Equipment Appraisal Blog | Understanding Machinery Appraisals

When you run a business, you know that to roughly paraphrase Benjamin Franklin, failing to plan is planning to fail. If you don't know what direction your company is going in, how to respond to changing market conditions or even where your company is strong and weak, you can't take advantage of opportunities and avoid risks when they come along. But even for those business owners or managers who do business planning for their enterprise, there can be some areas where you don't know exactly what you're working with. One of these areas is equipment values.

How Equipment Appraisals Help You Get the Most out of Your Business Planning

Often typing up significant amounts of equity, deciding on a timeline for equipment purchase or replacement and what type of transaction to undertake can be difficult to determine. Here are some examples of how an equipment appraisal can help in the business planning process:

• When to purchase machinery. Should you purchase new equipment before starting that new contract or after it's completed and paid? The biggest part of that answer hinges on how much longer your equipment is expected to last. Though a exact point of failure or the point at which it becomes unprofitable to continue repairing is hard to determine, a qualified machine appraiser can estimate a piece of equipment's remaining usable life will be. By knowing this, you can determine whether the existing equipment will make it through the contract or if it has potential to break down and cause serious delays and financial burden.
• When to sell equipment.  If you're hitting a problem point in your cash flow, should you sell equipment or take out a line of credit to cover the lean times? An equipment appraisal allows you to know what your machinery is actually worth by looking at the current market conditions. If your industry is going into a bust cycle, you may not get much money for the equipment you'd need to sell. If, on the other hand, it's going into a boom cycle, you may want to hold onto the equipment regardless to take advantage of favorable conditions. A machine appraisal could help with this type of information.
• Buying new or used or trading in. What type of purchase should you make? If you're considering buying new, can you save significant money by buying used instead? If you're thinking of buying used, would a new machine provide a significantly longer useful life for just a little more cash? Should you buy more equipment or just upgrade by trading in your old machinery? A good machine valuation specialist can help answer those questions by letting you know what your equipment is worth. By going into a dealership prepared with the current machinery values, you're able to negotiate from a position of strength.

When you have a machine appraisal performed, that information helps lead to better business planning in the future. By having a solid plan in place that reflects accurate information for your business, you can successfully grow your business.

When you run a business, there's always some risk to your investment. Being a wise business owner means you know how to recognize those concerns and how much of a risk they pose to your company. Though many business owners discount the value of shop equipment appraisal, it can be vital to your business' success or failure. Here are details on how that happens:

How Shop Equipment Appraisal Protects Your Investment 

• Providing documentation of value: If you need to document the value of your machinery, whether for financial documents, a loan to expand your operations or to disprove a high property tax assessment, a machinery valuation prepared by a certified equipment appraiser serves as legal proof of the value of your workshop equipment. Because a certified appraiser uses recognized, accredited methodology to calculate the equipment values, it will stand up to strong scrutiny from virtually any source, making it much easier to bring negotiations around to the actual value of your business and equipment, saving you time, effort and money in the process.
• Ensuring appropriate insurance coverage: When your business suffers a loss, whether it's from a fire, a natural disaster or a theft, your insurance company will require you to provide proof of value. The problem is that many businesses aren't sure of the value of their machinery at the time of a loss, due to changes in market conditions, depreciation and similar issues that are often dealt with in equipment appraisals. An equipment appraisal also ensures that you're carrying the appropriate level of insurance on your workshop equipment. If you have an appraisal from a certified equipment valuation specialist, it provides legal proof of value, minimizing the chance that you'll have to take your insurance company to court to collect the proper valuation on a loss.
• Ensuring correct depreciation: Many bookkeepers and tax accountants only depreciate your shop equipment and other depreciable business assets based on the federal tax code's schedule of depreciation. But what if your equipment is being heavily used and is no longer worth the amount shown on the depreciation schedule? On the other side of the coin, if you've spent good money investing in and maintaining quality shop equipment, it may be worth significantly more than the depreciated value, which is very important to the asset side of your balance sheet when you need to get a load for expansion, to prove value when selling equipment or for other business transactions.
• Helps protect against unexpected early machine failures: Part of the equipment appraisal process is estimating the expected lifespan of machinery. Though most appraisers can do a fair job of estimating this figure, equipment valuation specialists who work primarily on industrial equipment are far better at this than most. Because they deal with machinery on a daily basis, they can help you determine how much longer the equipment you have is estimated to last, making it much easier for you to start making plans to replace it when the time comes. Though this figure is not set in stone, it is a good gauge to help you plan for your business future expenses.

By having a shop equipment appraisal performed on your workshop machinery, you can ensure that your investment in your business is protected, no matter the exact risk at hand.

Divorce is almost virtually never a simple process. When people who shared their lives decide to leave a marriage, it's natural for each party to want what's best for them. When it comes to dealing with equipment values, having a professional equipment appraiser provide a machinery valuation helps ensure everyone gets a fair share of the business. Here's why.

Dealing with Divorce: How an Equipment Appraisal Can Help

• Equipment values are different that that of home, auto or cash item values. While it's much easier to identify the value of common, everyday items, machinery values can have a range. This range can be manipulated by one party to ensure they're getting a better deal than the other party is receiving. This often plays out that the leaving partner wants a higher amount of the business than the remaining partner is willing to sacrifice out of concerns for whether the business is able to remain solvent. Which ever side of the divorce you're on, having an equipment valuation performed by a certified machinery appraiser means the value will be determined in a way that is fair to everyone.
• You need to meet legal requirements. Though there are a wide range of appraisal methods that can be used on business equipment, the court system often limits the methodologies that can be used to determine equipment value when dealing with the dissolution of marriage. The most common methodology is determining fair market value, which takes a wide range of changing factors into account, to determine a value that is fair to both sides of the dissolution if the business is to remain in operation.
• But what if there's a push for one partner to get out of the business? In cases like this or when the equipment needs to be sold quickly so that both parties can receive their appropriate profits, fair market removal may be used.
• If a situation is in place where both parties want out of the business and need the money quickly to start their lives over, they may be willing to settle for liquidation value, which provides a significantly lower value for the machinery, but tends to produce a solid cash value for the equipment which would then be split equitably among the parties. Though this is a rarely used technique, it is still in place in many no-content divorces and similar situations where neither party is remaining vested in the company's interests.
• Certified machinery appraisers can work from a variety of positions. They can be hired by one spouse, the other spouse or by council. They can also work for both spouses, helping both parties reach an equitable distribution of the business value. Because divorces often demand a certain amount of testimony, make sure your appraiser has experience working in that type of situation.

Divorce can be a messy process, but equipment appraisals helps make sure everyone's interests are addressed during the process. If you haven't had the chance to speak with a certified equipment appraiser, we're here to help.