Equipment Appraisal Blog | Understanding Machinery Appraisals

Purchasing an existing equipment appraisal practice can be a great way to start your own business or expand your current valuation firm. Acquiring an established company gives you a foundation of existing clients, systems, and reputation to build upon. However, choosing the right one can be a challenge.

The value of any appraisal business lies heavily in its clients. Review the practice's existing client list, frequency of repeat work, and strength of their relationships with those they work with. A practice with long-term, loyal clients and strong referral pipelines provides immediate cash flow and growth opportunities.

The equipment appraisal industry is somewhat of a niche market with considerably fewer players than business and real estate appraisal firms. Therefore, a strong website with a solid SEO will go a long way toward clients finding you through their internet searches and alleviate many marketing headaches. This can be an incredible benefit to a new business owner who wouldn't need to chase leads but instead, manage the ones that come in through their website.

An appraisal practice with a strong reputation in the marketplace carries significant intangible value. Look for evidence of positive client feedback, professional affiliations, and industry recognition. A solid brand can shorten the time it takes for you to gain trust with new clients.

Ensure the prior owner is an accredited appraiser who adheres to USPAP (Uniform Standards of Professional Appraisal Practice) and other recognized industry standards. This will lend credibility to the company and allow the business to take on dispute work involving litigation.

Review three to five years of financial statements. Consider profit margins and fee levels in relation to the size and complexity of projects. Look at gross revenue from steady clients vs. new business. A financially diverse and steady practice is far more valuable than one overly reliant on a single revenue stream.

Smooth ownership transitions are critical in professional services businesses. Ask the seller if they are willing to stay on temporarily to introduce you to clients, train you on their systems, and transfer institutional knowledge. This support can make or break the long-term success of your acquisition.

In summary, acquiring an existing equipment appraisal practice can be a rewarding investment if you conduct thorough due diligence. By focusing on SEO and website effectiveness, client relationships, reputation, financial stability, and operational systems, you will position yourself to carry forward the company's legacy while adding your own vision for growth.

When you're buying a company, one of the last things on your mind may be equipment appraisals. What does a machinery valuation matter compared to profit and loss, equity and overall assets? If you ask any equipment appraiser, they'll tell you just how important equipment values are in your business' bottom line. Here are a few reasons why you'll want to see a machinery valuation before you sign on the dotted line.

Why do equipment appraisals matter when you're buying a company?

• They represent actual assets and equity rather than paper assets and equity. When a business is preparing its tax documents, machinery is often depreciated on a specific schedule. But in the real world, there are a wide range of factors that can impact how long the equipment can remain in service without compromising your profitability. A completely depreciated piece of equipment can continue working for years to come, while one that has had rough treatment or that is of poor quality may give up the ghost years before it would be completely depreciated on a standard schedule.
• They give you a better idea of the condition of the machinery you need to operate your new business. Part of the process can involve looking over the maintenance and repair logs giving you insight into whether the machinery has been properly maintained to deliver years of service or if it is in poor repair, which may require negotiating to a lower sale price to compensate for equipment that will need to be replaced.
• They help you plan for costly repairs or replacements down the road. An appraisal might contain the estimated normal and remaining useful lives on the equipment. This allows you to plan for these repairs or replacements long before they're needed so you can have the financial resources in place that will be needed.
• Equipment appraisals can also be completed at the "Replacement Cost New" level which would give you insight on how much would go into replacing something if you had to buy it new.  This might be helpful when setting up your new insurance policy on the business that you are buying.

Equipment valuations may take a small part in the overall view you get when you're buying a company, but it can give you a solid view of the business from an asset perspective. But just as important as getting an equipment appraisal is the equipment appraiser who does the analysis. Hiring a certified equipment valuation specialist ensures that the calculations of the equipment values are determined by someone who has learned the appropriate methodologies for any number of different situations. This ensures the equipment values they calculate will hold up to strong scrutiny and will help you with obtaining financing, covering insurance losses or fighting a bad tax assessment.