Equipment Appraisal Blog | Understanding Machinery Appraisals

When you work in manufacturing, you know that customer trends and sales can be fickle at times. With the continued economic recovery, many businesses are seeing new growth, but many businesses are unsure how to respond to that growth after the depth of the last recession. How do you figure out when it's time to ramp up production and what assets you have available when it's time to invest in additional equipment, manpower or materials? Here's a quick look at how a manufacturing equipment appraisal can help the process along.

Ramp up production with a manufacturing equipment appraisal

When the market starts to shift in your company's favor, it's very tempting to purchase new equipment, upgrade your existing equipment or expand your operation for additional production. But which one is the right choice for your situation? One way to gain more insight into the issue is by having an equipment appraisal performed.

Equipment appraisals do more than simply determine the value of the machinery, though that in and of itself can be very helpful information. An experienced equipment appraiser looks at a number of factors when valuing machinery which gives you additional insight into when you should expand operations, when you should replace equipment and when simple upgrades may make the most sense. 

One area the appraiser looks at is the machinery's overall condition. Because an experienced appraiser spends time every day looking at equipment, they have a good feel for when the equipment is getting ready to fail. For this reason, they can often determine how much longer the machinery will function, also known as expected useful lifespan. If your machinery is at the end of its lifespan, you may want to replace it. If you have equipment that is fairly new but has been poorly maintained, that will impact the expected useful lifespan of that piece of machinery. If on the other hand, the ancient but well-maintained extruder you have is still in excellent condition, the appraiser may recommend you keep it in production for the foreseeable future.

Another area that is looked into is the market. Experienced appraisers have often seen the market for your sector go through changes. This allows them to estimate the value of your machinery based on market projections. They may be able to share those insights with you, saving you the expense of expanding your operations just in time for the market to downturn, leaving you with machinery that has quickly devalued with the market slowdown. If the market is expected to continue doing well for a period of time, you may be able to replace or upgrade your equipment to allow for faster or more economical production, or simply expand your production to take advantage of the steady nature of the current market.

The US economy seems to be in a solid state of recovery, with growth turning into manufacturer's higher profits. When you get a manufacturing equipment appraisal, you have the opportunity to learn a great deal about the condition and value of one of your business' biggest asset pools: your production machinery. By learning this information, you can quickly leverage that knowledge to decide whether you need to upgrade, replace or expand particular types of equipment to boost sales and profitability. The benefits of equipment appraisal give you valuable insights that help you manage your business more efficiently and with greater flexibility than ever before.

When you have manufacturing equipment that you're getting ready to replace due to age or needed upgrades, there's always a concern that you may not get what the machinery is worth. This can lead to financial issues with your company or perceived ideas that the machinery was sold for less than it should have been. How do you get what your equipment is worth when it's time to negotiate? A manufacturing equipment appraisal can provide you with the documentation you need to get a fair price.

Using a Manufacturing Equipment Appraisal for Negotiations

Many people assume that equipment appraisals are simply calculated based on what the market will bear. But what happens if you're only planning on advertising the equipment in your industry, which is currently in a slump? What about the market as a whole? Will there be additional costs for removal that need to be taken into consideration? These questions will all play into your initial asking price and the point from which potential buyers will negotiate. 

If, for example, everyone in your industry is inserting magnets into their plastic molds, does your machine have that capability? Added to the initial value of a machine without that capability, a retrofit or after-market kit may be required to add that feature. Machines that are left without that feature or that are incapable of being upgraded to include it may end up receiving lower final sales prices, because they won't keep up with the latest trends that newer, more expensive machines are able to contend with.

But what if you're not following the latest trends, because you provide more traditional means of production? Many companies find that hiring someone who professionally specializes in equipment appraisals has a finger on the beat of change in the industry. Hiring a well-qualified, certified equipment appraiser can mean the difference between knowing when to sell your machinery and when you're just going to be stuck with it.

Another area where businesses often take a hit on selling manufacturing equipment is by assuming its value is what the tax accountant says it is. The problem with that value is that machinery often ages faster or slower than the depreciation tables issued by your tax agency. If you have quality equipment you've kept in exceptional shape, you may sell it for less than it is actually worth, because it would still operate for several years after the equipment has been fully depreciated and shows a value of zero. If your equipment takes a beating because of your location, environment or manufacturing practices, it will probably fail before it is fully depreciated, which will lead to potential buyers backing out because your asking price is then too high for the expected useable lifespan, another measurement a good appraiser will calculate for you.

As you prepare for negotiations, having a manufacturing equipment appraisal ensures you can negotiate from a point of power, with documentation that your requested price is fair and reasonable. But are you working with a certified equipment appraiser? A certified appraiser uses a standardized methodology in calculating your machine appraisal report. This ensures it will hold up to scrutiny whether you're in the meeting room, the board room or the courtroom.

When you need an appraiser for a piece of manufacturing equipment, it is important that you hire the right equipment appraiser -- a person who is uniquely qualified to appraise the piece of equipment you have. Yet, how exactly do you go about finding the right person for your manufacturing equipment appraisal, especially if you have a tight deadline? Learn our tips for selecting a qualified equipment appraiser to pick the right person for your present need. 

Finding a Qualified Machine Appraiser: What to Look For

An appraiser performing equipment valuation can have a lasting impact on the value of your business assets, so it is vital that you pick the right person for the job. Here are several criteria we recommend using when selecting a manufacturing equipment appraiser: 

• Certified - To protect yourself and get an accurate machinery valuation, look for an appraiser who is certified by one of the major industry associations, such as the American Society of Appraisers, and holds a specialty in machinery and technical equipment appraisals. Since appraisers come to the field from different backgrounds, they may have different work histories and educations. As long as they have a professional certification, they are independently certified to have the right experience for the job and you can hire them with confidence. 
• Independent - In some cases, you may be getting a piece of equipment appraised to satisfy someone else. Perhaps your company is merging with another, or you are getting something appraised for insurance purposes. In these cases, there is another party who has a vested interest in the equipment's value and who could stand to benefit from a lower appraised value. For this reason, we recommend hiring an independent equipment appraiser instead of someone who has a tie to the parent company or insurance company. At Equipment Appraisal Services, we offer independent machinery appraisals to individuals and companies. 
• Knowledgeable - Machine appraisers specialize in different niches and industries. One might be an expert in car manufacturing equipment, while another might be a scientific equipment appraiser, and another a farm machinery appraiser. You wouldn't take a tractor to an appraiser who regularly appraises scientific equipment; that individual would not have the degree of knowledge necessary to accurately value your equipment. Before you hire any appraiser, make sure they know your niche. 
• Personable - Finally, you will need to discuss the appraisal with your appraiser so you understand the equipment value of your machinery and can act accordingly. For this reason, we recommend hiring an appraiser that you have a personal connection with, and who possesses all the criteria listed above. 
• Fits Your Budget and Time Frame - In many cases, you have a time constraint and a budget for your machine appraisal. A qualified appraiser should be able to quote you a cost for the equipment appraisal and estimate a time frame of when they can complete the appraisal for you. To reduce your stress and ensure the best possible outcome, it is important to ensure that any appraiser will be able to meet both your budget and your time frame before you begin. 

Before you hire an appraiser to generate equipment values, ask them several questions either in person or over the phone to gain an understanding of their qualifications for your needs. Then hire someone with whom you feel comfortable and confident proceeding. Have you ever had to hire equipment appraisers? What criteria did you use to make your choice?