what assets you have available to secure funding for business expansion and upgrades. As the used equipment market grows, your equipment values also increase. By getting an updated construction equipment valuation, you can receive solid documentation of the increased value, allowing you to use that value as leverage with your financial institution.

What's more, an equipment valuation report created by a certified equipment appraiser uses methodology that has been proven to stand up in legal, financial, insurance and tax agency circles. That means when your tax assessor's office assumes that the growth in the industry means you should have a much higher tax on your equipment, you already have the documentation needed to fight the unfair assessment.

With the projected growth in the market, we can expect to see solid changes in heavy equipment appraisal values as time marches on. Are you ready for this upcoming growth? If you haven't had a recent equipment valuation, you may be missing asset value that you could use to your business' benefit as this growth takes place.

When your medical practice is doing well, it can be tempting to upgrade your machinery or open a new location. But how do you know if that move will be a good investment or a bad risk? Medical equipment appraisal can provide you with the information you need about some of your practice's most expensive assets to help you make an educated decision on these types of issues. Here's more information on how it does this.

How Medical Equipment Appraisal Helps Support Your Bottom Line

How much is your medical equipment worth? You might be surprised just how far that number can vary. When you've got an equipment sales rep in the office, they may say that it's worth very little, especially compared to their latest model. On the other hand, they may say it's worth a great deal, especially when they're willing to accept it as a trade in on the same latest model. Neither number is necessarily an accurate assessment of the machinery's worth.

Looking at what similar models have sold for may not give you a good picture either. How well were those machines cared for? Was the industry in a strong or weak cycle when they were sold? Is there demand for that equipment in the industry because of new techniques or practices? There are a number of different factors that can impact your equipment's value. Working with someone who understands these different factors can make all the difference in determining your equipment's actual value.

Imagine if you had a piece of equipment that had been ill maintained over the years or had been damaged in a flood or fire. It still operates, but not as well as it should, or it's probably going to have a shorter useable lifespan than expected. What happens when you use a standard depreciation table in a tax document to depreciate value? The depreciated value will be stretched out over a longer period of time than the machinery will remain in usable condition. This means it remains on your books as an asset even when it actually has no reasonable value.

Another piece of equipment could be very well maintained. It's always had proper maintenance and has been used within its specified parameters, ensuring that it's in excellent conditions. It can deliver productive results for your practice years after it's been fully depreciated. That means it has no value in your balance sheet, but provides real value to your practice on a daily basis. The first machine creates false value, while the second isn't recognized for the value it delivers. This can create inaccuracies in your balance sheet and make it difficult to make smart financial decisions based on your practice's asset worth.

By getting a medical equipment appraisal, you can ensure that you have a much better idea of where your practice sits financially. With this information in hand, you can make smarter decisions on new investments, whether it's to open up a new location or upgrade your assets to allow for further services for your patients. However, if you're not working with a certified equipment appraiser, you may be getting bad information. Certified appraisers follow accepted practices to ensure they provide you with accurate values for your medical equipment.

Working in metal fabrication can be a tough enough job, with times of plenty and need, difficult work and exacting specifications to meet. But when disaster strikes, it can become even harder to keep your head above water. Whether it's a shop fire, a natural disaster or a theft from your business, it can seem as though you've only gone through one disaster just to deal with another one: insurance company demands for value documentation. Here's some information on how a metalworking equipment appraisal can help you through the process.

Disaster Recovery: How a metalworking equipment appraisal helps you get through

When you have a disaster in your shop, proving the value of the equipment that has been affected can just add to your burdens during a difficult time. Having an equipment appraisal on hand provides you with a wide range of benefits, not the least of which is being able to immediately document the value of said machinery to your insurance company or a court of law, depending on the situation. 

But what if you haven't had the opportunity to get an appraisal performed prior to the loss? You're not necessarily just stuck with whatever the insurance company or court decides to grant you. Certified equipment appraisers are trained to develop equipment valuations in a wide range of circumstances, even when the equipment has already suffered significant damage or has been stolen. By going back to the date of the loss and studying the documentation you have available, an equipment appraiser can provide you with an appraisal report that can document the estimated value of the machinery, which is especially helpful if your insurance company or the other party in a lawsuit is trying to lowball the value of your metalworking machinery.

How does this work? The equipment appraiser will look at your original purchase documents, photos, records of maintenance, repairs and updates made to the machinery and uses that documentation to develop an estimated value for the equipment.

But how is this more accurate than your insurance adjuster's final figure? Equipment appraisers spend all day appraising equipment, often specializing in a particular type of equipment. An insurance adjuster, on the other hand, must determine values for a wide range of items, from houses and medical claims to liability and structures. They don't know metalworking equipment nearly as well as a certified equipment appraiser does.

Though you can wait on getting a metalworking equipment appraisal until after you've had a disaster, having one on hand ahead of time can help speed the process along with your insurance company or court case. But make sure you're working with a certified equipment appraiser who has experience in the metalworking industry. By doing so, your appraisal report will be prepared using standardized methodologies that have been proven to hold up in legal and insurance circles.

Understanding orderly liquidation value in your equipment is just something most business owners never consider. Why? In general, liquidation is considered by most business owners to be a sign of failure, such as a bankruptcy liquidation. But there are a number of circumstances in which you may need to have an equipment appraiser perform a liquidation machinery valuation that have nothing to do with financial trouble in your business. In this post, we'll take a look at which circumstances may call for orderly liquidation equipment values and why this type of appraisal is used in those situations.

How businesses work: understanding orderly liquidation value in your equipment

What is orderly liquidation value?

Orderly liquidation value falls between forced liquidation value and fair market value in terms of monetary compensation. It's calculated under the assumption that the piece of equipment or machinery must be sold, but that there is a longer period of time to do so, such as a few months. You would receive less than you would at fair market value, but receive more than you would under a forced liquidation.

How is it different than fair market value?

Fair market value assumes that the equipment would fall under normal exposure in the market place before being sold for what is perceived as a fair price to both the buyer and seller. There's no serious time limit on how long the equipment would be offered for sale, so it would be sold for a higher price than in an orderly liquidation scenario.

How can orderly liquidation equipment values impact my business?

When you're getting ready to sell a business, knowing the orderly liquidation values allows you to gain quick cash to help with financing or to provide an additional buffer during the sale process if things don't go as smoothly as you'd like. When you're purchasing a business, knowing these values allows you to relatively quickly sell some of the excess equipment to pay down debts or meet other needs during the process. 

In what kind of situations is orderly liquidation value used?

In many circumstances, people involved in a business need to receive money relatively quickly for a number of reasons, but are willing to wait a reasonable amount of time to ensure they're getting more from the sale of that asset than they would through a forced liquidation. This can include the breakup of a partnership, the dissolution of a marriage where both individuals were involved in the business, the sale of excess equipment in anticipation of closing a business sale, an unexpected death of a business partner or similar scenarios. By providing additional time, the party that is leaving the business or their heirs will then receive money for the equipment that is sold without having to either lose out on the machine's value through a quick sale or wait a long period of time for it to sell using conventional methods and fair market value.  Banks also often lend based on Orderly Liquidation Value.

As you can see, there are many different situations where understanding orderly liquidation value in your equipment is important to your bottom line. When you need equipment appraisals, it's important to work with an equipment appraiser who is certified, because the certification training process ensures they know which standardized methodologies to use in which situations. Why is that important? Standardized methodologies are developed to stand up to strong scrutiny, including legal, insurance, financial and tax circles. Getting a quality equipment appraisal is vital to your bottom line.