Valuation of business machinery and equipment
Part of business appraisal is assessing the value of business assets. This is especially important if the company is for sale and the purchase price needs to be allocated across its asset base.
Business equipment values are typically established by market comparison. A business machine is valued based on its functional utility and condition, regardless of where it is located and who currently uses it.
The secondary market for used business equipment is well established. Equipment dealers do business in just about any kind of machinery a company can require. As a result, knowledgeable dealers have a pretty good idea of what a given machine is worth.
A company can make a choice of getting a new piece of equipment or finding a used machine that is cost effective and can perform the same function. The comparison boils down to the age, condition, and utility relative to the price of new versus used equipment.
If you are valuing business assets, the first stop should be a few equipment dealers. These intermediaries are usually happy to provide pricing information for free because the inquiries keep them abreast of who and why uses the machinery. This could generate a useful contact for future business deals.
Equipment auctions are another source of pricing information. When businesses are dissolved, their assets go up for sale. The prices paid at such auctions offer you direct evidence of what the market values for similar equipment are. You can even trace the age of sold machines based on the model and serial number information published by the auctioneer.
Just as with the company as a whole, market values of business assets can change over time. Be sure to pay attention to the timing and relevance of comparable sales when working out the values of your company’s machinery and equipment.