In some cases, an entrepreneur might start a new business using some assets he or she already owns. One example of this would be an avid gardener who owns a truck he's had for a few years. If this gardener were starting a farm stand business, he might want to use that truck as a delivery vehicle - which would make it an asset in the business plan forecast. These types of assets are sometimes called grandfathered assets.
To represent a pre-owned asset in your forecast requires two entries:
- One Asset entry representing the remaining value of the asset
- One Financing entry representing the invested value of the asset
The reason two entries are required is that essentially, the business is taking ownership of the asset - or, put another way, purchasing it from the owner. The owner is then investing the "purchase price" in the company. When you make the entries in your LivePlan forecast, the Asset entry is calculated as a large expenditure. To keep your financials in balance, you'll also need a Financing entry representing the same amount.
Entry #1: Pre-owned asset
- In the Forecast tab, click Assets:
- Click the Add Asset button near the bottom of the Assets page:
- In the first overlay, give this asset a name. Click Next:
- Click One-time amount. Enter a dollar amount that represents the remaining value of this asset. So, if you have already owned it for a number of years, it has depreciated in value in that time. Enter the remaining value as of the start of your forecast. Lastly, select the first month of your forecast as the start date of the asset:
Note: You may notice instructions for this entry that tell you to enter an asset you already own in Starting Balances. The Starting Balances, however, are designed for existing businesses. If your business is a start-up, you can ignore that instruction and proceed with this asset entry. If your company is already in business, you'd enter this asset in your Starting Balances.
- Click Long term to indicate that this is a long term asset. Then, choose the number of years this asset has remaining as of the start of your forecast:
- Lastly, indicate whether you plan to re-sell the asset, and if so, when and for how much. Click Save & Close:
Entry #2: Invested value of the asset
You'll now create an Investment entry to balance this asset entry.
- Click on the Forecast tab, and then More... > Financing:
- Click Add Investment:
Enter a name for the investment. Click One-time amount. Then enter the same amount that you entered for the value of the asset. Select the first month of your forecast as the start date of this entry:
- Click Save & Close.
Note: Of course, you aren't physically investing this amount of cash in your business. But the value of the existing asset you're bringing into the business is itself an investment. And that value is represented by this pair of forecast entries.