Be prepared!
When a business owner is actively considering or pursuing the sale of their business, they often engage an equipment appraiser to help them determine fair and full value for their physical assets. This is especially true of businesses that are machinery and equipment-intensive – manufacturing, processing, packaging, construction, etc.
And this is good, of course! It’s obviously wise for business owners to work with an appraiser to ensure proper valuation of machinery and equipment assets as part of a sale. What could make it great, however, is that same owner not waiting until the sale / acquisition process has started to engage an appraiser.
Owners who make sure their business is organized well in advance of any potential sale – who stay on top of their schoolwork, to put it simply – will go a long way in maximizing buyer confidence when it comes to the quality and sustainability of their potential earnings.
If a business owner wants to be prepared for any potential sale, here are some key steps they can – and should! – take in the immediate future:
The seller should begin organizing the business as soon as possible, showing three years of detailed operating expenses with equipment maintenance broken out, and having a well-thought-out capital expense (commonly called “CapEx”) plan.
Each central machine or production area should be treated as its own "mini-business" and profit center, with assigned operating and earnings costs, and planned operating expenses, capital expenses, and replacements.
The seller should have a detailed assignment of operating expenses and a central asset tagging and tracking system that increases clarity for the buyer - the more the buyer understands what they are purchasing, the less risk they will perceive in the acquisition.
A seller’s goal, after all, is to help the buyer clearly see continued earnings with the seller’s current equipment package, with predictable operating and capital expenses. The more organized and up-to-date the seller is when it comes to their equipment, the more value they help create for the business.
Want to hear more on this topic? Our machinery and equipment appraisal expert Tim Roy appeared on the Defenders of Business Value podcast last year to discuss how business owners can ensure they’re always fully prepared for a potential sale. You can listen to the episode here.