To Buy A Franchise, Know Your Net Worth

Working as a franchise and business consultant, I meet many individuals who are interested in entrepreneurship and the freedom of owning their own business.

Buying a franchise is a solid path to business ownership.

Last week, I was doing a consult with a prospect who wanted more information on one of the franchises I represent.

In the qualifying process, as I am getting to know my client, I usually ask a series of question to be able to get to know them better and to find the franchise that best suit their needs.

The questions I ask would clarify what type of concept they are interested in, whether it is retail, home-based, B2B, service or food.

Of course I ask a series of more specific questions to get to know the potential buyers.

Generally clients are able to answer all my questions without any hesitation.

Where do you work now?…Check
What type of franchise are you interested in?… Check
Have you owned a business before?…Check
How much do you have to invest? …Check

What is your net worth? Pause…stumble…uncertainty, rambling…


This is the question that creates the most confusion.

The bottom line is, if you are getting ready to make an investment into a business, where you are not paying cash, it’s important to know your numbers.

Your net worth is one of those numbers.


Most people are often perplexed by this question, as they are getting ready to make an investment.

So what is your net worth? How do you calculate the number?

Your net worth is the value of all of your assets, minus the total of all of your liabilities.
Put another way, it is what you own minus what you owe. If you owe more than you own, you have a negative net worth.
Assets include: money in your bank account, your cars, investments, home, etc.
Liabilities are: mortgage, car loan, credit cards, student loan, etc.

Here is the formula:

Assets – Liabilities = Net worth

Why does this number matter?

Franchisors need to know if you are in a position to be awarded one of their franchises.

They need to know if you are financially capable of making this purchase and handling all the responsibilities that come with business ownership.

Similar to buying a house, the agent will need to know how much you have been qualified for or how much you can afford so that they can point you in the right direction.

Buying a franchise is a great way into business ownership. Know your numbers and your net worth so that you can be pointed in the right direction.


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