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
Posted in Machinery & Equipment, Machinery & Equipment Appraisal | No Comments »

Auction Value: Orderly Liquidation

In last week’s blog, we began a discussion about the three different types of value that a certified appraiser will provide prior to a company auctioning off its assets. In this blog, we will address the first type, orderly liquidation value.

A liquidation value is the estimated amount of money a company’s assets could quickly be sold for if the company went out of business. In a normal, growing industry that shows profit, a company’s liquidation value would be much less than the share price. In an unprofitable or shrinking industry, the liquidation value would likely exceed the share price. Though not always the case, if the liquidation value exceeds the share price, the company will go out of business.

The orderly liquidation value is based on the idea that a company can afford to sell off its assets to the highest bidder. It assumes an orderly sale process in which the seller can take a reasonable amount of time to sell each asset in its appropriate season and through channels of sale and distribution that fetch the highest reasonable price.

In the next blogs, we will examine forced liquidation value and fair market value.

By: Present Value

Tags: equipment appraisal, machinery & equipment appraisals, machinery appraisal, Orderly liquidation value, present value
Posted in Equipment Auctions, Machinery & Equipment Appraisal | 1 Comment »

Know the Value of Your Machinery and Equipment Before an Auction

While the economy is showing signs of improvement, there are still a number of companies that are being forced to close their doors, which in many cases includes liquidating their equipment and machinery assets. Oftentimes, the most quick, efficient way to do this is through auction.

When considering an auction, a company should first contact an appraiser in order to get a sense of the value of its equipment and/or machinery. In a previous post on equipment auctions, we discussed the role of appraisers in the auction process. In this and the next few posts, we will cover more detail about the three different types of value that a certified appraiser will provide prior to an auction – orderly liquidation value, forced liquidation value, and fair market value.

It is important to understand various ways that a business’ equipment will be valued in the marketplace in order to set appropriate price ranges at auction and receive the highest possible profit from the auction sales.

By: Present Value

Tags: equipment appraisal, fair market value, forced liquidation value, machinery & equipment appraisals, machinery appraisal, Orderly liquidation value, present value
Posted in Appraisal Terms, Equipment Auctions, Machinery & Equipment, Machinery & Equipment Appraisal | 2 Comments »

Article for the NEBBI Newsletter

Chris Kinzie and Chris Spinelli of Present Value had an article featured in the latest National Equipment and Business Builders Institute (NEBBI) newsletter. The NEBBI is an international organization that trains and certifies certified machinery and equipment appraisers to perform appraisals that comply with USPAP standards, and Present Value is proud to be an NEBBI member. NEBBI members share resources and information, cross sell, and network, all in an effort to improve their individual businesses and the machinery and equipment appraisal industry as a whole.

In Present Value’s article, Kinzie and Spinelli discuss the company’s evolution from strictly a real estate appraisal company, to a more diversified company that offers a full complement of appraisal services, including machinery and equipment appraisals. They share with the NEBBI members some tips about creating a business plan, creating a business identity, and creating an effective marketing plan. The full article follows:

The Successful Partnership Between Chris Kinzie, CMEA, San Diego, CA and Chris Spinelli, CMEA Newton, MA 

Becoming a CMEA has been a huge benefit to our business. Our background is in real estate appraising and many years ago we wanted to diversify our business into other areas of appraising.  As members of the NEBBI we have some of the best resources at our fingertips.  We have this incredible forum to exchange information, network, cross sell, and grow.  We’ve worked with several other members on joint ventures, included several more on individual assignments, all the while watching the impact on our bottom line increase.  It wasn’t a fast process for us and we had to learn our in and outs as any other business.  Our hope is that our insight in this article might benefit you and your situations. We thought this article would be good to focus information toward newer members getting their business off the ground or others who might be struggling to get things going.  It benefits us all when more of us are doing better.

One of the best places to start when reworking your current situation or just new in the business is to “form a plan.”  Sit down and write out a simple business plan which would include what you want to do with this designation and education, research your competition, research the marketplace, who would be your potential clients, decide where you want to specialize (this is an important one), set your time goals, set your pricing for services, financial goals (short-term, long-term), create a budget for your business infrastructure and your marketing.  

Create an identity for yourself in this business. It gives you focus and credibility, which is crucial to success.  You need to stand out in some way from the rest.  One way is to specialize in a particular field of M&E appraising or consulting, another might be to offer a boutique of services.  Pull from your background, your interests, or your former career contacts.

Marketing is by far the hardest thing to grasp in business, especially if you’re working the business and your marketing at the same time.  We’ve discovered the more personal the interaction with a potential client the greater the chances for turning a lead into a job in a shorter timeframe.  People need to know who you are and what you do.  People especially listen more when you have something to offer rather than something to sell.  Don’t sell someone your service, offer them help.  A great way to get in front of people is join a networking group … join a few.  It gives you a voice, adds credibility, and provides a new sphere of influence that will grow.  You might have to visit a few but when you find the right one it can do wonders.  If you don’t know where to start try www.meetup.com.  
 
Another source for leads is your own accountant, CPA, or tax attorney.  They may not give you business but they’re a resource to interview and show you the inside track of how they think and where there may be a need.  Talk to everyone!  If you have a fear of speaking in front of people or making presentations, one resource to work on is www.toastmasters.org.
 
Follow up, follow up, follow up!  If you do a letter campaign, phone campaign, or any other type of marketing you had better follow up on those leads.  Be consistent, dedicate time, and keep in contact.  If you’re not good at marketing, join forces with someone who is.  

So who needs you? Many lenders have approved lists but not like residential appraisers are used too.  You might get a call from the lender or they may make the borrower find you. The commercial lending department is a good place to start for the decision maker. From our experience it doesn’t matter which appraisal discipline you work in, typically it comes down to pricing and turn-around time who gets the job.  With regard to attorneys and accountants, we’ve found it really depends on their clientele.  Most areas have a book of lists, which most business journals have.  This has been a good resource to find more about the local and regional leaders in industries.   The larger the company the more complex and diverse the needs are for your services; if you’re targeting large corporations you may be looking at multiple decision makers and multiple streams of income.  

We hope some of the ideas that have helped us be more successful will help you.  Be good and remember to be honorable and upfront in all that you do.

By: Present Value

Tags: equipment appraisal, Machinery and equipment appraisal, machinery appraisal, NEBBI, NEBBI Newsletter, USPAP standards
Posted in Machinery & Equipment Appraisal | 1 Comment »

1031 Exchanges

Tax time is here, and even while you’re puzzling over that pile of papers on your desk, you may already be planning for next year. If selling an asset and purchasing another is in your plans for 2009, you may want to consider a 1031 exchange.

A 1031 exchange is an IRS-recognized method of deferring capital gain taxes. A capital gain is any profit that comes from the sale of a property, and this income is taxable. However, there is a way around this particular type of tax. If you sell one asset and acquire another within a specific time frame, you’ve performed a 1031 exchange. The logistics of an exchange are the same as in a sale, except that the asset sold and the asset purchased must be of equal value, or like-kind, and must be used for a business in order for the transaction to qualify for the tax deferral. The idea behind this particular section of the tax code is that when money gained from the sale of an asset is used to purchase another like-kind asset, there is no economic gain.

The tax code is fairly clear on its definition of like-kind when it comes to depreciable property, like a piece of machinery, but its definition of like-kind in real estate transactions offers less guidance. This is where working with an experienced appraiser becomes important. Because the IRS keeps an eye on these types of transactions, you want to make sure that you’re working with an appraiser who understands the IRS like-kind definitions.     

So after you clear that pile of papers from your desk, keep this possibility in mind – it may make next April 15 a bit easier.By: Present Value LLC 

Tags: 1031 exchange, equipment appraisal, machinery appraisal, Real Estate Appraisal, Tax issues
Posted in Machinery & Equipment, Real Estate Appraisal, Tax issues, business appraisals | 1 Comment »