When you are in the process of buying another company, there is a lot to prepare for. Top of mind are usually all the short and long-term factors, like the transition period, operations, profit, and assets. While these are all important, what often gets overlooked is an equipment appraisal.
Many individuals do not realize just how important equipment appraisals are to their company’s bottom line. In fact, some individuals fail to see the value of equipment beyond its typical day-to-day usage. When you are on the hunt for what business to purchase, make sure you get an equipment valuation before you sign the dotted line. The appraisal will provide you with a significant amount of information, which will ultimately inform whether or not buying a specific company is a good idea. Below are a few reasons why you should consider an equipment valuation completed before you purchase another business.
Determines the condition of every piece of machinery
When it is time to prepare your necessary documents for the upcoming tax season, the equipment you use at your company is depreciated on a specific schedule. But we all know that the condition of a piece of machinery is impacted by a multitude of factors. Equipment that is completely depreciated can actually last for a few additional years, while machinery that follows the standard depreciation schedule could give out years before it is expected.
Provides maintenance records
An equipment valuation not only gives you an understanding of the life of your machinery, it gives you a comprehensive understanding of each piece of equipment. Part of the appraisal process can include diving into previous maintenance and repair logs. This insight is important, as you can see if everything has been properly maintained during its lifetime. If there are multiple pieces of equipment that are in poor condition, it should influence your buying decision. Fixing and replacing large machines is costly, so a valuation can give you leverage to negotiate the final sale price.
Prepares you for the future
If you know the condition of the equipment and whether every item has been correctly maintained, you will have a better idea for what future costs you should prepare for down the road. This helps to ensure that there will not be a high number of surprising (and expensive) costs so that you can budget more accurately.
An equipment appraisal is a small part of looking into buying a company, but it is also a crucial part of the process. Because an equipment valuation can be important, you should also take careful consideration into the firm you are hiring to conduct your equipment appraisal. Here at Appraisal Economics, we have conducted a wide range of equipment valuations, including appraisals for hospital equipment and power generation machinery.