How To Calculate Your Personal Net Worth
You've decided that franchising is right for you. You've done the research, you've narrowed down the categories and sectors that you think would best match your skill set; perhaps you've even picked a brand you'd like to join. But before you go any further, it's time to talk money. You're going to need to bring capital to the table to ink the deal. And one important assessment you'll need to make is determining your personal net worth.
Franchisors generally want to know something about your net worth - which is really just your overall state of financial health. It gives them a clearer picture of you as a business risk and helps them understand a little more about you as a potential franchise operator. And frankly, your net worth is a good thing for you to know anyway because it can help you be a better spender and saver.
So, do you know what your net worth is? If not, it's time to find out.
By definition, net worth is a measure of the basic monetary value of an individual or business. It is calculated by subtracting the total dollar amount of all liabilities from the total value of all assets. Net worth is sometimes called by other names including: book value, shareholder equity, or liquidation value. It's fairly easy to compute basic net worth. But keep in mind that it can be somewhat misleading because the true market value of some assets, such as real estate or loan portfolios owned by banks, can be difficult to estimate. Also, some business assets are carried on the books at their purchase price, not what they are worth today, which could be considerably more or less.
Your primary assets are going to be: 1) cash, money held in bank accounts, money market accounts or certificates of deposit (CDs); 2) personal property, including homes, cars, boats, recreational vehicles, furniture, art, antiques, collectibles, and jewelry; 3) investments, including stocks, bonds, mutual funds, annuities, the cash value of any life insurance policies, and real estate; and 4) retirement savings, including employee pension plans, 401(k) or 403(b) accounts, and IRAs.
On the other side of the coin, your most significant liabilities will be: 1) credit card debt; 2) automobile loans; 3) real estate loans; and 4) any other bills and notes payable that you owe.
Subtract those liabilities from your assets. That is your approximate net worth.
If you're net worth calculations are not as rosy as you had expected, there is still hope.
First, get out of debt. Don't buy more than you can afford, pay down the balances on those credit cards, and basically, eliminate debt wherever you can - and as fast as you can. Once you've done that, it's time to save.
Start setting aside something every month. Every little bit helps and you're building a nest egg at the same time.
In the meantime, there are a few other things that you can do to prop up your net worth and set yourself up financially for getting into franchising and, perhaps most importantly, being successful. One way is to have a working spouse who has a healthy income. This helps while you are making the transition from your previous career and into franchising. Next, partner with deep pockets. Many individuals who enter franchising do so with an investment partner who has capital and a solid net worth. Of course, you give up some of your control but many partnerships have gone on to become very successful in franchising.
Visit https://www.franchise.com/net-worth-calculator to calculate your net worth.
6.7: Franchising Trends
7.2: Creating A Business Plan