Retire Rich You may be good at growing your biz, but how's your personal portfolio? Check out our wealth-building tips.

Retirement is not a word that often rolls off anentrepreneur's lips. Whether starting a new business orenjoying the benefits of an established one, few entrepreneurs careto think about their golden years-or anything else that mightseparate them from their companies.

Perhaps it's their built-in tolerance for risk, or thesuccess-at-any-cost passion that entrepreneurs wear on theirsleeves, but many seem to want to work until they hit itreally big--or die trying. But that strategy won'tensure a life of leisure when 38 turns into 83. And it won'tprovide for your family--or your funeral--at any age. Like it ornot, to retire rich requires careful planning at every stage ofyour business. From starting up to selling out, there are thingsevery entrepreneur should be doing to balance the inherent risks ofowning a business with the inevitable certainties of old age anddeath.

First, Do No Harm

Carmine Caccavale liquidated every penny of his savings tolaunch Mount Vernon, New York-based GNC Payroll Plus in2002. He sold his house. He emptied his retirement savings. He evenpaid penalties to cash out his 401(k). "That's probablynot the textbook way to start a business, but that's myapproach: I burned the boats," he laughs, comparing his newventure, which projects $700,000 in 2005 revenue, to the old Vikingbattle tradition of victory or death.

But unlike many entrepreneurs, Caccavale, 38, also made sure hisfamily's financial future was secure. A $2 million lifeinsurance policy and a disability income policy at least guaranteethat, in case of misfortune, his fledgling business venturewon't bankrupt his spouse or prevent his two daughters fromgoing to college.

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

Caccavale's use of insurance is a smart move, says MarkMenges, an independent financial planner in Columbus, Ohio. Mengescoaches entrepreneurial clients on the best ways to build personalwealth. Reducing startup risks through insurance is one of thefirst things Menges recommends for early stage entrepreneurs. Buthe 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 thebusiness, you need the ability to access money from othersources."

Tom Taulli, an attorney, author and business finance advisor inNewport Coast, California, says it's hard to overstate theimportance of reducing business risks of all kinds during thestartup phase. He suggests purchasing life insurance policies oneach founder and key employee. "For just about every emerginggrowth company, there are key employees. If one or more [dies], itcan wreak havoc on a company," he says. "One way to dealwith this is to purchase key-person insurance." In case oftragedy, the insurance plays a dual role: It pays not only toreplace the person, but also to buy the company stock back from hisor her surviving heirs.

Whether through death or simply disagreement, the departure of apartner, key employee or spouse can derail a startup and threatenthe founder with loss of control. Devising a plan to deal with suchissues is best done in the original documents that create thecompany, including the shareholder agreement. Within the contractthat each shareholder signs should be a buy-sell agreement thatmaps out how a founder can buy back shares of stock from partners,employees and other shareholders. If you're an early stageentrepreneur like Caccavale, your business is your most valuableand important personal asset-so maintaining control is key toretiring rich.

Retirement is still a long way off for Caccavale, but it'salready on his mind. "This money that I'm investing now-Iknow 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 toreach the goal of selling your company for a king's ransom. Andmany entrepreneurs are content to enjoy the journey, perhaps nevereven reaching the goal.

Toni Knight, founder and CEO of WorldLink, aLos Angeles media company that sells direct-response andinfomercial airtime to advertising agencies, is clearly enjoyingthe journey. Just back from a three-month maternity leave, Knightsays she's "got a great personal life and a greatbusiness." Clearly, she loves the challenges of operating aninternational company that employs 72 people and expects to billmore than $100 million in 2005.

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

Knight's brand of smart growth will make retiring rich asimple matter, when the time comes. Just owning a business throughits profitable growth years can be enough to provide for yourfuture if you handle it well, says Menges. First, entrepreneursshould be diligent about paying themselves-and about saving whatthey bring home. "Balance your lifestyle with yourincome," says Menges. "You should be putting away 15percent of your income [for retirement]. If you have thatdiscipline and balance, then as your business and income grow, sodoes the amount you are saving."

But accumulating savings is not enough. Manage your personalwealth with as much attention as you manage your business, andyou'll soon find that some investments just make more sensethan others. "If you owned a business, some investment realestate and whole life insurance, you'd never have to own anypublic stocks, and you could be super-successful," advisesMenges. He explains that each of those three assets can grow invalue while also providing either income or liquidity, a trait hesays harnesses the "velocity of money."

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

Developing a habit of saving and investing is an importantbusiness strategy, says Taulli. Having savings and available cashcan be a competitive advantage in tough times. "You'll beable to capitalize on situations when other companies haveoverextended themselves," he says.

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

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

Balancing business growth and personal wealth-building istricky. The key is to remember that the business was built to servethe founder-and not the other way around. To the extent possible,says Taulli, entrepreneurs should always use the business tofortify their personal wealth. "This is what suchentrepreneurs as Michael Dell and Bill Gates have done. Over theyears, they have liquidated their company shares and diversifiedtheir wealth. Over time, you've got to diversify. Pull moneyout as soon as you can."

Timing Is Everything

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

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

"It's not so much when you want to sell as when thebuyer wants to buy," says Taulli. "When you start to getunsolicited offers, the reality is, that's a good time to exityour business." Taulli believes that current economicconditions 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-thosewho are primarily interested in the return they can get from thebusiness.

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

If you're convinced that the market is hot and you'reready to sell, Menges suggests an immediate consultation with atrusted financial planner. Someone who knows everything about yourpersonal financial situation will be able to help you negotiate thebest 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 lumpsum or as an income over a period of time. That needs to fit witheverything else."

The right fit, Menges says, will ensure that you can retire withboth monthly income and longer-term investments. "Baseincome-such as an annuity from selling the business-helps you sleepat night," he says. But you also want to have assets like realestate, which can continue to grow in value over time. If yourpersonal portfolio is already heavy in one of those categories, thebest deal for you will help balance current income with long-termsavings.

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

Taulli's second suggestion: Do everything you can tomaximize profits and cash flow. Most business valuations are tiedto the amount of cash the business throws off each month, sothere's rarely a good case for buying expensive new equipmentjust before selling out. And if you can show a buyer how most ofthe profit is recurring-how the same customers continually comeback to spend money with you each month or year-your valuation issure to increase.

Koeppel Direct seems well-prepared for the imminent exit of itsfounder. "I've always believed in hiring good people andinvesting in the infrastructure of the business," saysKoeppel. "I've spent a lot on marketing, which haspropelled our growth. But there are also strong systems inplace." And Koeppel has purposely cultivated clients that canbe relied on for repeat business. The company, which booked over$100 million in media in 2004, has served well-known companiesincluding Ben Hogan Golf, DirecTV and H.J. Heinz.

Koeppel knows what companies like his have been selling for butadmits he hasn't sat down to figure out the value of his ownbusiness. He's clearly torn between opportunities for continuedcorporate growth and locking in the kind of personal wealth thatwould let him retire and relax in style. "The market's thebest it's been in five years," he says, as hisentrepreneurial instincts start kicking in. "But things arechanging-ad expenditures are going to the internet. I see dollarsshifting, so we're getting more involved in that." Perhapsa relaxing retirement is not what he has in mind.

David Worrell is Entrepreneur's "RaisingMoney" columnist.