Retirement is not a word that often rolls off an entrepreneur's lips. Whether starting a new business or enjoying the benefits of an established one, few entrepreneurs care to think about their golden years-or anything else that might separate them from their companies.

Perhaps it's their built-in tolerance for risk, or the success-at-any-cost passion that entrepreneurs wear on their sleeves, but many seem to want to work until they hit it really big--or die trying. But that strategy won't ensure a life of leisure when 38 turns into 83. And it won't provide for your family--or your funeral--at any age. Like it or not, to retire rich requires careful planning at every stage of your business. From starting up to selling out, there are things every entrepreneur should be doing to balance the inherent risks of owning a business with the inevitable certainties of old age and death.

First, Do No Harm

Carmine Caccavale liquidated every penny of his savings to launch Mount Vernon, New York-based GNC Payroll Plusin 2002. He sold his house. He emptied his retirement savings. He even paid penalties to cash out his 401(k). "That's probably not the textbook way to start a business, but that's my approach: I burned the boats," he laughs, comparing his new venture, which projects $700,000 in 2005 revenue, to the old Viking battle tradition of victory or death.

But unlike many entrepreneurs, Caccavale, 38, also made sure his family's financial future was secure. A $2 million life insurance policy and a disability income policy at least guarantee that, in case of misfortune, his fledgling business venture won't bankrupt his spouse or prevent his two daughters from going to college.

The decision to take out life insurance, he says, was based partly on a tragedy that struck Caccavale's family 30 years ago. Shortly after starting a new check-cashing business, Caccavale's father was killed in his store in 1976, leaving his family nearly destitute.

Caccavale's use of insurance is a smart move, says Mark Menges, an independent financial planner in Columbus, Ohio. Menges coaches entrepreneurial clients on the best ways to build personal wealth. Reducing startup risks through insurance is one of the first things Menges recommends for early stage entrepreneurs. But he also says having a Plan B makes good financial sense. "Don't put every penny you have into the business," he says. "If you have a downturn or even growing pains in the business, you need the ability to access money from other sources."

Tom Taulli, an attorney, author and business finance advisor in Newport Coast, California, says it's hard to overstate the importance of reducing business risks of all kinds during the startup phase. He suggests purchasing life insurance policies on each founder and key employee. "For just about every emerging growth company, there are key employees. If one or more [dies], it can wreak havoc on a company," he says. "One way to deal with this is to purchase key-person insurance." In case of tragedy, the insurance plays a dual role: It pays not only to replace the person, but also to buy the company stock back from his or her surviving heirs.

Whether through death or simply disagreement, the departure of a partner, key employee or spouse can derail a startup and threaten the founder with loss of control. Devising a plan to deal with such issues is best done in the original documents that create the company, including the shareholder agreement. Within the contract that each shareholder signs should be a buy-sell agreement that maps out how a founder can buy back shares of stock from partners, employees and other shareholders. If you're an early stage entrepreneur like Caccavale, your business is your most valuable and important personal asset-so maintaining control is key to retiring rich.

Retirement is still a long way off for Caccavale, but it's already on his mind. "This money that I'm investing now-I know I'll get it back in spades," he predicts. "That's going to be my retirement."

Grow Smart

Nobody will deny that it takes years of effort and sacrifice to reach the goal of selling your company for a king's ransom. And many entrepreneurs are content to enjoy the journey, perhaps never even reaching the goal.

Toni Knight, founder and CEO of WorldLink, a Los Angeles media company that sells direct-response and infomercial airtime to advertising agencies, is clearly enjoying the journey. Just back from a three-month maternity leave, Knight says she's "got a great personal life and a great business." Clearly, she loves the challenges of operating an international company that employs 72 people and expects to bill more than $100 million in 2005.

"I'm not ready to think about selling the business or retiring," says Knight, 41. But she's nonetheless grooming the business for her ultimate exit. Knight says she has grown slowly but steadily. The business was profitable from Day One, she says, and she never takes on new expenses until there is new revenue to support them.

Knight's brand of smart growth will make retiring rich a simple matter, when the time comes. Just owning a business through its profitable growth years can be enough to provide for your future if you handle it well, says Menges. First, entrepreneurs should be diligent about paying themselves-and about saving what they bring home. "Balance your lifestyle with your income," says Menges. "You should be putting away 15 percent of your income [for retirement]. If you have that discipline and balance, then as your business and income grow, so does the amount you are saving."

But accumulating savings is not enough. Manage your personal wealth with as much attention as you manage your business, and you'll soon find that some investments just make more sense than others. "If you owned a business, some investment real estate and whole life insurance, you'd never have to own any public stocks, and you could be super-successful," advises Menges. He explains that each of those three assets can grow in value while also providing either income or liquidity, a trait he says harnesses the "velocity of money."

This three-pronged investment strategy is one recommended by many investment advisors, and Knight manages her business and personal finances according to a similar concept. "It's like my dad told me-it's not how much money you make; it's how much money your money makes for you," she says. But Knight is also quick to admit that her personal financial plan is probably in need of a tuneup: "I have to do some updates now that I'm married and have a baby," she says.

Developing a habit of saving and investing is an important business strategy, says Taulli. Having savings and available cash can be a competitive advantage in tough times. "You'll be able to capitalize on situations when other companies have overextended themselves," he says.

On the other hand, your company won't continue to thrive unless you put those savings to work. So Taulli also urges growth entrepreneurs like Knight to focus their investments on the key drivers of growth and profitability.

"A lot of business owners don't focus on the most profitable opportunities. They try to do everything," says Taulli, and that can be their undoing. "Business owners typically over-invest in their own companies. Then they realize that their businesses can fall apart very quickly, and 10 or 15 years of work are gone."

Balancing business growth and personal wealth-building is tricky. The key is to remember that the business was built to serve the founder-and not the other way around. To the extent possible, says Taulli, entrepreneurs should always use the business to fortify their personal wealth. "This is what such entrepreneurs as Michael Dell and Bill Gates have done. Over the years, they have liquidated their company shares and diversified their wealth. Over time, you've got to diversify. Pull money out as soon as you can."

Timing Is Everything

At 51, Peter Koeppel knows that retirement is not far off, so lately he's been listening when investment bankers call to discuss buying his direct-marketing agency, Koeppel Direct. Even though Koeppel would like to continue working for several years, he says the timing is probably right to cash out of the business he has built since leaving the corporate world in 1995. "I have an interest because of what the investment-banking people are saying about the current environment," he says. "I wasn't looking to [sell], but you have to take it seriously if the number gets to where it needs to be."

That number-the sale price of the business-will likely be the largest single factor affecting Koeppel's financial health at retirement, so getting the best price is an important consideration. And for Koeppel, as for most entrepreneurs, the best price often has to do with the best timing.

"It's not so much when you want to sell as when the buyer wants to buy," says Taulli. "When you start to get unsolicited offers, the reality is, that's a good time to exit your business." Taulli believes that current economic conditions are helping many business owners get out at the top. There's an excess of money available in buyout funds, he says, which means sellers can get top dollar from financial buyers-those who are primarily interested in the return they can get from the business.

When searching for a buyer, entrepreneurs seeking to maximize the sale price are traditionally advised to look at strategic buyers-competitors and others who have a strategic interest in the business. That's not necessarily a valid assumption today, says Taulli. "Sometimes the strategic buyer is not the best buyer. There's just so much money right now that financial buyers are paying a premium."

If you're convinced that the market is hot and you're ready to sell, Menges suggests an immediate consultation with a trusted financial planner. Someone who knows everything about your personal financial situation will be able to help you negotiate the best terms for the sale of your company.

There's no one-size-fits-all solution, according to Menges. "It depends on how the rest of your finances are set up," he says. "You need to decide if you are cashing out in a lump sum or as an income over a period of time. That needs to fit with everything else."

The right fit, Menges says, will ensure that you can retire with both monthly income and longer-term investments. "Base income-such as an annuity from selling the business-helps you sleep at night," he says. But you also want to have assets like real estate, which can continue to grow in value over time. If your personal portfolio is already heavy in one of those categories, the best deal for you will help balance current income with long-term savings.

Of course, the right time to plan for your retirement and the sale of your business is when you're still a startup. But if you failed to do that, Taulli has several recommendations that can still help you get the most out of a potential buyer. First, make yourself obsolete. "If the founder is key to the business, you may get a lower value, or more of the payment will be contingent on performance," he says. Making the business run without you is a major milestone and key to exiting to a relaxing retirement.

Taulli's second suggestion: Do everything you can to maximize profits and cash flow. Most business valuations are tied to the amount of cash the business throws off each month, so there's rarely a good case for buying expensive new equipment just before selling out. And if you can show a buyer how most of the profit is recurring-how the same customers continually come back to spend money with you each month or year-your valuation is sure to increase.

Koeppel Direct seems well-prepared for the imminent exit of its founder. "I've always believed in hiring good people and investing in the infrastructure of the business," says Koeppel. "I've spent a lot on marketing, which has propelled our growth. But there are also strong systems in place." And Koeppel has purposely cultivated clients that can be relied on for repeat business. The company, which booked over $100 million in media in 2004, has served well-known companies including Ben Hogan Golf, DirecTV and H.J. Heinz.

Koeppel knows what companies like his have been selling for but admits he hasn't sat down to figure out the value of his own business. He's clearly torn between opportunities for continued corporate growth and locking in the kind of personal wealth that would let him retire and relax in style. "The market's the best it's been in five years," he says, as his entrepreneurial instincts start kicking in. "But things are changing-ad expenditures are going to the internet. I see dollars shifting, so we're getting more involved in that." Perhaps a relaxing retirement is not what he has in mind.


David Worrell is Entrepreneur's "Raising Money" columnist.