To Sell or Not to Sell?

In previous posts, we have discussed that if a business owner is looking to sell equipment or machinery, he/she needs to know three separate types of value that their assets could bring in the market – orderly liquidation value, forced liquidation value, and fair market value. The differences among these types of machinery and equipment asset valuations are dependent upon the situation of the business and the time frame in which the assets need to be liquidated. Recently, however, we have seen that in certain markets, like California, there may be almost no difference between orderly liquidation value and fair market value due to sluggish market conditions.

Because there is such a large amount of equipment and machinery available in the market, buyers have more options than they normally would. Of course, there are other circumstances that determine the current value of equipment, such as in the case of custom machinery. And for that reason, potential sellers need to know what it’s all worth.

Some sellers, like those whose businesses are in dire circumstances, may be forced to sell and get the best price for the equipment as quickly as possible. However, for others who may not be in such a rush to sell, understanding the current types of equipment value can help them make better informed decisions about whether to sell now or not.

As we have mentioned often in other posts, it is essential for business owners to know the value of their equipment, especially if they are looking to sell so that they can receive the best possible price in the current market.

By: Present Value

Tags: California, certified machinery and equipment appraisal, custom machinery, equipment appraisal, fair market value, forced liquidation value, Machinery & Equipment, machinery appraisal, Orderly liquidation value, present value
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Expansion Financing in a Down Economy

While the economy is showing signs of improvement, many small businesses are still finding it difficult to stay afloat. However, there are a number of businesses that have been able to not only survive, but succeed despite this economy. For companies like this, a down economy can be seen as a time for growth.

A period of growth, for some companies, might require expansion financing to obtain capital to grow their business. Such financing could be used to support the business’s growth through endeavors such as hiring additional staff, purchasing equipment, acquiring real estate, or ramping up marketing efforts.

Businesses need to demonstrate the clear value of their growth in order to justify financing. While the sources of financing can vary greatly – from banks to friends and family members – for the most part, lenders will require detailed, complete business and operating plans. As we discussed in our last post, lenders are conducting more vigorous due diligence than in the past. So, in addition to the traditional business information, lenders are requiring third-party appraisals to provide greater protection for themselves and their investments.

An appraiser must be able to take into consideration all aspects of a business, including operating costs, assets, equipment, revenue, etc. in order to establish a complete picture of the value of a business. Business potential, economic growth, and market growth are other factors that need to be taken into account for this type of appraisal.

In addition to providing clarity to a potential lender, an appraisal can also help business owners make crucial decisions in a time of economic uncertainty.

By: Present Value

Tags: business appraisals, Business Valuation, certified machinery and equipment appraisal, Expansion Financing, present value
Posted in Asset Inspection, Business Valuation, Machinery & Equipment Appraisal, business appraisals | No Comments »

Auction Value: Fair Market Value

We’re continuing our discussion of the three different types of value a certified appraiser will provide before a company auctions off its assets. Read the other posts on this topic here.

Fair market value (FMV) is the estimated potential value of equipment and machinery if it were sold in an open market. The following assumptions are made when determining FMV:

• Both the buyer and the seller are willing and knowledgeable about the asset, and neither party is being forced into the transaction.
• The market is open and accessible by many buyers and sellers.
• All rights and benefits attributable to the asset are included in the sale.

Additional factors are considered when assessing FMV: the cost or selling price of the item, sales of comparable assets, replacement costs, and expert opinions. FMV can be somewhat subjective because it is based on the circumstances of place and time, and the availability of sales data for comparable machinery or equipment.

This concludes our series of posts on the three types of asset values that a business should know prior to an auction. Understanding the three types of asset value that should be provided by an appraiser can help a business set appropriate price ranges at auction and receive the highest possible profit from auction sales.

By: Present Value

Tags: auction value, certified machinery and equipment appraisal, fair market value, present value
Posted in Appraisal Terms, Equipment Auctions, Machinery & Equipment Appraisal | 3 Comments »

What We Appraised on Our Summer Vacation

We have written a number of blog posts on machinery and equipment appraisals, including What’s It Worth? and Certified Machinery and Equipment Appraisal. We have talked about the complexities of appraisals for custom-made equipment, such as dies, molds, or custom machinery, and the importance of working with an experienced appraisal company to ensure that you know the value of all your machinery and equipment.

Recently at Present Value, we have worked on some fascinating appraisal projects that we thought might of interest to our readers and also show the breadth of businesses that we work with on a daily basis.

The first project of interest was a radiology clinic, where we appraised the various X-RAY, CAT-scan, and MRI machines that comprise the assets of the business. Another cool project was at a construction company. In this case, we appraised all of the large earth-moving equipment – backhoes, front-end loaders, and dump trucks – and smaller equipment like Bobcats. One of the most fun projects was for a movie theater company that had a dozen theaters and one IMAX theater that we appraised.

Although these projects varied widely in scope and by industry, they demonstrate that understanding the value of machinery and equipment assets are of paramount importance to any business.

By: Present Value

Tags: certified machinery and equipment appraisal, Machinery & Equipment, machinery & equipment appraisals, Machinery and equipment appraisal, present value
Posted in Custom Appraisal, Machinery & Equipment, Machinery & Equipment Appraisal | No Comments »

Certified Machinery and Equipment Appraisal

We have written a number of blog posts about machinery and equipment appraisals, including Common Types of Appraisal Reports, What’s It Worth?, and Insurable Value. In this post we will cover what should be included in a certified machinery and equipment appraisal (CMEA) report.

A certified machinery and equipment appraisal is a comprehensive and detailed appraisal report that provides an accurate and descriptive account of the value of specific machinery and equipment. CMEA reports include photographs, model numbers, serial numbers, and other descriptive information about the machinery and/or equipment. To determine the worth of machinery and equipment, an appraiser determines the value of equipment based on research, personal inspection, and contact with manufacturers and suppliers.

A CMEA should meet the standards set by the requirements of the Uniform Standards of Professional Appraisal Practice (USPAP), so that your certified equipment appraisal report will hold up under scrutiny from financial institutions, government agencies, buyers, sellers, shareholders, or partners.

By: Present Value

Tags: certified machinery and equipment appraisal, CMEA, USPAP
Posted in Appraisal Terms, Machinery & Equipment, Machinery & Equipment Appraisal | No Comments »

Why an Appraisal?

Business owners, lawyers, bankers, bank examiners, and CPAs all ask the same question: “What’s it really worth?”

Figuring out the market value of one’s machinery and equipment requires a professional with specialized skills and the expertise and certification to determine true fair market value, liquidation value, salvage value, or replacement cost. It makes sound financial sense to obtain a credible Certified Appraisal Report that holds up under scrutiny from financial institutions, government agencies, buyers, sellers, shareholders, and partners.

At Present Value LLC, we typically quote our fee based on the amount of capital items (items that had an original cost of $2,000 or more) that will be appraised. These items are typically the ones with the greatest value. Items of less-than-original value are considered support items (shop, electronics, and furniture) and are included in the appraisal in groups at no additional cost to the client.

Example:

XYZ Company provides Present Value with an asset list. After reviewing the list, Present Value determines there are 200 total items with 30 capital items. One hundred seventy of these items are considered support items and will be placed in different groups and given value at no additional cost. The remaining 30 capital items will be appraised individually as line items, i.e., 30 capital items x $90 per capital item = $2,700. The total cost of appraisal is $2,700. When you take into account the expertise behind the creation of a report like this, and the credibility it brings to XYZ Company, that $2,700 is a small price to pay.

For more information or to receive a quote on your next Certified Machinery & Equipment Appraisal, please contact Present Value at 866-466-8555 or visit us at www.presentvaluellc.com

By Present Value LLC

Tags: appraisal, asset list, certified machinery and equipment appraisal, equipment, machinery, present value, report, worth
Posted in Machinery & Equipment | No Comments »