How to Value Your Old Equipment
Are you interested in selling your old manufacturing equipment? Maybe you are looking to upgrade old equipment or free up space in your warehouse. Whatever your reason for selling, you might be faced with the difficult question: how much should you sell your equipment for?
In this article, we will outline what factors influence value and three different valuation methods you can use to assign a fair price to your old equipment.
What Factors Influence Value
Although there’s no one-size-fits-all approach when it comes to assigning a purchase price, there are factors that can influence value.
· Manufacturer – Not all manufacturers make the same quality of equipment, making it important to know how the brand name of your machinery is perceived.
· Life Expectancy – This is one of the most important factors. How long do you expect the machinery to be useful? If the piece of equipment is in its last life, you probably won’t get as much compared to a piece that’s only a few years old.
· Age – The age of your equipment matters. If your piece of machinery is ten years old, it might not have the capabilities buyers are looking for.
· Condition – Machinery that has little wear and tear is likely to fetch a higher price. Proper ongoing maintenance can help the condition.
Other factors, such as obsolescence, equipment type, and industry use can all sway the purchase price.
Understanding Different Valuation Methods
Keeping the above factors in mind, there are a few different methods you can use to value your manufacturing machinery.
Sales Comparison
The first method is a sales comparison. What are similar used machinery and equipment selling for? Conducting market research on marketplaces and past sales can give you a benchmark of how you should price your equipment.
Cost Approach
If you are having difficulty finding comparable sales, consider using the cost approach. This method starts with finding the replacement cost of a similar item. Then, the number is adjusted for factors, like life expectancy, age, and condition. Your used equipment might not have all the features of the latest machinery, making it important to factor those deficiencies into the tentative sale price.
Income Approach
Another popular valuation method is the income approach. How much income can the piece of equipment generate? Does it have the capabilities to double the output of a mid-sized manufacturing business? Although the income approach is more commonly used to value business entities as a whole, it can be useful to highlight income generation capabilities.
Summary
Finding the optimal selling price for your old equipment involves a variety of factors. Selling for too low might cost your business extra cash flow, while an overpriced item can sit on the market for months.
About IMS Supply: IMS Supply is a leading distributor of maintenance, repair and operations (MRO) products and services with facilities in East and West Michigan and Kentucky. Through our MRO Asset Recovery Program we stock hard to find parts and supplies from thousands of different manufacturers at prices up to 70% less than MSRP. Contact us today to find out how we can help your business.
