Confused as to Accredited Investor Status?

By Jeffery S. Watson

I was recently asked if someone qualifies as an accredited investor by looking at their total situation. They realized that they had not had a conversation with their accountant about the value of their business that had little to no debt, had a low operating cost, but consistently generated a couple hundred thousand dollars a year in gross revenue. This caused them to rethink whether or not they were an accredited investor. Sometimes, we overlook some of the assets we own or control when determining our net worth.

My good friend Tom Krol frequently challenges people through various motivational and inspirational posts on social media that have so much educational value in them. Many of these posts remind business owners that they need to consistently track their net worth on a monthly basis so they can see if they are moving the needle in the right direction. Are you making money, or are you spending it faster than you make it?

I’ve discovered that many investors don’t fully understand the value of their portfolios because they haven’t sat down and figured out what they own and what it’s worth based on cash flow minus liabilities, and then see how that matches up with generally accepted accounting principles to determine their net worth. Because of this, there are probably individuals who may be accredited investors who don’t realize it because they don’t have a million dollars in the bank or a million dollars in equity in their real estate. If, however, they looked at what they have in the bank, what they have in investments, what they have in retirement accounts, plus what they have in businesses as far as equity, particularly if it’s equity in a business in which they have a controlling interest, they may discover that their net worth really is in excess of a million dollars.

So, do you qualify as an accredited investor? I will be sharing more in my next couple of emails.

        Your comments and brief questions are appreciated. I read every one and will do my best to briefly respond. If you like this article, please feel free to share it on social media or otherwise and encourage your friends to go to WatsonInvested.com to sign up so they can receive their own emails.

Until next time,

Jeffery S. Watson