Why the Net Worth of an Entrepreneur is Important for a Potential Investor
Entrepreneurship is one of the most exciting times in a person’s life, and it can also be a very scary time.
You have to take on great risk with your opportunity while trying to make a success of it. It can make a constant struggle for your desire, but you have nothing to lose by giving the business a try!
However, if you do not have good credit or personal finances then many people will see that as an obstacle that will get in the way of you gaining funding.
This is why it is important to develop a good business plan and find investors, because your chances of success increase with the level of support and backing you receive.
Without the right documentation and financial information, lenders will not fund your company unless they know that it has solid backing to demonstrate that the business has potential to be successful.
Why is the net worth of an entrepreneur important for a potential investor in the business?
The net worth of an entrepreneur can show such support as well as provide a foundation for which you can base your business upon.
Investors need to know that the entrepreneur is financially stable, and they need to understand the potential of the venture. If you have a great idea, but you are unsure about your ability to bring it to life then you could be heading for failure very quickly.
For example, if the entrepreneur personally has bad debt, or if they are low on cash because they have not been able to make payments on their debt, then the entrepreneur may not have the investor’s interest at heart.
Most likely, the entreprenuer will be pressured to pay off their personal debt, either by having the intention to liquidate the business, or by having to pay off their debt at the expense of the business, worse is to embezzle funds and take on debt for personal use.
The first thing that needs to be determined is the entrepreneur’s ability to manage debt. The entrepreneur must understand how much debt they can handle and how they will keep on top of it.
Without a proper budget, it is very possible for an investor to lose money as well as become frustrated, as they try to figure out what you are doing with funds that should be going towards the business’ success.
At the end of the day, all investors are only interested in investing in “winners”, or a “winning deal”. No investor invests in something that they know for sure they will lose money or not make money for them.
Therefore, if you are in debt, then it may be better to wait until you have paid off all of your debt before trying to begin pitching the business idea to raise funds.
On the other hand, if you are an Entrepreneur who has already “made it” in finding some financial success which leads to a higher net worth.
Then, this may be an advantage in being able to pitch the idea of the business in a way that conveys success and potential, as investors will respect your past successes and use that as a benchmark for future successes, with their investment.
I have seen many Entrepreneurs pitch their businesses to investors who are very wealthy. They would put on a great performance, showing how their business was already successful, and how it would be even more successful if given the financial backing.
Whether you are an entrepreneur with a good standing, or have personal debt that is keeping you from being able to pitch the business, you need an efficient and convenient way of tracking your net worth and expenses.
You can do so with an app that tracks your net worth and expenses. It should allow you to import your bank accounts, expense lists, investments and more into the app. This enables you to keep track of all of your financial data in one place.
If you are an entrepreneur with a bad credit background who has not paid off their debt yet, then it is important for you to get hold of documentation showing that you are able to make payments on time before attempting to pitch the business idea.
A Net Worth tracking app can be used to show your progress and provide documentation to show that you are capable of paying your debts in a timely manner.
If you have all of the right information, then investors will believe in your ability to not only run the business successfully, but also get it off the ground. With this knowledge, they will be less likely to lose their investment or get frustrated with debt that is causing them financial problems.
Most likely, they will want to support you even more by giving you money so that you can further develop and expand the business.
So the next time that you are looking for investors for your business, be sure to show them all of the information that they will need in order to make an intelligent decision about your idea.
About the Author
I hope that my post has helped you know more about Startups. Feel free to leave a comment and tag me and I will answer them. Follow my profile to get the latest content I post to stay ahead of the curve.
I am the Founder of Cudy Technologies, a full-stack EdTech startup helping teachers and students learn better. I am also a mentor and angel investor in other Startups of my other interests (Proptech, Fintech, HRtech, Ride-hailing, C2C marketplaces, and SaaS). You can also find me on Cudy for early-stage Startup Founder mentorship and advice.
Connect with me on LinkedIn if you have further questions. Let me know that you are a reader of my Medium posts in your invitation message.