Does outdated equipment lower my price or complicate the sale?

Equipment shows up in two places in a sale: the price discussion and the closing checklist. Old is not the same as defective. A machine that is dated but maintained and still earning is a different conversation from one that needs replacing soon. BDC notes that a buyer will see what they will have to spend on the business, so prepare what you can show about condition, maintenance and ownership before they find out for themselves.

How condition enters the price talk

BDC’s guide to negotiating a sale says the realistic adjustments in a negotiation are typically tied to discoveries made in due diligence, and it names building or equipment defects among them. It adds that a buyer who sees what must be spent, such as on defective equipment, has an opening to start creeping the price down. BDC’s guide to selling advises owners to maintain equipment and warns that a seller will not get full value if equipment is not maintained.

Who has a claim on it

Ownership can complicate a sale as much as age. Ontario’s Personal Property Security Act lets any person, on payment of the required fee, request a search of the business debtor name index, and the certificate issued is proof of its contents in the absence of evidence to the contrary (s.43). That Act is Ontario’s, so ask your lawyer which provinces’ registries to search, which registrations show against your business and what must be discharged at closing.

Leased and financed equipment

BDC’s guide to purchase agreements gives an example of a closing condition: leases or contracts that the vendor needs a third party’s consent to transfer. An equipment lease may be one of them. Read the lease for a transfer clause and ask the lessor early. If a leased machine cannot move to the buyer, work out what replacing it would cost.

What to have ready

A buyer’s questions are easier to answer from paper than from memory. Before listing, prepare these, then see what lowers the value of a business for the wider list:

• A list of every major item, marked owned, leased or financed.
• Service and maintenance records, and any repairs now overdue.
• Lender and lessor contacts, so payout and consent questions can be answered quickly.