March 28, 2007 | Joe Kerr

So, what is your equipment and machinery worth?

Do you know the value of all the equipment and machinery that drive your business? All the machines, vehicles, tools, trucks, and equipment that allow you to generate the profits and cash flow you’ve grown accustomed to. You know its not book value, and you are uncomfortable about guessing its true value. You should have your machinery and equipment appraised by an unbiased and certified appraisal professional. You may ask yourself “Why should I pay for an appraisal?” The answer is simple… The fact is, in your business, the machinery and equipment may hold the greatest tangible value and be your biggest asset. If you own stocks, you more than likely check the value of your holdings on a regular basis so that you know what you have and what action you may need to take. Given that machinery and equipment can be a key element of any assets transferred in a sale, used for collateral on a loan, or used to help solidify value in estate planning, knowing the real value of your machinery and equipment is crucial.

Let’s briefly go over a few of the basic reasons why you need an appraisal on machinery and equipment. First, if you want to borrow against your asset, you will need to know and prove the Fair Market Value (FMV). Changing the tax status of a corporation (i.e. from a C Corp to an S Corp) requires a certified appraisal, as does elections to sell via an ESOP. Estate planning requires an appraisal. And finally (but not least), if you don’t properly value your business (including the machinery and equipment), the IRS will determine the value for you, and you will be doing a disservice to yourself and your heirs. When you are selling your business or doing a recapitalization through an SBA lender, your bank will require a valuation, possibly including a certified machinery and equipment appraisal. If your business is publicly traded, you must comply with Sarbanes-Oxley and FASB 141 and 142 that require the assets of the business valued on a periodic basis. When it comes time to exit your business, the proceeds of the sale will have to be allocated for the IRS and it will have tax implications for you!

Statistics prove that businesses that are properly valued prior to a sale sell within 7% of the asking price based on the valuation. Businesses that sell without a valuation sell for 80% or less of the asking price and take much longer to sell. Machinery and equipment appraisals are a KEY COMPONENT of a business valuation and are used by valuation professionals to insure accurate assessed value of all assets transferred.

If you want to give yourself the leg up on getting value for your machinery and equipment, contact us [email protected]. Learn how successful businesses keep ahead of the game by knowing “what’s my equipment and machinery worth?”