Equipment Appraisal Blog | Understanding Machinery Appraisals

What You Need to Know About Fair Market Value in Machinery Appraisal

Posted by Equipment Appraisal Services on Tue, Oct 23, 2018 @ 02:24 PM

The term "fair market value" often comes up when discussing machinery appraisals. Do you know what it really means and why it's important? Find out how an appraiser determines the fair market value of a piece of equipment and why this matters for your company's bottom line. 

Understanding Fair Market Value in Machinery Appraisal

Fair market value represents how much a neutral buyer (i.e. someone who isn't personally invested in your company and who might overpay for that item) would be willing to pay for your equipment, whether you're talking about a bakery oven or a set of bicycle repair tools. 

Fair market value reflects how much the buyer would pay assuming there were no extenuating circumstances. A caterer would pay a lot more for that bakery oven if their oven failed the day before a large wedding than they would pay if time was not pressing. This valuation also assumes that all parties have equal knowledge -- that the seller is not attempting to hide any flaws in the equipment. 

Fair market value may affect the price of machinery installation or transit, notably with large items that must be installed before use.

Why Fair Market Value Matters

Assets are always in a state of flux in businesses: A new piece of equipment comes in and something old goes out. 

Maybe you decide to donate the old equipment, so you can take the tax write-off for dropping off that bakery oven at a soup kitchen that needs an oven. While this is a fine impulse, there is no way that you can write off the equipment on your taxes accurately without knowing the accurate valuation. 

Perhaps you decide to get some return on your investment by selling the old piece of equipment. If you're in a generous mood, you might even get that oven cleaned and serviced, so you're selling something that is clean, ready to use, and reads temperature accurately. What if you found out that your old oven had a very low value and you would not recoup what you spent getting the oven serviced? 

Alternately, maybe you have a favorite tool -- like those bike tools that fit your hand really well. What if there was a break-in at your bike shop and those tools disappeared? Or a fire that destroyed all of your equipment? How could you make an insurance claim not knowing the value of what you lost? 

As these examples illustrate, you can only realize the value of an asset when you know what it's worth -- which is subject to change in time. Without an appraisal of fair market value, you can't realize your equipment's value whether you're looking to sell it, donate it, or replace it. 

You may believe that you can look up the price of equipment online or use the tax documents, which take depreciation into effect. While this is a valid impulse, you can't compare your used equipment to a depreciation table or to the cost to replace the item new. It all depends on how often (and how well) you use the machinery in your work. An oven that's taken care of and serviced annually has a higher value than one that is never cleaned and never serviced. 

If you haven't had your equipment appraised recently, now is the time to get your business's critical assets valued. Find a machinery appraiser that has experience valuing equipment commonly used in your industry, whether it's culinary, sporting goods, or anything else. 

Tags: machinery appraisal, fair market value

Using a machine shop appraisal to keep up with current trends

Posted by Equipment Appraisal Services on Tue, Jun 13, 2017 @ 10:38 AM

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If there's one thing that's true in the fabrication industry, it's that staying on top of changing market trends is vital to the overall health of your business. But how do you determine where your equipment falls, what it's worth and how you can leverage that value to upgrade your shop to the latest technology? A machine shop appraisal provides you with all the information you need and more to determine your equipment values. Here's how it works.

Using a machine shop appraisal to keep up with current trends

New welders offer an entirely new range of precision, lowering your overhead costs and reducing post-welding cleanup operations. CNC machines deliver a level of accuracy that is virtually impossible to match using traditional metal fabrication tools. Multi-axis machines allow unprecedented access to the piece in progress while providing faster production times. Additive manufacturing gives you options you'd never before considered possible for your machine shop. How do you decide which technological breakthroughs are worth your hard-earned equity and whether you can afford these new tools in the first place? What determines the value of your equipment assets?

One way to approach the issue is through a machine shop valuation. Geared at taking a solid look at the actual value of your machinery, a valuation takes a good, hard look at a number of different aspects that impact machine values. Current and projected future demand for that particular piece of equipment is taken into account, as well as the features and kits available, condition of the equipment itself and what would be involved in terms of cost when removing the equipment for use in another facility. This helps you determine what the equipment is worth to your business and whether it's time to upgrade to more advanced equipment or leave the existing equipment in place to provide additional capability in your fabrication business. 

As an example, many companies are seeing the potential of additive printing, but very few are investing in the technology at this time. However, companies that are investing in this technology are seeing huge gains in their market share for these specialty tools. Though many companies are considering purchasing a 3D printer, they're not sure whether they have the assets available to purchase one that will meet their needs. Equipment valuation can help with this situation, allowing you to determine what equipment you would need to sell or use as collateral to purchase the necessary equipment to finish fitting out your machine shop for solid technological advancement.

By getting a machine shop appraisal, you can gain insights into your overall equipment values and leverage that value to improve your fabrication company's technology assets. But many machine shops make the mistake of simply counting on their equipment broker's word on what the equipment is worth. By using a certified equipment appraiser, you can ensure that the values you receive are backed up by solid methodologies that have stood the test of time in financial, tax agency and legal circles. If you're not currently working with a certified equipment appraiser, you could be leaving money on the table when it's time to buy or sell equipment.

Tags: machinery appraisal, machine shop appraisal

Mining Equipment Appraisal: Where is the Market Going?

Posted by Equipment Appraisal Services on Tue, Dec 27, 2016 @ 09:12 AM

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A recent market study by Credence Research has projected that the mining equipment market will grow to $30.5 billion by 2023. But what does that mean for your mine and how do you determine equipment values in a changing market? One option to consider is a mining equipment appraisal and how you can use the information and insights in that appraisal report to take advantage of good opportunities without risking your business on a poor risk. Here's more information on how equipment appraisals can help you stay ahead of the curve:

Mining Equipment Appraisal: Where's Your Business as the Market Grows to $30.5 Billion by 2023?

But where is this growth coming from and how will your business meet these changing needs for equipment? Countries that are industrializing are demanding more coal and material goods. Even with developed countries implementing new recycling standards to make the most out of scrap metals, they can't keep up with the demand. As other countries continue to develop, the people have more disposable income and require more material goods to improve their standard of living.

As mining companies continue to grow, they demand more equipment to keep up production rates. Companies that have become stable in the industry are often shifting to more modern and energy-efficient equipment to lower their overhead and improve profitability. Improved worker safety regulations demand healthier equipment with less exposure to greenhouse gasses while they work. This demand is driving mining equipment sales.

When your mining company needs to update its equipment, it may be due to wanting a more efficient machine or better worker safety. But what will you do with the older equipment? One option to seriously consider is selling it overseas to the developing markets. Because they are still growing, they haven't necessarily reached the level of stability where they can purchase new equipment. But at the same time, the equipment that you're done using may sell for higher rates overseas where they're desperate for quality machinery than at home, where other mining concerns are selling their machinery for the same reason you are.

As the market shifts, it can be virtually impossible to determine where your mining machinery will fall in terms of value. Why? Because your job is to get coal, ore and other valuable materials out of the earth, not to try to sell your machinery. Many mining concerns find that hiring in an equipment appraiser with experience in the field is very beneficial. It allows you to determine not only which machinery to sell, but also at what time to sell it for the best possible profits. Because appraisal is all they do, the appraiser can determine a fair market value for your machinery based on current market conditions.

As you can see, by getting a mining equipment appraisal, you can decide better when to upgrade or replace your existing equipment while still getting top dollar for the second-hand machinery you sell. But part of the process is ensuring that you're working with a certified equipment appraiser. Why? A certified machine appraisal specialist has the knowledge, experience and methodology to ensure you're getting the right kind of appraisal for your specific situation.

Tags: machinery appraisal, mining equipment appraisal

Protect Against a Volatile Market with an Oilfield Equipment Appraisal

Posted by Equipment Appraisal Services on Tue, Jan 26, 2016 @ 10:30 AM

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Though the current price at the pumps may have most Americans smiling, those in the petroleum business know just how difficult a downturn in this volatile market can be to their business. From keeping the crew happy to making fast decisions on whether a possibility is a go or a no-go, the fast changes in this market is enough to make anyone a little stressed. In this post, we'll take a good look at how you can protect your company against volatile changes in the market  and position yourself for the next boom by making wise business decisions based on a proper oilfield equipment appraisal.

Protect your interests with an oilfield equipment appraisal

Know your bottom line

By knowing exactly what your equipment values are, you're able to know exactly where you sit in terms of assets. A qualified equipment appraiser can include an estimated remaining useable life as part of your machine appraisal, giving you a good heads-up on when you can expect to replace aging equipment. They can also point out areas where you may want to start the replacement process, by leaving long-term machine equity until the last for replacement, ensuring you'll get more from your machinery in the used equipment market.

Have a solid grasp of your business' actual worth

Equipment appraisals provide you with a better idea of what your equipment is actually worth, rather than the depreciated value counted on your taxes. During a market upswing, the cost of a particular piece of equipment can rapidly increase, which a qualified appraisal specialist takes into account when providing you with a quality oilfield equipment appraisal. Because you know exactly where your assets stand, you know exactly where you stand to make better business decisions. Even better, a quality machine appraisal is prepared to a specific set of standards, which makes it easier to secure financing using your machinery as collateral, because the bank knows it can trust the machine appraisal as part of an accurate picture of your business' net worth.

Avoid risky propositions

When the guy on the next rig comes along to tell you he's quitting and ask if you're interested in buying him out, do you know whether it's a good idea or not? A machinery valuation is a great way to determine your bottom line, so you know whether you're in a good or bad financial position to take advantage of these situations as they arise. Depending on how your books are set up, you may have a financial picture that is either too optimistic that puts you in danger of losing your business to a bad investment or is too conservative, keeping you from taking advantage of new business and business expansion opportunities when they arise.  Knowing your financial state helps you make intelligent business decisions.

The oil & gas industry is volatile, but your business doesn't need to be. Instead of risking everything on a gut feeling gamble, why not look at having a quality equipment appraisal performed on your oilfield machinery? Position yourself to take advantage of the next upturn and you'll be ready to go while your competitors are still catching up with the market change. By using an ASA-certified appraiser who has received the standards board's Machinery & Technical Specialties, you're ensuring that you'll get a professional machinery valuation that will meet your needs. Contact us today for more details on getting started on the path to making wise and informed business decisions.

Tags: machinery appraisal, oilfield equipment appraisal

How a Tractor Valuation Helps You Make the Best Plans

Posted by Equipment Appraisal Services on Mon, Jul 27, 2015 @ 08:30 AM

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There are few people who work as hard as farmers do, with as much dedication to the land, to making their living from it and to leaving a legacy to their children and grandchildren. But when it comes to machinery and equipment appraisal, many farmers don't know what their equipment values are to protect their investment and provided guidance to future generations. It's important to your farm's bottom line to have an equipment appraiser provide tractor valuation and machine appraisal for your records. Here's how a tractor valuation and equipment appraisals gives you the best information to make plans for you and your farm's future.

Budgeting Concerns

When you're working on your accounting records, what is your machinery worth? If you know your machinery valuation, you have a better idea of how much it should be depreciated, allowing you to take advantage of your machinery's changes in value in your accounting and on your taxes. Talking to a machine appraiser will help you estimate how much your new equipment will lose value over time and how to budget for those changes accordingly.

Proper Insurance Coverage

Do you have sufficient insurance coverage on your farm equipment? When you suffer a loss, it's vital that you know what the equipment value is for the damaged or stolen machinery. If you don't know the value of your equipment, you can't determine how much of a loss you've taken and whether you're being treated fairly by your insurance company. Farm equipment appraisers provide a detailed description of your agricultural machinery, including its actual value. 

Know Your Trade-In Values

When it's time to replace or upgrade farm equipment, do you know how much your equipment is worth to negotiate with the sales representative? We've all heard stories of people who have been cheated on their trade-in value by unscrupulous dealers. Even when you're dealing with an honorable dealership, how do you know that you're getting the best possible trade-in value on your existing equipment? By having an equipment appraisal performed by an accredited agricultural equipment appraiser, you'll have proof of the exact value of your machinery, giving you a position of power at the negotiating table.

Planning for the Future

When you're making plans to pass your farm onto the next generation, are you passing them a farm that's successful or one that's in financial trouble? With estate taxes and the confusion that often arises around the transfer of ownership, having a solid plan in place to pass your estate to your children or grandchildren will help ease the process. If financing needs to be obtained to help the process move along or modernize your farming operation, having a solid farming equipment appraisal in place provides solid documentation of your farm's assets. With knowledge of your farm machinery's proper values, it's much easier for your heir to plan what steps to take for future changes and expansions.

No matter what your reasons, having a solid grip on your farming machinery values is a great benefit to keep your farm operating successfully. By having an accredited appraiser perform a valuation on your farm equipment, you have a better idea of what your bottom line actually is and where your finances are going. Don't put off having an appraisal done on your ag equipment - tomorrow will be here sooner than you know it.

Tags: tractor valuation, machinery appraisal