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If Two Thirds Of Small Business Owners Plan On Selling ...

Inquiring Minds Want To Know What Do You Do If The Business Is Asset Heavy?

64.5% of current business owners plan on selling their business acccording to the U.S. Small Business Administration Office of Advocacy.  Industries such as manufacturing firms, food services, construction, medical, and  machine shops are asset heavy.  The seller wants to achieve top dollar for the business whereas the seller wants to achieve a lower price.  Therein lies the challenge for the lender, CPA, attorney, buyer, and seller.  Afterall, with an asset heavy business, one has to consider that the value of the equipment is instrumental to the financing and sale.

Don't be fooled and fall into a risk of liability by relying on the equipment value that is based on a depreciation schedule, an owner's word, invoices, or a guess!  The ONLY way forward is to obtain a Certified Machinery & Equipment Appraisal by a professionally trained ECA (Equipment Certified Appraiser) or Expert Equipment Certified Appraiser (EECA). 

Reduce your risk of liability with an unsubstantiated value by contacting an ECA or EECA.  You'll receive an experienced professional who will deliver a defensible estimate of value that will withstand scrutiny!

From An Industry Professional Who Has Received IEV's "Spirit of Excellence Award" in recognition of his dedication to further the mission of equipment appraisal, personal, and professional growth. 

Reasons for an Equipment Appraisal

By John R. Harris, ASA

There are numerous reasons why the world needs you and your equipment appraisal ability and certification.  Here is a partial list that can serve as a reminder for those reasons:

·         Buy/Sell Agreements

            Whenever individuals start a company, they recognize they will need an exit plan at some point.  The smart move is for the partners to have an agreement going in as to how the finale will work.  They need to know the value of their assets.

·         Insurable Value

            Tornadoes, floods, fires, thefts – all of these are reasons why the owner of the business and the insurance company need to know the value of the machinery and equipment. 

·         Financing

            Whenever the business owner needs to borrow money, on their equipment, the bank will want to know “what’s it worth?”  The bank will need a Certified Appraisal.

·         Tax Purposes

            These can vary but it is understood that a Certified document providing value can go a long way in winning an argument with the IRS. 

·         Business Valuations

            Some of the approaches to value in a business valuation require the Fair Market Value of the tangible assets.  Business valuators should have a Certified Appraisal of the machinery and equipment.  Using “Book Value” does not always give a true picture as to the true Fair Market Value of the machinery and equipment.

·         Divorce Settlements

            Whenever there is a divorce and a business is involved, you can count on there being a squabble between the husband and wife as to the value of the equipment.  This is an excellent source of business for the appraiser.

·         Estate Settlements

            When Uncle Harry dies, do we know the value of his machinery and equipment? The heirs will need to know for certain. 

Yes, the world needs Certified Machinery & Equipment appraisers.  Keep up your certification and continuing education, and you will benefit from this well-established profession. ​​​​​​​

Reflections Of An Equipment Appraisal

A lender contacted a Certified Equipment Appraiser (ECA) to appraise a gas station/car wash/convenience store establishment.  The owner of the business was seeking an increase in their line of credit and the lender wanted to validate the existence and fair market value of the equipment that the owner of the business was using as collateral. 

bigstock-Obstacle-Solution-Idea-For-Bu-351709571.jpgThe ECA and owner of the business looked at each piece of capital equipment. The ECA photographed and documented the make, model, serial number, age, and condition of the equipment.  What was interesting was that the owner thought and had added the gas pump canopies to his list of equipment as well as the structure for the car wash.

The ECA informed the business owner that both the canopies and the structure for the car wash were considered as "leasehold improvements" and would not be included in the value for the Equipment Appraisal.  The ECA further explained to the owner that a commercial real estate appraiser would appraise these structures but they are outside of the scope for a Certified Equiupment Appraiser.

An ECA understands the key differences in PERSONAL property (equipment) and REAL property (leasehold improvements). The rule of thumb is:  "Can this equipment be physically moved?"  Examples of leasehold improvements:  Lights, counters, bars, and air conditioners.