Kathleen Casey-Kirschling was born just after midnight on Jan. 1, 1946. Little did her parents know at the time, but in addition to being a New Year’s baby, Kathleen’s birthday made her the very first member of a generation that would later come to be known as the "baby boomers." More than 61 years later, Kathleen marked another milestone when, on Oct. 15, 2007, she became the first of her generation to file for social security retirement benefits.

So what does this have to do with the engineering profession? Frankly, it would be hard to cover the myriad ways that the retirement of the baby-boomers impacts our industry. We’ve probably all heard about the impacts on where and how new land development will occur (and its supporting infrastructure), the demand for healthcare and assisted living facilities, et cetera. But there’s an even more pressing implication for our businesses, and it’s a simple issue of supply and demand.

Let’s start with some basis statistics. Although it’s a point of some contention, most define the baby boomer generation as those born between 1945 and 1964. The "boom" represents a spike in birth rates associated with the end of World War II. The generation is estimated at almost 80 million people, representing roughly 28 percent of the U.S. population. If you’re reading this, chances are you belong to this generation. You are probably also in a leadership position in your firm. You may own stock in the firm. You may even be one of its founders. If so, in the next 10 years you will need to groom your successors and find a way to transition firm ownership—you and millions of others of your generation. Starting to see the potential problem?

If you look a little deeper into the demographic data and trends, things get even more interesting. The baby boomer demographic spans almost 20 years, but birth rates during this period were not consistently high. The boom is actually concentrated in the earliest years, meaning that the leading edge of the bubble represents the largest portion of this group. Compounding that is the demonstrated propensity of this generation for entrepreneurship. An AARP study indicated that boomers are more than 50 percent more likely to be business owners than generations prior or since.

The message here is that these demographic trends could be a problem for you and your engineering firm, if you don’t start planning now. The economic laws of supply and demand are not in your favor. During the next 15 years, the U.S. Census Bureau projects that the percentage of retirees (people 65 years and older) will increase by roughly 5 percentage points, while the percent of those in the entire workforce age range (people age 20 to 64) will decline by the same amount. Baby boomers will have to deal with a decreasing pool of potential heirs to the leadership and ownership of their firms, and as a result, the old rules of ownership and leadership transition in this industry will need to change.

To start with, you may need to rethink preconceived notions of who may become an owner in your firm. The pool of 40-something professional engineers may not be large enough in many firms to absorb the ownership interests of the retiring boomers. This may entail seeking out potential employee-owners of younger ages, including non-technical staff (financial professionals, human resource professionals, marketing and business development professionals). The ratio of owners to overall staff may also need to increase.

Business owners should also understand that the longer they wait to begin transitioning stock, the more the value of their stock is at risk. Equity value in a privately held engineering firm can be a fleeting thing. Firm owners who wait too long to begin transitioning their ownership could see the value they’ve worked so hard to build quickly evaporate. At the very least, overall stock values in our industry may decline as a result of the aforementioned shift in the supply and demand curve. Therefore, you may want to begin the process of selling down your ownership interests earlier than you originally planned to get the process underway and secure the commitment of the next generation. You may also find it necessary to extend the period of time during which the transition occurs, which may also mean postponing your retirement from what you originally envisioned.

Kathleen may be able to retire comfortably on her social security benefits, but if you’re like many boomers, the equity in your business represents a significant percentage of your retirement nest egg. If so, a little forethought and planning will go a long way toward ensuring your firm’s continued prosperity, preserving the investment you’ve made in the firm and allowing you to liquidate and realize the value of that investment.

Ian C. Rusk, ASA, senior vice president, leads ZweigWhite’s Financial Advisory Services division. He can be contacted at irusk@zweigwhite.com.