Equipment Appraisal Blog | Understanding Machinery Appraisals

Over the past few years, the economy has been up, down and all over the place. If you've been able to keep your business in operation, it was probably due to some insights you gained while watching other businesses deal with the consequences of the recession and recovery. But what about your business? Do you know what your machinery is worth or if you can use it to leverage new growth for your company? One of the best ways to determine this is through a woodworking equipment appraisal. Here's how it helps:

Talk Shop: How a Woodworking Equipment Appraisal Helps You Get Ahead

As our economy continues climbing up out of the recession, we're seeing strong growth. People are investing in real estate again, and with that comes wood products to build those homes and the furnishings needed to make them unique. Many woodworking companies have begun to see an upswing in their sales once again and are starting to consider growing their businesses to meet that increased demand.

But at the same time, even as consumers are increasing their purchases, many businesses are being more cautious of growing too quickly. After the housing bubble crashed, many of them saw a strong downturn in sales as foreclosure rates began to climb. A large number of companies found they could no longer keep their doors open in these conditions and closed down, often liquidating their stock and machinery.

The remaining businesses are, understandably, a bit hesitant to embrace this new growth. These businesses want to take precautions rather than jump into new opportunities. The new restrictions on business loans that have come into effect during the recession make it more difficult to gain the financing needed to expand operations regardless. They're worried that if they begin to expand, equipment could fail or another calamity could cause them to lose what they've held so tightly to the past few years. What is the average woodworking shop owner expected to do to move a business forward in this business climate?

One option to consider is a woodworking equipment valuation. This process involves having a certified equipment appraiser take a good, hard look at your equipment, and then prepare a report to estimate the equipment's value. But more than the value is the information you gain. You'll receive an estimate of the expected useful lifespan of your machinery, allowing you to better prepare for potential replacements or repairs down the road. You'll know exactly what your equipment is worth, giving you solid numbers to take to the bank to secure financing to expand your business. You'll discover whether your equipment is in demand or whether there's still an excess on the market that you could take advantage of to expand your operation. With these details, you'll know exactly what you have, what it's worth and what you can do with it.

By taking the time to get a woodworking equipment appraisal performed on your machinery, you can gain some great insights into not only your equipment's value, but also its general condition and expected lifespan. This, in turn, can help you plan your expenses over the next few years, allowing you to then invest in other areas of your company when it's appropriate or purchase replacement machinery when it's needed. Make sure you work with a certified equipment appraiser who has experience in the woodworking industry to ensure the most accurate valuation possible.

When precision tooling and machining is vital to your business' success, getting a quality CNC machine appraisal helps best protect that significant investment in your business' equity. But these machines are interfaced with a wide range of other tools and operate in a number of different environments, making it very difficult to determine exactly what your equipment values should be. Here are some of the considerations to keep in mind when getting your CNC equipment appraisals performed.

Protect Your Investment with a CNC Machine Appraisal

A Computer Numerical Control or CNC machine provides exact precision control of a wide range of machinery. It can operate mills, lathes, plasma cutters, wire erosion, water jet cutters, drills, routers, grinders and many other pieces of machinery to meet the exacting specifications of a wide range of projects. They can range in price from a few thousand dollars to well over $100,000 a piece, depending on the level of precision required and the size and specifications of the tools to be used. A certified appraiser should have experience in CNC machines due to their complex nature.

With this type of cost, it's easy to sink a significant amount of capital into these machines. When you have a certified equipment appraiser provide you with documentation of the equipment values, you can make better decisions about your investment. An appraisal might tell if your machinery is beginning to wear due to high hours. It might also tell whether the machinery has been well or poorly maintained, helping decide which used machinery to purchase for your business. If the market has been shifting, it may be able to tell whether you should invest in additional equipment or sell off excess CNC machines to ride out the storm of an industry downturn. 

If your business suffers a loss due to theft, vandalism or a disaster, having an appraisal on your machinery helps you get what your business needs from a reluctant insurance company. It helps you prove value if you're using your CNC machine as collateral for a financial institution if you're expanding your business or taking advantage of a new opportunity. A certified equipment appraiser can even provide a value for your CNC machinery after it's been damaged in a fire or donated to a charitable organization. But without having a proper machinery valuation in place, you may find that you're losing out on your business finances.

By getting a quality CNC machine appraisal, you can ensure that your business' investment is protected, whether you have an insurance loss while dealing with a difficult adjustor, need to document value when selling a business or the information you need to determine when it's time to replace aging machinery. But you need to make sure you're working with a certified equipment appraiser who has experience researching CNC machinery. A certified appraiser has the training and experience to prepare machinery valuation reports that are based on standardized methodologies and for that reason, will stand up to scrutiny in legal, financial and insurance circles.

When you have a shop full of prime lumber and fine equipment to turn it into a piece of fine craftsmanship, equipment values may be the furthest thing from your mind. But what about when you move from being a hobbyist to a professional and need to get a loan to open your business' doors or purchase more advanced equipment? How do you prove the value of your equipment if it needs to be used for collateral? Unlike vehicles, there's not a handy guide to valuing shop machinery. A woodworking equipment appraisal performed on your equipment is a great way to fill the gap. Here's how it helps you make the most of your assets:

How a Woodworking Equipment Appraisal Helps You Leverage Your Assets

Equipment appraisals provide a better picture of the value of your machinery. Though you may have seen a similar piece of equipment go for a particular amount at a local auction, that may not dictate the actual value. The auctioned equipment may have been of better or lower quality than your machine to begin with. It could have been neglected in maintenance and repairs, which would be reflected in a shorter expected useful lifespan or lower appraised value. The wrong buyers could have been at the auction, resulting in a lower than usual ending bid or a bidding war between a pair of bidders with a sentimental attachment to the machinery. There are many factors that come into play that can affect the value.

Are you basing the value on a tax depreciation table? If you haven't been using the equipment full time or if the machinery is expected to have a longer expected useful lifespan than the depreciation table accounts for, the machinery will often last for quite a while after its depreciated value has reached zero. If you then use the tax documents to verify value, the financial institution you want to work with may decide you don't have sufficient collateral to receive the loan, which can have a serious impact on your business' growth and future performance.

What about when you have an opportunity but aren't sure if the risk is worth it? If your machinery is being heavily used or goes without necessary maintenance or repairs, you may lose your business over the investment. Why? If you are basing the equipment off the value of a depreciation table or used sale price, the actual value may not provide a sufficient cushion from the investment risk. If you make the investment and then need a loan to cover expenses while the investment is being paid off, your financial institution may not agree with your value figures, preventing you from receiving much-needed cash and resulting in a cash flow issue. If your equipment becomes unusable and must be replaced before the investment has paid for itself, that additional expense could also sink your business. Having a quality valuation of your woodworking machinery helps ensure you're basing your decision on solid values.

When you have a solid idea of what your machinery is worth, it's much easier to use those assets to pursue your future plans. A woodworking equipment appraisal is a great tool in that planning.

Whether you just play around on the weekend with some quality woodworking tools or are a dedicated professional woodworker who has spent years developing your craft and investing in only the best quality equipment, having a professional machine appraiser provide an in-depth woodworking equipment appraisal means you know what you have and what it's worth when it's time to trade, upgrade or collect damages from a shop disaster, especially as growing demand in this $710 million plus annual industry is expected to continue growing at a rate of 3.4% over the next five years. Let's take a good look at how a machinery and equipment appraisal helps you protect your investment.

The Equipment Appraiser

To properly protect your equipment, you'll want to make sure you're dealing with American Society of Appraisers credentialed equipment appraisers using the Uniform Standards of Professional Appraisal Practice. Hiring an appraiser for a machinery valuation who is not certified means the report produced may not be accepted by insurance companies if you suffer a loss.

Equipment Appraisals Process

The appraiser will take a good look at your machinery, both as it sits and in operation. He or she will take note about the manufacturer, the model, any features it has, any additional kits, upgrades or modifications that have been added, how well it runs and if there are any areas where it needs repair or maintenance that affects its performance or equipment value. All these details tie in to the final machine appraisal report that is prepared.

What Your Woodworking Equipment Appraisal Helps With

So what can you do with that shiny new equipment appraisal? Provided that it was obtained using a an ASA-certfied appraiser and USPAP standards, it can give you real insight into where your equipment values stand and prove the value of the equipment to your insurance company if you suffer a fire, tornado, earthquake or other damaging event. It provides documentation of its worth when your tools have been assessed way too high by your local tax assessor. If you're getting ready to go professional and need to secure a business loan, it helps prove the collateral value that's available to the financial institution you're using, and then provides an accurate valuation for tax and accounting purposes later on. A quality equipment valuation provides a starting point for negotiations if you're selling some of your equipment or trading it in for an upgraded model.

What an Equipment Appraisal Won't Do

There are, however, limitations to what an equipment appraisal will do. It won't make your 1963 off-brand table saw suddenly worth $5,000 - unless, of course, it is actually worth $5,000. It won't lower your tax assessment if the assessment is accurate (it's up to you whether you mention it to the tax assessor if your assessment is too low). It may or may not put your kids through college, but if you could afford to spend a college-education's worth of money on woodworking tools, you're probably a good enough woodworker to be able to send your kids to school without selling your hard-won tools. You get the picture.

Having a quality machine appraisal performed on your woodshop tools is a great way to know exactly what you have and what it's worth, whether it's for business purposes, tax accounting, insurance use or just to know what it's really worth. Schedule an appraisal today to protect your investment.