Recently, I added a new question to the free franchise compatibility quiz I created. (Almost 6,000 people have taken this quiz.)
But there’s a problem, and it could be a big one.
I’m pretty sure almost everybody is answering the question wrong.
In short, their math is off. Or they forgot to add an asset or two.
A question: Have you figured out what your net worth is yet?
If not, it’s something you need to do. Even if you aren’t looking to buy a franchise yet.
The reason: You need to know where you stand, financially. At all times. No guessing.
And if you have done a net worth statement…
Your Net Worth Calculations Are Probably Wrong
Based on what I’m seeing, the majority of the prospective franchise owners taking the quiz either:
A. Don’t know the meaning of net worth
B. Don’t know how to calculate it
And that’s a problem.
One one hand, I find it hard to believe that over 60% of the people taking the quiz have a net worth of less than $250,000. Except, that’s the box they’re checking.
On the other hand, if it’s true, our country is in a s_ itload-er…I mean a lot of trouble.
Because a net worth of $250,000 isn’t going to get you very far.
Financial Qualifications In Franchising
Franchise Fact: You have to qualify, financially, for the franchise opportunity you’re interested in.
Generally speaking, at a minimum, your net worth needs to be $300,000.
In addition, some of your money needs to be immediately available. In other words, a portion of your net worth needs to be liquid. (Figure $50,000 or so.)
Tip: Retirement funds are not considered to be liquid assets. And that can be a problem. Case in point…
A Couple With A $600,000 Net Worth
I remember working with a couple who had a decent net worth…around $600,000. But they had a problem.
Almost $500,000 of it was in company retirement plans. And the franchise opportunity they were interested in had a $150,000 liquid capital requirement, which meant they were coming up short. They couldn’t pull the trigger on the franchise they liked.
The couple was presented with an alternative idea, but they decided against it.
FYI: This happens way more than you know.
There are lots of people who have worked at a company or two for 10-20 years, who have wisely taken advantage of their company’s retirement plans.
But they can’t touch that money until they’re 65 or older, without paying a penalty.
What Is Your Real Net Worth?
The only one way to determine what your net worth is to calculate it. And it’s really easy.
Especially since I have a free net worth calculator available for you.
But before I provide the link to my free net worth calculator, there’s something you need to do.
You need to gather all of your financial information.
- Credit card statements
- Mortgage payoff amount
- Investment statements
- Retirement plan balance
- Auto loan payoff amounts
- Other outstanding loan balances
- Misc. investment information/value
- The amount your valuables/furnishings etc. are worth (Your best guess)
Once you’ve gathered everything, set aside an hour or so, and use my free net worth calculator.
Once you’re on the page with my free calculator, all you need to do is type in your assets and liabilities. Then hit the “Calculate” button.
You now have your net worth. But don’t forget to hit “Print.”
And as long as your figures are correct, and you haven’t missed anything, your net worth will be right.
Plus, you’ll have it right in front of you when you’re talking to franchisors.
Business Tip: You Need To Get Business Owners Policy Insurance