Whether you’re applying for a loan, planning for retirement, growing your business, or just curious, calculating your net worth is easier than you might think. In today’s post, I’ll walk you through everything you need to know to calculate your personal net worth or the net worth of your small business.

What is net worth?

Your net worth is simply the difference between everything you own and everything you owe. The formula you can use to calculate your net worth is:

Net Worth = Total Assets – Total Liabilities

It’s important to understand that your net worth is just a snapshot of your financial situation taken at one point in time.

If your assets are greater than your debts, then you have a positive net worth, but if your debts are greater than your assets, you have a negative net worth. While a negative net worth may sound dire, it’s actually very common, especially for young adults, first-time homeowners, and new business owners.

How do I calculate my personal net worth?

Now that you know the formula for calculating net worth, the next steps are pretty straightforward.

Step 1: List Your Assets

You should include anything you own that has value. Common examples are:

• Cash
• Banking accounts (checking and savings)
• Investment accounts
• Retirement accounts
• Stocks and bonds
• Certificates of deposit (CDs)
• Your home’s current fair market value
• Fair market value of jewelry, collectibles, etc.
• Cash value of life insurance policies
• Fair market value of automobiles, boats, etc.

Step 2: List Your Liabilities

Your liabilities are everything that you owe or are making payments on. You should calculate this number by using the current payoff balance. Common examples are:

• Mortgage balance
• Auto loans
• Student loans
• Credit card balances
• Personal loans
• Home equity loans
• Medical debt
• Tax debt

Step 3: Subtract Liabilities from AssetsWhatever you calculate as your difference between your assets and liabilities equals your net worth.

Let me give you an example:

How do I calculate my business’ net worth?

Calculating your business’ net worth is done essentially the same way that you calculate your personal net worth. The only difference is that when doing the calculation, you’ll only include what’s owned or owed by the business and not any of your personal or individual assets or debts. The calculation is:

Business Net Worth = Business Assets – Business Liabilities

Keep in mind that there are several terms that are used interchangeably to refer to a business’ net worth, depending on the type of business:

• Owner’s equity – term often used for small businesses and sole proprietorships
• Shareholders, stockholders, or stakeholders’ equity – terms often used for corporations, including S-Corporations
• Net assets – term often used on financial reports like balance sheets

One note here: If you need a certified business net worth amount to be used for a loan or sale, then you would likely be required to hire a Certified Valuation Expert (CVA) who would factor in other considerations like marketability and goodwill when determining your business’ net worth.

Marketability is the measure of how fast you can turn your business share into cash. This means that the CVA would determine how quickly your share of the business would likely sell or how easily the business’ stock could be traded, if applicable. If marketability is high, then the value of your business increases.

Goodwill is the measure of extra value that can come from having a good business reputation, a loyal customer or client list, or a recognizable brand name. If your business’ goodwill is high, then the value of your business increases.

What counts as a business asset?

Business assets include anything that the business owns that has value. For equipment, office furniture, or other tangible things, you should use the fair market value of those items in their current condition (used) and not the price you paid for the items.

Common examples of business assets are:

• Business checking and savings accounts
• Accounts receivable (money customers or clients owe you)
• Inventory
• Equipment like computers, cameras, printers, machines, etc.
• Office furniture
• Vehicles owned by the business
• Real estate, include buildings and land
• Intellectual property established through patents, trademarks, trade secrets, etc. (admittedly difficult to put a value on)
• Business investments
• Supplies

What counts as a business liability?

Business liabilities include everything that the business owes or is making payments on. You should use the current balance or payoff amount of these items in your calculations.

Common examples of business liabilities are:

• Equipment loans
• Small Business Administration (SBA) loans
• Lines of credit
• Bills from vendors
• Sales tax payable
• Business vehicle loans
• Commercial mortgages

Does my small business count as part of my personal net worth?

Yes, your small business can count towards your personal net worth. This part can get confusing, but the bottom line is that if you personally own your business, your ownership interest then has financial value and is part of your personal net worth calculation.

However, you can’t just add your business assets to your personal assets. Instead, your share of ownership in the business is used to determine your share of the business’ net worth.

Here’s how that looks in real life:

• Business Assets = $250,000
• Business Liabilities = $90,000
• Business Net Worth = $160,000

If you own 100% of the business, then obviously all $160,000 can be included in your personal net worth calculation. If you own a percentage of the business, then you’ll use that percentage to determine how much of the business’ net worth can be included in your personal net worth calculation.

Abridged by Amy

Calculating your net worth doesn’t have to be intimidating or complicated. Whether you’re tracking your personal finances or evaluating your small business, the basic formula remains the same: assets minus liabilities equals net worth.

For individuals, knowing your net worth can help you measure your overall financial health and plan for long-term goals tied to retirement and estate planning. For small business owners, it can provide insight into how much value your business is creating over time, and it can also help you identify areas where your debt may be growing too quickly or areas where you should reinvest because the gains are greater.

Remember that wealth is typically the result of many small financial decisions made consistently over time. Rather than obsessing over a single number, I recommend using your net worth calculation as one tool to help monitor your financial progress. If you need help determining your net worth or understanding what the numbers really mean, work with a CPA who can analyze your current situation and help you think about your money strategically.