This is the first blog in a three-part series that discusses the opportunities and challenges entrepreneurs face after selling a business.

Small businesses are often called the backbone of the American economy, and the vast majority of U.S. small business owners fund their businesses with their own money, according to research sponsored by the Global Entrepreneurship Research Association. By nature, entrepreneurs are willing to take on more risk than the average worker, and with this additional risk often comes financial gain. While business ownership can be an effective way to build wealth, the skills necessary for growing and sustaining a business are typically vastly different than the skills needed to manage and preserve the wealth that has been amassed.

As a small business owner transitioning away from your role as business leader, a new approach is often needed to ensure that the wealth you have worked hard to create lasts through your next phase of life and beyond. As you work through the process of selling your business, certain considerations for how to manage your windfall of cash and other assets may better prepare you for what lies ahead.

Setting new financial goals. After selling a business, many entrepreneurs struggle with what to do next, how to spend their time, and where to invest their money. Former business owners can also face questions about lifestyle, how to raise their children and how to navigate the personal, familial and social complexities wealth creates. An important part of the transition process is setting new goals—and more specifically, financial goals—based on the lifestyle you envision moving forward and the wealth your recent liquidity event has created.

For many business owners, planning and saving for retirement is an afterthought as free cash flow is often put back into the business. If you have not yet developed a retirement plan, you may want to think about your goals for retirement and whether you are financially prepared. At the same time, determining how you wish to spend your time and money post-sale is an essential component of your overall financial plan. Whether you wish to engage family members and transfer your wealth to future generations, pursue philanthropic causes and establish a legacy of charitable giving, or invest in new business opportunities, a savings and investment strategy will be needed to achieve these goals. In doing so, allocating portions of your wealth to different pursuits can be advantageous—for example, making sure you have enough money set aside to meet your near- and long-term objectives while designating funds for new ventures or higher-risk investment opportunities.

Asset allocation and diversification. In wealth management it is often said, “Concentration builds wealth, but diversification preserves wealth.” This rule of thumb likely explains why most entrepreneurs have the majority of their personal capital tied up in their businesses. While such a strategy may seem less risky due to the control business owners feel they have over the returns they earn—as well as a deep knowledge of their industry—concentration can lead to excessive volatility and even permanent loss of capital in an investment portfolio.

Diversifying your assets is an important measure when transitioning from business ownership to a long-term wealth management strategy. This means investing in different asset classes, geographic regions, and investment styles that behave differently from one another in various market environments. In contrast to a concentrated portfolio, which may experience drastic swings in performance depending on whether the primary investment is performing well or not, a diversified portfolio typically has some investments that are performing well and some that are not performing as well at any given time to ensure a smoother ride over the long run. Although investing in markets that you are less familiar with may feel uncomfortable, diversification is a necessary step for long-term wealth preservation.

For many business owners, the transition to managing wealth involves a major shift in mindset and identity. Entrepreneurs who have sold their businesses often enter an environment for which they are largely unprepared, and navigating through it can be extremely challenging. While most business owners are highly proficient in financial matters, wealth management requires a very different skill set. However, successful business leaders tend to surround themselves with trusted advisors, a habit that can be just as beneficial after the business is sold. If you are considering selling your business or have already taken steps to begin the process, preparing yourself for the challenges you may face during and after the transition can eliminate the often stressful, looming question of “what’s next?” and narrow the gap between entrepreneur and family wealth manager.

Mark Cassell is a senior relationship manager with the firm. For more than 25 years, Mark has concentrated on meeting the unique needs of the affluent investor. He is a trusted financial advisor to a select group of business owners and other successful individuals and families, providing customized and comprehensive wealth management solutions.