Certified Machinery and Equipment Appraisal and Sales
National Equipment Appraisal provides professional machinery and equipment appraisal services for business owners, banks, CPA’s, and attorneys. Read More
Written by our Experts - Informative articles about appraisal, valuation and business sales.
Written by Mark Richardson for the Business Transfer Advisor
Almost every business owner I meet who is considering selling their company asks me about using pricing multiples. Before I answer their question, I ask them to think about two very differ
Written by Mark Richardson for the Business Transfer Advisor
Almost every business owner I meet who is considering selling their company asks me about using pricing multiples. Before I answer their question, I ask them to think about two very different manufacturing companies in the same industry. Each business has annual sales of $12,000,000 with a net income of $700,000.
Company A has been in existence for over 20 years. While gross margins are adequate, Company A prices each new manufacturing job on a bid-basis, and negotiated jobs are based on the owner's personal relationships with the customer. Product quality is good, but Company A's equipment is aging, and there is a significant amount of deferred maintenance. The firm is highly leveraged, and working capital constraints limit the amount of new work the company can take on. Sales have remained at the current levels for the last three years.
Company B develops and manufactures products, and sells them through diverse distribution channels. Customers contract for future delivery, and Company B uses a sophisticated inventory management program to plan production and control costs. Research and development programs have resulted in new products and top line revenue growth of 15% annually over the last three years. Company B's management team runs the daily affairs of the business, and the owner works on the company's future. The owner arranged an outside board of directors and advisors that hold regular meetings. The company's accounting firm prepares reviewed financial statements annually.
Which company is worth more?
Using a common industry multiple may result in overvaluing Company A and undervaluing Company B. Business valuation multiples simply represent a summary of trends based on a broad range of completed business sales. The multiples are industry specific, offer a wide range of estimated value, and do not consider the payment structure. As a result, multiples are generally used for smaller businesses.
As an alternative to using multiples, business owners should look at the company's value from three perspectives: economic, market and strategic.
The economic value of a company is what it is worth to the owner or, the monetary value required to replace the owner's current income stream and economic benefit.
Market value is what a new owner or investor is willing to pay for the company. Business owners should compare the company's market value to its economic value prior to going to market to determine:
• If a potential sale is viable
• If a sale will meet the owner's personal and financial objectives
• If an offer results, would it be something the owner would accept.
Strategic value is what a company could be worth. Businesses are purchased because buyers identify value drivers in the target company that can either improve or enhance the acquirer's existing business. Sellers who identify buyers' strategic objectives -- and position their companies to meet those needs -- negotiate better and receive higher sale prices.
Brokers, intermediaries and investment bankers may contribute information to transactional databases used to determine multiples, yet sellers should realize that specific deal values on private company sales are difficult to obtain and may be obscure. The real value in the transactional database research is that it identifies buyers -- which investors or companies are buying in the market today.
Finally, a comprehensive market evaluation is a valuable tool for business owners. During the evaluation process, the owner develops a deep understanding of the business itself, the client base, the assets, employees, industry focus, competitors, and intangible resources – from the viewpoint of a business marketer. Recasting the financial statements organizes the owner's current economic benefits. Most importantly, the evaluation identifies the high value drivers and low value diminishers, the most significant benefit of the analysis, because these factors help the business owner make the company more attractive to the market.
Sellers who reconcile the economic, market and strategic values of the business will gain a thorough understanding of the company and make better decisions than owners who rely on multiples and "rules of thumb."
Auction Buyer Tip #1: Do not mistake auctions for retail sales. The two have very little in common. Auctions are different from retail because auctions are governed by federal laws, state laws, Uniform Commercial Codes and city ordinances. When you b
Auction Buyer Tip #1: Do not mistake auctions for retail sales. The two have very little in common. Auctions are different from retail because auctions are governed by federal laws, state laws, Uniform Commercial Codes and city ordinances. When you bid at an auction you actually enter a legal contract.
Auction Buyer Tip #2: You must have a bidder's card in order to buy at the auction. To obtain a bidder's card, you must put down a deposit for a bid card. This insures that you will pay for all your purchases that you bid on. Once you pay for your items or decide to leave the auction without purchasing any items, your deposit is immediately returned to you. If you do bid and win, your deposit is applied to the purchases.
Auction Buyer Tip #3: Be careful when you bid on lots. Know how much you are bidding and whether you are bidding against your spouse, parent, sibling or friend. Although you can retract a bid while the bidding is open, you cannot retract it once the auctioneer has said "sold". Auctioneers expect you to take full responsibility for your bids.
Auction Buyer Tip #4: The moment the auctioneer says "sold", the ownership of the item being auctioned has changed hands. This is the law. If your merchandise is later stolen you will still have to pay for it. It is no different than having your wallet or purse stolen while shopping at a store.
Auction Buyer Tip #5: Know what you are bidding on by closely inspecting each item before the auction. This is why an auction preview is offered. Use your own evaluation as your bidding guide, not the auctioneer's description or other bidders' comments. You are buying the merchandise "AS IS WHERE IS WITH NO IMPLIED WARRANTY" with no guarantees of any kind from the seller or auctioneer. The risk of the item not being what you wanted should be factored into your bidding amount.
Auction Buyer Tip #6: A fast-moving auction benefits both buyers and sellers. Auctioneers have the right to reject any bid amount that would slow the bidding. Auctioneers cannot wait for slow bidders, so know in advance what to buy and how much to spend. Your inability to keep up with the bidding pace is not the auctioneers' concern.
Auction Buyer Tip #7: Don't be shy about bidding loud and large. Raise your bid card in the air if you want an item and keep it up until you are done bidding. Make certain the auctioneer is aware you are bidding because the auctioneer may be taking bids from someone in front as well as online or behind you. Once the auctioneer says "sold," the item is gone even if you are willing to continue bidding. There are no do-overs in the auction business. Spotters or ring men are there to help the auctioneer spot bids and will signal your bid to the auctioneer.
Auction Buyer Tip #8: When the auction starts, you will hear a ring man call out a lot number and give a brief description of the item. The auctioneer will begin selling the item and will ask for you to bid. The auctioneer continues to go up in increments until the item has been sold. Once the bidding has closed, the auctioneer will say "sold" and state the winning bidder's number and the final price.
Auction Buyer Tip #9: During the auction, clerks record the description of your items and your buyer number as well as the amount you paid for the item.
Auction Buyer Tip #10: There are some terms that are used during an auction of which you need to be aware. These terms are "choice" and "all for one money."
Written by Mark Richardson for NEBB Institute
One of the things I recommend to business owners who are in the planning stages of selling their companies is to sell off non-producing assets such as unused machinery or excess, slow moving inventory. B
Written by Mark Richardson for NEBB Institute
One of the things I recommend to business owners who are in the planning stages of selling their companies is to sell off non-producing assets such as unused machinery or excess, slow moving inventory. Business owners who embrace this strategy benefit several ways.
First of all, they can turn idle assets into immediate cash. The cash can be used to pay down debt, be withdrawn by the owner or reinvested in the business. I don't normally advise business owners who are contemplating a sale to go out and invest in new equipment, but they should expect that buyers will require that the equipment they purchase is in good usable and working order and they are not inheriting deferred maintenance problems.
Another reason to sell off idle equipment is that the buyer of the business will recognize unproductive assets as nearly worthless. My experience is that business owners will receive more cash for idle assets if they sell them outright to a company that wants and needs the asset.
Companies that are asset intensive often times don't generate enough income and cash flow to support the enterprise value the owner is seeking. This will seriously affect the marketability of the company and result in fewer offers. An appropriate strategy might be to analyze the asset utilization, sell off idle assets, pay down existing debt and hold off marketing the company until the new cash flow supports the balance sheet.
Most purchase agreements contain extensive protective clauses in the form of representations and warranties that are designed to protect buyers from assuming non-performing assets. Avoid potential post sale problems by selling off idle equipment before you put your company on the market and put cash in your pocket today.
Turn idle equipment into cash; call National Equipment Appraisal at 877-282-7146
"When business owners ask me to help them sell their companies, it's my job to make sure they position the company for its highest value and receive top dollar for their years of hard work. Owners look to me to provide solutions to the complicated process of selling their business interests.
Idle, non-producing assets are a problem I encounter in several businesses. In the past, I could only recommend that clients should sell off idle equipment but now I can offer them a practical and easy way to help them do it through the sales division of National Equipment Appraisal."
Written by: JMR Capital, Inc.
A recent survey conducted by a national accounting and advisory firm indicates M&A activity to remain solid throughout 2019. Multiples are steadily increasing because interest rates are low and the supply of viable busi
Written by: JMR Capital, Inc.
A recent survey conducted by a national accounting and advisory firm indicates M&A activity to remain solid throughout 2019. Multiples are steadily increasing because interest rates are low and the supply of viable businesses available for sale is low.
Prospects for acquisition financing are the best we've seen in years. Several of the banks we work with are gearing up to accommodate the increased demand for business acquisition financing. Interest rates are at historical lows.
While this may be good news for business owners who are considering selling in the near future, today's bullishness may not last long. There continues to be uncertainty about the economy, taxes, rising deficits, government regulations and the political future of the country. In situations like this, companies tend to focus their efforts by building from within, paring unprofitable product lines and cutting costs to improve profitability.
We anticipate businesses will continue to become more competitive by pursuing both courses of action – buying companies and building from within.
On the local level, buyer activity at our Southern California office is up over 300% from last year and it's from all segments of the market. Corporate balance sheets are strong and it's not just the public companies looking to buy businesses. Smaller, middle market companies with revenues of $5 to $50 million are actively seeking acquisitions of companies that provide complementary services or regional expansion opportunities.
Private Equity investors are increasing their acquisition efforts. We see activity in "add-on" acquisitions to be strong because fund managers are looking for strategic investments that enhance the value of their existing portfolio companies. It's known to us, but maybe not you that private equity groups make a lot more acquisitions of companies with sales under $20 million than sales over $100 million.
Private individuals who missed acquisition opportunities in 2012 and 2013 are back in the market and are eager to run their own businesses. Low interest rates and competition among local community banks to provide SBA 7A loans have created a window of opportunity these buyers might not see again for years.
Clearly, the desire and the money to get deals done exist. Whether it's private equity, corporations or entrepreneurial individuals, offers are being made. Overall, we think the outlook is very positive for 2019. It's a seller's market for now, but we can't say how long it will last. Business owners who are considering selling their companies or delayed putting their companies on the market a few years ago, should take a serious second look.
JMR Capital, Inc., Mark Richardson, Acquisition Executive
The National Equipment and Business Brokers Institute (NEBB) is a professional organization of certified machinery and equipment appraisers who prepare certified M&E appraisal reports for business owners, banks, CPA's, attorneys and valuation specialists. The Institute provides initial and monthly comprehensive education, on-going support, a dynamic national network, and certifies professionals in the art of machinery/equipment appraisal and brokerage.
The National Association of Certified Valuators and Analysts (NACVA) trains and certifies Certified Valuation Analysts (CVA) to perform business valuations as a service to both the consulting community and the users of their services. Through training and rigorous testing, CVAs demonstrate they are qualified to provide capable and professionally executed valuation services. CVA's must meet a level of expertise the Association deems credible and worthy of one of its certified members.
The Alliance of Merger & Acquisition Advisors® (AM&AA) is the premiere International Organization serving the educational and resource needs of the middle market M&A profession. AM&AA members represent sellers and buyers of businesses ranging from $5 to $500 million in transaction value. Their services are seller representation, buyer representation, due diligence, accounting, financing, business valuation, tax planning, legal, strategic advisory, and many other transaction services.
Consider the following two factors:
1. What is the intended use of the appraisal and who will be using it?
2. What level of assurance do you want?
If the purpose of the appraisal is to send the report to the IRS, an Appraisal Report is required because it meets the guidelines established under IRS Revenue Ruling 59-60. This type of appraisal is used for filing an estate / gift tax return, ESOPS, charitable contributions and calculation of built in Gain for S Corporation election or any tax matter that will be brought before the IRS.
If the subject report is to be used by the court, in litigation or divorce proceedings, we highly recommend a Complete Appraisal.
You should also be aware of increased scrutiny by the IRS of appraisers and the reports they generate. The IRS follows the guidelines established by the Pension Protection Act of 2006 for "qualified appraisers and qualified appraisals." This means, who prepares your business appraisal, is just as important as who will use it.
National Equipment Appraisal's reports are accepted by the IRS, banking regulators and the courts.
Level of Assurance:
The level of assurance is greatest with a Comprehensive Business Appraisal, less so with the Value Calculation and Market Report and least with the Broker Opinion Letter. Our experience shows that business owners who have relied on our Comprehensive Business Appraisal and we have subsequently taken their companies to market sell faster than industry averages by about 40%.
Only you can determine the level of assurance that is best for your situation. Call National Equipment Appraisal before you engage because our advice may save you time, money and reulatory oversite recommendations in the future.
Since 2004 our performance is outstanding with 100% on-time delivery. If we cannot meet your timing and schedule, we will not accept the assignment.
We base our fees on the time involved and complexity required.
We know every job, like every company, is unique and for this reason, we strongly urge you to call us and to talk about your appraisal project. That's why we offer a free, no-obligation fee proposal. When we talk you will get to know us and we'll make recommendations to cost effectively deliver the appraisal report that best suits your needs. Often times we can limit the scope of the project and save you money.
If a Business Valuation is required and we perform the machinery and equipment appraisal at the same time, you will save money because our cost is less and we pass along the savings to you. What's better yet, you will have a single contact for the entire business valuation project.
Before we start any engagement we confirm, in writing our full understanding of the assignment, your scheduling requirements and our fees. All of our engagements are fixed fee which means we won't nickel and dime you with extra miscellaneous charges and there will be no surprises.
It depends, some businesses are saleable; others are not.
Mark Richardson, the company's founder, is experienced and has been a broker for more than 30 years. He specializes in the sale of privately owned companies and is an expert on local market conditions.
Business Sales are transacted through JMR Capital, Inc., a certified merger and acquisition company and licensed real estate broker. (DRE01815017)
You can learn more about JMR Capital, Inc. and Mark Richardson and find informative articles about buying and selling a business by visiting the company's website.
National Equipment Appraisal, its appraisers and their work product comply with IRS definitions for "qualified appraisers and qualified appraisals" as outlined in the pension protection act of 2006. Certified Machinery and Equipment appraisals are prepared to the rules and standards of the Uniform Standards of Professional Appraisal Practice (USPAP).
This means our work product is accepted by the IRS, courts and banking regulators.
Value to You
• We are advocates of the appraisal, not of any person or entity.
• We are experts at locating and determining substantiated values on the equipment we appraise. We hold and promote the ethics and reporting guidelines of the Uniform Standards of Professional Appraisal Practice (USPAP).
• We stand behind our work - the Certified Machinery and Equipment Appraisal reports we issue are defensible, substantiated, and withstand scrutiny by financial institutions and their regulatory agencies, taxing authorities, and the courts.
• National Equipment Appraisal and Mark Richardson and their work product comply with IRS definitions for "qualified appraisers and appraisals" as outlined in the Pension Protection Act of 2006.
• A certified equipment appraisal removes doubt, substantiates loan values and reduces audit risk. Bank examiners concur.
• If a business valuation is required, National Equipment Appraisal can save you time and money by performing the entire appraisal project.
• We are experienced in buying and selling used assets and have been doing so for 30+ years.
• National Equipment Appraisal offers a professional performance Guarantee and has a 100% on-time performance record. You will receive the appraisal on-time, every time.
That's why we are successful and are called upon by business owners, lenders, CPAs, attorneys and the courts to objectively value equipment.
To discuss your appraisal project, please contact:
National Equipment Appraisal
United States and Canada Certified Appraisal Division
Telephone: 877-282-7146 ▪ Personal 714.282.7146
"Our clients trust us to always look out for their best interests. With this in mind, our work is guaranteed to the complete satisfaction of the client. If the client is not completely satisfied with our services, we will, at the client's option, either waive professional fees, or accept a portion of those fees that reflects the client's level of satisfaction. We strive for 100% Client Satisfaction - No Less."
Of course, it would be unethical to guarantee the results of an appraisal and we would never accept an assignment if a prospective client asked us to do so. We can and do however guarantee:
• The Certified Machinery and Equipment appraisal will be prepared to the rules and standards of the Uniform Standards of Professional Appraisal Practice
• Before we start the engagement we will confirm in writing our full understanding of the assignment, your scheduling requirements and our fees.
• The appraiser will maintain conformity and privacy of the information you provide us in the course of the assignment.
• The appraisal will be delivered on time.
• We will always watch out for your interests.
National Equipment Appraisal adopts and complies with the regulations and ethics rules of the Uniform Standards of Professional Appraisal Practice (USPAP). Business valuations are completed in accordance with the National Association of Certified Valuators and Analysts' Professional Standards. In addition, JMR Capital, Inc. endorses and follows the ethical conduct standards for financial advisory firms as promulgated by the Alliance of Merger & Acquisition Advisors.