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The basics:

• Record number of baby boomers set to retire this year, sparking ownership opportunities
• Buyers can benefit from mentorship and structured handovers
• Digital upgrades are key to modernizing legacy operations
• Legal and tax planning critical during ownership transfer

The largest number of baby boomers will retire this year in what is being called the “silver tsunami,” creating both uncertainty and risk, as well as opportunity for New Jersey’s next generation of business owners. This can include younger family members taking over the business for the first time or a brand-new owner interested in making an acquisition.

Whether they have prior knowledge or experience in a specific industry, there are some key considerations individuals should plan for when making the leap into business ownership, especially in New Jersey. As a business owner looks to secure their legacy and possibly relocate to a new state for retirement, it’s important to understand the entire transition process.

Smooth Operator. Purchasing a business that is already well established in a community, with a solid customer base and strong operations, carries less risk for the next owner. It also poses a unique opportunity for those looking to own and operate a business but aren’t yet ready to build one from the ground up.

Often, retiring business owners consider mentoring successors to make the transition more seamless. They may also seek to establish a handover period where the previous owner serves as a consultant. This can give buyers access to insider knowledge, customer insights and supplier relationships.

Buyers should also gain an understanding of the legacy being passed on from the previous owner as this is often reflected in the business’s identity, current employees and relationships with customers. A smooth transition can help retain both employees and long-time customers, while eliminating uncertainty.

There may also be generational differences to consider. Is there an existing chain of command? Is there established middle-management? Is there an openness to adopt new technologies? Are there varying expectations on career growth and trajectory? Understanding the culture before diving into business ownership can better help bridge any potential gaps.

Time for an Upgrade. Most baby boomer businesses were established without a digital-first approach and may still be utilizing outdated and unintegrated systems. A digital transformation can breathe new life into a business by introducing fresh technologies and innovation that can help grow and scale while reaching new customers.

Upgrading automation including administrative tasks, bookkeeping and inventory management processes like workflow management or online booking tools and digital marketing tools can help boost productivity and reduce costs. Knowing that this investment needs to be made upfront can help to anticipate the overall cost of taking over a business while setting it up for continued success.

Leaving a legacy

More experts discuss how family-run businesses can survive and thrive across multiple generations. Read more here.

Making a Move. Many business owners may pass on their legacy to their children or sell it to others, and once they retire, consider relocating outside of New Jersey. If so, there are several critical financial, legal and operational considerations to make to help ensure a smooth handoff for all parties involved.

The first step is ensuring the transfer is formalized, whether it be through an inheritance, a living trust or gift, they will need to make sure the ownership is legally documented, filed and reported to the appropriate state and local agencies. This includes the Secretary of State, IRS and business licensing boards. It is also crucial to change the owner’s name on Articles of Incorporation/Organization operating agreements, and other important documents.

If the former owner moves to another state, it may reduce their tax obligations, but if they are still receiving income from a business, which could include dividends or consulting fees, the new state may tax it. If the business owner moves, but decides they still want to remain involved, the business may need to register as a foreign entity if operations cross state lines.

Ready for the Next Wave. With many baby boomer business owners in New Jersey ready to pass their legacies to the next wave of business owners, it’s important to consider some of the advantages and risks in this current environment.

By carefully considering factors such as purchasing established businesses, seeking mentorship and consulting from retiring owners, and establishing handover periods, new business owners can navigate this transition smoothly. Whether a business owner planning to retire or a next generation business owner just starting out, partnering with a trusted wealth advisor to provide guidance throughout the process is key.

Embracing core strategies will mitigate risk and leverage the wealth of knowledge and relationships built by previous owners, paving the way for a successful and sustainable future in business ownership in New Jersey.

Don DiCarlo is president of Wilmington Trust Emerald Family Office & Advisory and Jim O’Hoppe is NJ & NY regional president & executive vice president at Wilmington Trust. This piece is Part II of a two-part series on the silver tsunami; Part I appeared in the July 14 edition of NJBIZ and is available here.