If you're like most entrepreneurs, you're probably worried you won't have enough tucked away for retirement. You many even expect to sell the company you've worked so hard to build, and live off of your gains.
That may be a mistake, Randy Gerber, founder of the personal finance group Gerber L.L.C., told The New York Times on Wednesday.
Many businesses simply cannot be sold, and others end up being sold for far less than expected, he says. And even if a business can be sold, owners often have an unrealistic notion of how much it might be worth.
It is essential to know how much your business is worth--and to start tracking its value now, says Gerber.
Inc. contributor Bill Harris suggests that you look at your business like a house when prepping for a sale. Ask yourself: Is it a "showcase home" or a "fixer-upper"?
Too often, I’ve seen a founder bear the birthing and growing pains of a new business, only to have the baby snatched away by new management or impatient money during the always-longer-than-you-think march to profitability and growth. As an entrepreneur that should make your skin crawl. If anyone’s going to pocket the big profit, it should be you, right?
"That boils down to auditing your company to find the places where some renovation today can increase the value of your business tomorrow," Harris writes.
Another prudent solution: Don't bet everything on one final sale.
"As a serial entrepreneur, I get it. Saving for retirement is more of an insurance plan than a core strategy," he writes. But that doesn't mean you shouldn't prepare for the worst.
Invest in a entrepreneur-friendly savings plan like the Roth 401(k), he suggests. But what if everything goes according to plan? What if you sell the business and don't need to tap into your retirement fund--didn't you just open yourself up to additional and unwanted taxes?
Not with the Roth 401(k), Harris reports. "All you need to do is transfer the money into a Roth IRA before you reach age 70 and a half--there will be no tax bill for this move," he writes.
Gerber agrees that entrepreneurs ought to prepare for the worst, especially when it comes to retirement. His suggestion: Diversify your investments. This means more than simply broadening your investment portfolio--it means getting creative with how you think about income.
Think about making a real-estate investment in the building that your business occupies, he says. And keep the ownership of your business and it's office building separate; "That makes it possible to sell the company and keep the real estate, collecting rent from a new occupant."