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Getting top dollar for used equipment

Tom Bradley for Progressive Dairyman Published on 11 December 2018
Auctioneer Tom Bradley sells used equipment

There are many reasons a person might sell farm equipment. You might have become an executor to an estate; you may be a farm operator wishing to liquidate for cash, upgrading, downsizing or retiring.

A dealer might want to reduce inventory for new models coming in or may need to cover capital needs by liquidating select inventory.

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In today’s environment, it’s more important than ever when you market equipment that it “brings the money.” Your original investment in equipment should have been structured in a way that you anticipated the ability to create income with the machine and derive tax advantages or depreciation benefits with some sort of plan to achieve a premium price in its resale.

Done correctly, machinery is a great investment, but it will depend on planning for your exit from ownership.

As a professional auctioneer, I’ve sold farm equipment for many producers big and small. Some producers have set themselves in a great position to get the most money for their equipment, and some just never thought ahead.

First, your choice of marketing is very important. Will you sell it using an auction or a private sale? The two methods are vastly different for this reason: With a private sale, you negotiate with many people many times; with an auction, you negotiate with many people at the same time.

With a private sale, a person comes to you to negotiate on the machine. You start high, they go low and, if you do not reach agreement, they go away and buyer No. 2 comes along. You start in the exact same place you did with buyer No. 1, right back at zero. This process repeats over and over until you either reduce your expectation and take what you can get or the right buyer meets your expectation.

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Auctions bring efficiency to the process of negotiation because when buyer No. 1 says he will give this amount, buyer No. 2 has to offer more, and buyer No. 3 has to offer more yet.

With either method, you have to consider exposure, participation and individual attention. How big is the audience that will see your equipment? How easily and how often do they participate? Can you get the spotlight to shine on you – and for how long?

Today, free advertising is available through Facebook Marketplace and Craigslist, and it’s not unusual for us to go looking through those platforms to find business. While they are free and can occasionally create a successful sale, we’ve found they don’t provide the exposure, participation or individual attention necessary to create a successful sale.

While one item may get lots of attention, the popular post in social media will squelch hundreds of others. Craigslist might give a more fair opportunity for exposure, and it’s popular with buyers, but a poorly written ad or photos can make your ad seem like it’s invisible.

You should consider demand for the lots you intend to sell and look for options. Demand can be geographically driven – and often is.

For example, today, when we sell older combines in the Midwest, we really try to target our advertising for those machines to international buyers and exporters or areas with smaller farm sizes. We might also look inside the area for demographics that most demand that type of machine.

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Investors who own small hunting farms can be a great secondary market for used machinery. As an auctioneer, I understand targeted advertising to the right buyers makes more sense than the shotgun approach because the auction method works best when you create competition.

Tips for future resale

If you can foresee selling your equipment at some point down the road, consider these tips:

  1. If you own equipment, always treat it with respect and use it for its intended purpose.

  2. Always clean and take care of the paint. Shiny equipment sells very well regardless of age.

  3. Own equipment from reputable brands buyers know will be here for a long time.

  4. Train your employees about the importance of machine condition.

  5. Routine maintenance is impressive to buyers; document it and sell it with the machine. Anybody can say anything when they sell something, but having it on paper brings creditability to the process. Include receipts with the records.

  6. Do not talk to people about the value of the equipment before selling it on an auction. Let the process set the price without interference.

  7. Trust the professionals. They are as passionate about their job as you are, and they understand their value to you is in doing a good job. It’s been said many times, “If you think hiring a professional is expensive, try hiring an amateur.”

Selling privately

If you’ve decided to sell your equipment privately or “by owner,” consider these marketing tips:

  1. Photos are a big deal. Taking a photo of a dusty machine in the back of the barn may show it has been stored indoors, but I still firmly believe a clean machine on clean ground without a cluttered background says more.

  2. Forget the OBO. When you say $100,000 OBO (or best offer), you’ve already admitted you are going to take less. Set a price based on the market and comparable sales.

  3. Negotiate in good faith. Never get offended by an offer – use it as an opportunity to counter. Phrases like “I appreciate the offer but” are more effective than ridiculing a potential buyer. Remember, you are now a salesman and not an equipment owner.

  4. Look for demand. Take a lesson from the fisherman; you should always go fishing where the fish are biting. Look for demand and think outside the box. Concentrate your advertising efforts on those who will find the most value in your equipment.

  5. Headlines matter. Today, people see thousands of marketing messages every day. Research shows you get less than one second to capture a buyer’s attention. Pay close attention to the wording in your headline and combine it with a great photo to draw maximum attention.

  6. Finally, understand the value of time and money. Holding out for that last $1,000 may not make sense if you could get the money today and put it to work making you money somewhere else. I have seen too many producers lose a good sale over a small amount of money, only to eventually take even less. We all want to get as much as we can, but at a certain point it can become unreasonable.

Put these guidelines to use in your operation, and you will find more value in your machinery investments over time. Over a lifetime, it will result in a significant addition to your personal wealth.  end mark

PHOTO: Auctioneer Tom Bradley sells used equipment at an equipment auction. Photo courtesy of DreamDirt Farm & Ranch Real Estate LLC.

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