Equipment Appraisal Blog | Understanding Machinery Appraisals

An IT Equipment Appraisal Can Support Higher Business Valuation

Posted by Equipment Appraisal Services on Mon, Oct 26, 2015 @ 09:00 AM


In today’s digital world, IT equipment plays a crucial role in the efficient functioning of any business office or manufacturing facility. It helps people and machines to communicate, controls production demands, and manages inventory or shipping needs. When determining the value of a given business, an IT equipment appraisal can support a higher valuation.

The business may need a valuation for a number of purposes. The owners may be considering a sale, some type of incident might have resulted in an insurance claim, or the valuation may be needed to justify a request for additional capitalization. Whatever the reason, a professional equipment appraisal service can make sure that the IT equipment is properly accounted for in the valuation.

IT equipment often serves as the backbone of any type of industry today. The modern office cannot function properly without it, but manufacturing concerns also rely on technology to operate at their highest capacity. There are two types of classes involved in IT equipment - tangible and intangible. The tangible items are those things which are more visible - servers, printers, desktops, laptops, and computer-aided manufacturing assets, for example - although such things as computer software and networks may also fall under this category.

The intangible aspects of IT equipment can be more difficult to monetize. This might include a proprietary programs that have been developed to address specialized manufacturing for a particular plant, or other digital systems which contribute to the plant’s flow. An IT equipment appraisal may include the value of not only the hardware, but also the software associated with these systems. Factors an equipment appraiser might take into consideration when evaluating IT equipment include:

  • Value of the equipment itself: A machinery and equipment appraisal will include the actual value of the IT equipment itself. This takes into account the purchase price, depreciation, condition, and open market value to determine a fair equipment value.
  • Value of the software: This may be harder to place a value on. Can the operation run without the proprietary software its engineers developed to enable one piece of machinery to run in conjunction with another? Is there a specific program that gives this particular operation an advantage over its competitors? In a sales situation, this might very well be tangible topics for negotiation that are of crucial interest to a potential buyer. In an insurance situation, this could help determine how difficult it might be to replace this information.
  • Value in the business: A business that is already set up with the latest in servers, networks and mobile communication technology has more appeal to a potential buyer or lender than one without these capabilities. Companies that have not invested in technology are often looked at as being behind the times and inefficient.
  • Impact on performance: How important is this equipment and information to the smooth functioning of the operation? If the shipping department cannot operate without a full schedule of all trucking operations, then productivity and sales could decrease. Anything that lends to the ability to produce, manage, control or ship has an impact on the entity’s overall performance.

If a business can prove that there is a value to the IT equipment and underlying software, it could result in a substantially higher sales price, insurance settlement, or bank loan. That is why an IT equipment appraisal is such an important part of a business valuation.

Tags: Equipment Appraisal, valuation, IT equipment appraisal