As a business owner, your time is already mostly accounted for each week. When an additional task pops up, it is often difficult and inconvenient to try to navigate how to fit it into your schedule. There are some tasks that can be pushed around to other weeks, but others, like an equipment appraisal, require immediate attention.
Fortunately, desktop equipment appraisals can offer some flexibility so you do not have to worry about sacrificing your schedule during the process. Instead of scheduling an in-person visit with an appraiser, business owners can send pictures and specifications about their equipment to an expert who will analyze the items at their office. In addition to saving time, desktop equipment appraisals also have other benefits for companies.
A cost-effective option
For businesses that need to be cognizant of how and where they spend their budgets, a desktop equipment appraisal can provide value with less cost. Since the appraiser is not visiting your business to value a piece of machinery first-hand, it eliminates any travel expenses that would typically accrue otherwise. An owner will be able to obtain sufficient documentation of what their piece of equipment is worth, which can then be used for a number of reasons.
Process a larger amount of equipment
Since desktop equipment appraisals are beneficial for finding out the worth of more standard pieces of equipment, they can quickly help you understand the value of larger amounts of the same equipment. For example, if you bought multiple semi-trucks around the same time, you can use these appraisals to figure out the total worth without having to have someone come out to inspect them all. You will still need to provide the appraiser with certain information, like the mileage and ID numbers of each truck, since each one needs to be individually appraised, but it is a faster, more efficient way to get a ballpark figure on similar items.
What does the appraiser need from you?
As mentioned above, desktop equipment appraisals work better with standard equipment within your industry. When undergoing a desktop appraisal, you will need to provide your appraiser with as much information as possible. This includes a detailed description of the asset(s) you need appraised, so they can begin conducting the appropriate research on the item in question and high-quality photographs that accurately represent the condition of the equipment, among other information. You will also need to appoint someone who the appraiser can speak to if they have any additional questions about the equipment.
When is a desktop appraisal not appropriate?
Desktop equipment appraisals do not give a totally accurate representation of worth, which is fine in some cases, but not suitable in others. If your equipment is in question due to a contested court case, you will need to schedule an in-person site visit with a certified appraiser.
Every business owner understands the significance of protecting their growing company. Establishing a new business venture is a feat in an increasingly competitive market, but continuing to grow and become profitable is even more challenging. There are a significant number of factors that should go into protecting your business, and obtaining a trademark is one of the most important steps in the process.
In your company’s early stages, you should make sure to file the proper trademark paperwork with the United States Patent and Trademark Office, where you will eventually be issued a federal registration number. This is a necessary step, but it is not the final step. In fact, there is no final step, as keeping your trademark requires frequent action for as long as your company is around.
In order to keep and enforce your trademark, it must be continuously used. In the United States, you are required to file a declaration of use or excusable non-use between the fifth and sixth years of registration. Failing to file a Section 8 declaration during this time period will result in a cancellation of your registration. Additionally, you must also file a Section 71 declaration on or between the ninth and tenth year anniversary of your registration date, and then every ten years following. When you file these declarations, you must also file a specimen showing as well. Having a trademark, as well as having evidence you are actively using your trademark, ensures you are legally protected against anyone trying to infringe upon your trademark.
This happens more than you might think. McDonald’s recently lost their Big Mac trademark after a legal battle with Supermac’s, an Irish fast-food chain in Europe. In an effort to dissuade Supermac’s from using food names that closely resembled their own menu items (like their Mighty Mac burger) and to thwart their expansion plans, McDonald’s sued — and lost. The European Union Intellectual Property Office came to the conclusion that although McDonald’s used their trademark, they could not genuinely prove their use, so the legal battle ended in Supermac’s favor.
Immediately following the ruling, other big fast food chains started capitalizing on McDonald’s loss. Some Burger King locations in Sweden immediately started marketing their food with captions like “The Burger Big Mac Wished It Was” in an attempt to profit off the situation. Iwo Zakowski, CEO of Burger King’s Swedish operation, said: “It’s too much fun for us to stay away.”
While larger brands like McDonald’s are unlikely to take much of a hit when it comes to losing one of their trademarks, small businesses will not be so lucky. Just as you have worked so hard to make a name for yourself in your industry, you do not want that growth to be hindered by a failure to renew your trademark registration, or have insufficient evidence to prove that you are still using your trademark. A trademark is one of your most valuable assets, so make sure to protect it at all costs.
Periodically, institutional investors are required to report the values of their portfolio investments to their investors. The goal, of course, is to show an increase in the portfolio’s value. However, investing for growth while also managing risk is a tough equation.
Many strategies that seem balanced are too inflexible to optimize growth and minimize volatility long-term. As a result, many investors fall prey to strategies that increase risk over time, or, conversely, ones that do not allow additional risk allocation when it is advantageous. These five strategies can help institutional investors increase their portfolio valuations by embracing diversification and actively managing risk:
The rigidity and narrow focus of popular strategies (such as a factor-oriented, low-volatility equity strategy) can result in several challenges: underperformance in certain market conditions, crowding, and interest rate sensitivities. While such strategies are growth-oriented and designed with some protection relative to the market, they open the door to other challenges.
Institutional investors are better served by actively managing a growth portfolio with a set of diversifying, positive return positions that are tailored to work together to improve the overall portfolio’s return and risk characteristics. Smart investors use absolute return strategies to diversify, investing across capital markets.
Don’t rely on the past to dictate your investment decisions. Instead, concentrate on the future. Building a forward-focused, diversified strategy involves the participation of a team of various subject matter experts.
Investment strategies should be shaped by as many different perspectives as possible: economic and risk analysts, asset class-specific expertise, industry experts, and professionals with the necessary market and geographic know-how to form a complete picture of likely future risks and rewards. A holistic and informed approach allows investors to identify the strongest return-seeking ideas that can simultaneously reduce the risk of the overall portfolio.
Leverage Enhanced Analytics
Sophisticated risk analysis tools help inform investment strategies. Simulations are an excellent way to efficiently assess market outcomes across asset classes for potential worst-case scenarios and determine impacts to an overall portfolio. Advanced analytics allow institutional investors to make such processes scalable, as well as quickly respond to unforeseen events or market changes.
Embrace Diversity in All its Forms
Diversification of asset classes, industries, geographies, long- and short-term holdings, and risk profiles are so important for institutional investors. However, investing in diverse companies is important too. It’s now proven out that great corporate decision-making is based on the consideration of different points of view from people of different backgrounds, perspectives, and experiences. Gender diversity, racial diversity, sexual orientation diversity, and socio-economic diversity in leadership is a notable indicator of corporate success, and companies with a better inclusion strategy have a competitive edge in the marketplace.
Seek Independent Valuations
While many asset managers have the ability to perform portfolio valuation analyses themselves, that approach has largely fallen out of favor. Investors, funds, and regulators prefer the opinion of independent valuation experts to avoid conflicts of interest and ensure that a wide range of opinions and expertise have contributed to value assessments. Valuation firms also help investors assess a portfolio’s future outlook, informing their investments going forward.
Actively managing a diverse, flexible, and informed investment portfolio helps to ensure that your portfolio valuation increases, making those performance reports to management and investors go smoothly.
Sometimes a distressed business’ best path forward is to take advantage of the benefits of bankruptcy. Bankruptcy is a legal declaration of a debtor’s inability to meet and pay their liabilities, and it can play out in three ways. Chapter 7 involves a trustee liquidating the debtor’s assets for cash and making distributions to creditors. Chapter 11 allows a business to continue operations by following a court-approved reorganization that involves an incremental repayment to creditors. The third option, out-of-court restructuring, is an avenue that is less often publicly discussed because it unfolds behind closed doors. Out-of-court restructuring is a bankruptcy approach that is confidential, less expensive than a Chapter filing, and provides the debtor with more flexibility.
In an out-of-court restructuring, an informal creditors’ committee is formed and those participants define the parameters of the negotiation, including what payments can continue being made, allowance of interest, and other factors that would become more uncertain in a judicial process. As a result, the debtor maintains more control over its business. It also avoids public exposure, keeping its reputation and intangible value intact. Creditors benefit from the debtor’s ability to keep operating to the best of its ability, since creditors are relying on the business’ future earnings to satisfy debts. Out-of-court restructurings are designed to quietly stage a struggling company’s turnaround.
The process can be initiated by the debtor or by its financial creditors. Typically, the largest financial creditor will chair the steering committee. Each participating creditor must agree to refrain from taking action against the debtor that is outside of the restructuring process. These agreements, however, are short-term, allowing creditors to pursue other solutions if progress is not being made. As the restructuring and negotiations progress, non-financial creditors typically continue to get paid: employees, trade creditors, landlords, etc. The process is unaffected by the availability of court time and other judicial constraints, so it can move quickly.
Steering committees comprised of financial creditors typically engage accountants, financial advisors, and lawyers to assist. An out-of-court restructuring also requires an independent, third party to appraise assets and perform a business valuation that can withstand scrutiny. These resources help to facilitate restructuring negotiations and are crucial to maintaining the confidence of the creditors’ committee.
Whether you are a trustee, a member of a creditor committee, or head of a distressed company, no out-of-court restructuring proceedings should begin or proceed without regular valuations to support your efforts. Out-of-court restructurings often require more effort. There is a larger time commitment and negotiations involve many stakeholders. Asset appraisals and business valuations ensure that all parties feel comfortable working toward a solution that, despite its inherent complexity, ultimately protects everyone’s privacy and best interests.
Convertible securities come in many forms—convertible notes, convertible bonds, and convertible preferred shares, to name a few. Generally, they are interest-bearing, fixed-income debt securities that may also be converted into a predetermined number of common stock or equity shares, meaning they combine features of debt and equity. When a company is looking for alternative means of financing, convertible securities hold numerous advantages over common and preferred stock. Convertible securities can also be a compelling option for investors, but both parties should ensure that they are well-informed of the risks.
Companies offer convertible bonds at lower coupon rates, and because corporations only need to share operating income with the newly converted shareholders when performance is good, they benefit by holding onto more of their cash. In addition, bond interest is a deductible expense for the issuing company, meaning that the federal government will pay for a percentage of the interest charges on the debt.
Selling convertible bonds is also an advantage for organizations that do not want to lose voting control of the business. However, since bonds do convert to stocks eventually and stockholders are entitled to vote for directors, the benefit is usually temporary. Companies with weak credit ratings may also sell convertible securities to lower the yield necessary to sell their debt securities.
Companies should also be aware of the risks. Financing with convertible securities may dilute the earnings per share (EPS) of the issuer’s common stock. And, while convertible securities stave off yielding control of the company to others for a time, if a large part of the issue is purchased by an investment banker or insurance company, a conversion could shift voting control away from owners. Other disadvantages mirror those of utilizing straight debt, although convertible bonds do entail a greater risk of bankruptcy than preferred or common stocks, and the shorter the maturity, the greater the risk. If it does not convert, for example, the company may be forced to repay the money within a very tight timeframe.
Investors are drawn to convertible securities because they could yield the high returns associated with stocks, combined with the lower risk of bonds. By investing in debt, and essentially lending money to a company, investors are given more protections since they are technically considered creditors rather than owners and, if the company goes out of business, creditors are always paid before shareholders. These transactions also cost less than stock sales, making them a relatively safe and cost-effective way to invest.
Yet, investors are typically providing funds to unproven companies whose values are not yet known. Credit-worthy companies often issue convertibles to reduce the cost of obtaining capital. Sometimes, however, companies with poor credit ratings will issue them without the intention of ever converting the issues. Some corporations with weak credit ratings still have a high potential for growth, but investors must study the company’s performance and industry standing to make an informed decision about its likelihood for future success. The rate of return must be high enough to reward the risk.
Convertible debt has become a common financing tool, especially for entrepreneurs trying to fund start-ups, and it is a great way for investors to engage with this landscape with some built-in safety features. These transactions are quick, relatively easy, and beneficial for all involved, as long as everyone has done their homework.
Employee Stock Purchase Plans (ESPPs) are an excellent way to maximize employee compensation at a modest cost, but the benefits go well beyond remuneration. A well-structured ESPP also engages employees by helping to create an ownership culture. Employees will do what is best for shareholders because they are shareholders. Considerable benefits also exist for the issuing companies, which can better compete in tight labor markets, attract and retain high-quality talent, and even improve productivity and profits.
An ESPP allows employees to purchase shares of the company’s common stock at a discount, usually through after-tax payroll deductions. Typical plans offer a 10 percent purchase price discount, meaning that the moment employees purchase their shares, they are netting an immediate gain. Plans that include a lookback provision allow employees to purchase shares at the offering-date price or the purchase-date price, whichever is lower, yielding even higher gains. In cases where the purchase date stock price is lower than the offering date price, the employee is insulated from the decline by having the ability to purchase shares at the lower discounted price. Purchase discounts and lookback features are just two of the many options that employers can build into ESPPs to ensure that they are a valuable employee incentive.
ESPPs incentivize employees to work harder in the company’s best interests. By handing over a portion of their salary to an ESPP, employees have a higher stake in the company’s performance, and are willing to go above and beyond to ensure its share price appreciation. It has been proven that employees that participate in ESPPs work longer hours, are absent less frequently, and express greater job satisfaction.
When employees are more engaged due to an ownership culture, top talent begins to think and act as business owners. And why not? They actually are! When employees are taking advantage of a successful ESPP, it does not take them long to realize that each dollar they invest multiplies their wealth. This knowledge cultivates ownership, which in turn improves corporate performance.
The issuing company benefits by enhanced productivity, as well as lower turnover and greater efficiencies. There are, however, a number of harder financial benefits to be had. Regular payroll deductions provide a steady cash flow to the company. ESPPs also cost less than other equity compensation, and can substitute for more expensive benefits. Additionally, when companies offer discounted ESPP purchases, the company can take advantage of substantial tax deductions. According to the National Association of Stock Plan Professionals (NASPP), 52 percent of U.S. companies offer an ESPP. That figure might seem high, but given the benefits reaped by employees and employers alike, it should be higher.
ESPPs are a cost-effective tool for cultivating an ownership mindset among employees at all levels of an organization and can prove a powerful tool for hiring, retention, and productivity. Those organizations that have not yet considered developing one should do so, and those that have experienced lackluster results from an existing program should seek to restructure and revitalize it to its full potential.
Global demand for solar power is on the rise and rightfully so: it is an efficient form of green energy and a renewable solution toward lowering greenhouse emissions and addressing climate change. Government incentives, tax rebates, and lower prices have fueled increased consumer use, as well as broadened solar’s applications for both power generation and real estate development. The market is strong. However, solar companies’ profitability continues to lag behind this impressive growth. Companies can generate more value going forward by improving capital and operational efficiencies.
The global solar energy industry is expected to reach $422 billion by 2022, up from $84 billion in 2015, meaning that the market is growing at a CAGR of 24.2 percent. The United States installed 2.7 gigawatts (GW) of solar PV capacity in the first quarter of 2019, reaching 67 GW of total installed capacity. That is enough to power 12.7 million American homes and represents a 10 percent year-over-year increase. The U.S.’s total installed PV capacity is expected to more than double over the next five years, reaching over 15 GW of capacity installed annually by 2024.
Despite substantial growth, solar are continuing to struggle. Some developers and builders of solar power plants have seen their valuations drop, undergone restructurings, or even weathered bankruptcies. Factors like low oil and gas prices and increasing interest rates will continue to challenge the industry, but can be counterbalanced by better project margins, as well as improving capital flows and balance sheets.
Solar companies need to drive down the costs of building plants faster than the industry average. This can be accomplished by building systems that leverage more prefabricated components and are useful across a wider range of sites, rather than complete customization for each new project. Automation and aerial site assessments can also speed prototyping and, for large utility-scale projects, better assessments minimize rework for pile driving or trenching. The most straightforward path to profitability and, by extension, higher valuations, is to ensure that projects are finished on time and within budget. Delays and cost overruns reliably erode profitability and prevent solar players from generating more value.
Capital Flows and Strong Balance Sheets
Solar companies should look for new ways to attract long-term capital from institutional investors in order to improve capital efficiency and enable growth. Institutional investors are seeking high yields and low risk, and solar developers need dependable ways to liquidate higher-cost equity capital to reinvest in the next project. One solution is to create the next generation of YieldCo that houses long-term capital and also provides flexibility for project developers, as well as pure-play DevCos focused on equity without high debt levels. The industry is also testing PoolCos that invest on an asset-by-asset basis. Companies should also improve capital efficiency by ensuring that capital does not get locked up into long-term, low-margin uses. When capital is being put to use wisely and balance sheets are strong, it is possible to scale up without getting into financial trouble.
Falling costs, improved technology, and greater regulatory support will continue to fuel the industry’s growth, and developers that successfully lower the cost of their installed systems, manage the cost of capital, and improve their operations will increase their financial returns and generate more value.
Employee Stock Ownership Plans (ESOPs) have become commonplace in the United States, with 6,669 plans covering 14.4 million people. ESOPs are a fantastic option for private companies that want to reward and motivate employees by providing them with equity, but how and when share prices are valued is somewhat complex. Typical stocks are valued on a public stock exchange, meaning that the valuation and how it is attained is transparent and updated daily. ESOPs work differently. The Department of Labor mandates that an ESOP value its shares at least annually, which may seem extreme, but given how these share prices are determined, regular valuations are in everyone’s best interest.
ESOPs must determine what their shares would sell for on the open market without the benefit of actually being traded on one. That means that the trustee of an ESOP typically sets the share price based on a recommendation from an independent, third-party valuation firm. There are several methodologies used for valuations, but all take historical and future projected financials into consideration. Most appraisals utilize an income approach, which relies heavily on financial data. The approach may examine historical results, dividing them by a capitalization rate to determine value. It may also forecast future cash flows, which are then discounted back to the present value. Either way, organizations and their employees benefit most when updated financial information is provided and analyzed annually, so that share prices are never severely outdated, reflecting values that are either considerably higher or lower than is appropriate.
Similarly, other market factors that may change during the course of a year could have a profound effect on share prices. Industry performance plays a role, as does the competitive landscape. When major competitors are bought or sold, or when they experience an event that either leads to exceptional performance or bankruptcy declarations, these factors affect your industry standing and therefore inform value assessments.
ESOP companies grow 2 to 3 percent faster than would be expected without an ESOP, and have lower turnover and 2.5 percent higher productivity. Furthermore, ESOPs that leverage an ownership culture throughout the organization grow 6 to 11 percent faster. In order to reap these benefits long-term, however, ESOPs need to be actively managed. This ensures that employees understand the true value of their compensation packages and can rely upon their future existence. When ESOPs are not frequently monitored, this often leads to the program’s termination.
Over time, shares are allocated and debt is repaid, meaning that repurchase liability can accumulate quickly and consume a growing share of cash flow. If this has not been anticipated, cash that might have otherwise been used to fund growth initiatives is eroded in order to satisfy the company’s repurchase obligation. When the company’s growth is stifled, causing stock prices to drop, this burden becomes too heavy to shoulder. In order to properly manage ESOP obligations and ensure this does not happen, companies must regularly study their future repurchase obligations through the lens of regularly updated future stock price projections.
Valuing ESOP stock prices annually not only fulfills the Department of Labor’s mandate to do so; it also ensures the long-term viability of the company, their program, and the ongoing high performance, productivity, and satisfaction of employees.
Some of the most valuable trademarks are also the most recognizable company names: Google, Microsoft, Walmart, Mercedes, and others. However, trademarks protect more than corporate names. They also safeguard logos, designs, product names, taglines, and more. Furthermore, trademarks are not simply for Fortune 500 companies, either. Smaller organizations rightly rely on them too and, regardless of the nature of your business, you should never underestimate the potential value a trademark holds for your brand and, by extension, your company.
It is now widely believed that trademarks are a substantial portion of intangible value for companies, and intangible assets now account for approximately 80 percent of the value of an average U.S. company. That figure is substantially larger than it was even a few years ago and continues to grow. It is hard to ignore the math. Trademarks have become so valuable because they actually generate revenue.
Trademarks help distinguish your company and its products and services from the competition, making it easier to build trust with customers and, ultimately, attract and retain them. A trademark can function like a promise, becoming synonymous with a level of quality or service customers can expect and count on. It is the reputation of a particular brand. This brand recognition sways purchasing decisions and drives revenue generation, as does the fact that when certain products and services are trademarked, the competition is shut out from offering the same and thus revenues are maximized.
There is no more effective communication tool than an image, brand name, or tagline that succinctly conveys so much information. Trademarks tell a universally understood story about your reputation, your quality, your differentiators, and other intellectual and emotional attributes. Trademarks are valued both on their income history, as well as probable future sales and profits. Essentially, as your business reputation grows, your brand and trademarks become more valuable. And even though they make you money, they require minimal investment. The United States Patent and Trademark Office charges around $275 to obtain a trademark, and they are equally affordable to maintain.
Trademarks can also make it easier to expand your business into other industries or geographies. They can be bought, sold, or licensed, facilitate merger and acquisition activity, attract financing, and enable more effective recruiting. In more ways than one, Intellectual Property (IP) has become a coveted source of revenue.
With increased digitization, however, trademarks are becoming more difficult to protect. Information is shared online at such a dizzying pace, it is easier than ever before for competitors to embrace your ideas. Without trademarks, there is no recourse for this, meaning that a competing company could easily profit from another’s ideas, in some cases more so than the originator. Although IP disputes are becoming more common, they are much easier to resolve when you can point to trademark protections.
Most of today’s industries are rife with competition and when you create a trademark, you give your company the opportunity to differentiate itself from the pack. A well-executed trademark is specific enough to help you stand out, distinctly identify your business and, hopefully, your values. Most importantly, trademarks help generate more revenue (new and recurring) and protect those profits and your market share from others that are eager to erode it.
Fire, floods, earthquakes, and tornados; theft, vandalism, and negligence. Whether it is mother nature, an untrustworthy employee, or simply an error in judgement, business losses are a reality that cannot be ignored. When business owners suffer an equipment loss (and sometimes also a loss of accompanying records), nothing compounds that stress more than worrying about how to prove the value of those losses to an insurance company. Should you ever find yourself in the throes of the unthinkable, and you did not obtain equipment appraisals ahead of time, a retrospective appraisal could be your best path forward.
Eventually, damaged equipment will need to be either repaired or replaced. Retrospective appraisals comprise a trusted approach to dealing with significantly damaged equipment and involve the careful study of remaining paperwork and equipment to determine a defensible valuation of losses. Appraisers evaluate the equipment (if possible), as well as available records such as original purchase paperwork, maintenance logs, repair receipts, and other documentation that would support the equipment’s prior condition and resultant valuation. Most appraisers would also weigh demand for the equipment and other market conditions.
Sometimes, losses due to widespread disasters cause additional complications because supply and demand are impacted. In these instances, it is not uncommon for supply to dwindle and demand to spike or, conversely, for demand to dry up. Qualified appraisers know how to maneuver these situations and assign value accordingly. Additionally, if a loss was suffered in the distant past, appraisers have the ability to pull data from historic repositories to perform their work for a specific time in history, as well.
Retrospective appraisals enable business owners to secure fair compensation for damaged equipment, whether you are pursuing matters with your insurance company or simply claiming a loss on your tax returns. Owners also seek retrospective appraisals when documenting equipment donations or for litigation.
Performing equipment appraisals after the fact is not an easy undertaking, which is why it is so important to hire a seasoned professional for the task. Independent, third-party valuation experts are without a doubt the best choice to perform this type of work. Machinery and equipment valuations can be complex operations that involve weighing multiple factors within the context of a specific methodology. Damaged or lost equipment and/or records only complicate the process, making it even more critical to seek professional assistance that will hold up to scrutiny in court, and with insurance and tax agencies.