When you’re getting ready to pass your business on, don’t forget your digital assets!
If you’re the owner of a family run business, more often than not, you are the backbone of your business. Transitioning ownership and control can be difficult for any business owner, as leaders of the businesses you are typically faced with the added challenge of managing family relationships, while preserving the culture and standards you’ve worked hard to establish. It’s only natural to feel a bit nervous when you’re preparing to pass your business on to the next generation.
Between staffing needs, strategic planning, and financials, there’s a lot that goes into the succession of your business. No succession plan is complete without determining the best way to transition ownership. Regardless of what you decide, a comprehensive plan should be designed to serve the interests of all parties—including your estate. While there is no single transition plan that is right for all families, no plan should overlook the importance of digital assets in the succession process.
Digital assets – the online credentials, email accounts, files, imagery, branding, hosting information, and domain names – that are necessary to make your business run should all be properly stored and accessible for a seamless transition. Many business owners don’t have these assets stored or organized and are otherwise inaccessible. WIthout a structured system that provides reliable access to this information, your business remains exposed during the transition process.
Take this hypothetical scenario:
Mr. Smith is a third generation owner of a custom sheet metal producer. His company does roughly $2 million of businesses a year with a net profit of roughly $500,000 a year. He has five employees, including his two sons.
All employees work in the warehouse creating sheet metal. As the owner, Mr. Smith manages the company’s finances, payroll, accounting, customer orders, delivery, and banking through a variety of online service providers. He also uses software to set up the firm’s payroll. All customer orders are placed through the firm’s website, which keeps track of the orders, deliveries, and payments.
Mr. Smith is the only person in the company who knows how to access these digital assets, and upon succession of the business, if these digital assets aren’t properly secured, the company would be left without a practical way to access customer orders, payroll, or accounting.
While Mr. Smith’s son’s feel they could eventually gain access to this information, the lack of any digital asset succession plan would delay customer orders for months, causing hundreds of thousands of dollars of loss.
Financial loss is not the only concern for digital asset succession. Knowledge loss is a major concern. Like Mr. Smith, the owner is often the central source of competencies and capabilities across the organization. Few, if any, in a firm possess the depth of knowledge embedded in the owner’s mind.
Proper digital asset management can help relay the knowledge about assets, property, and legal procedures. Digital asset planning can also speak to strategic planning and the intended application of resources. Even if it means creating an excel spreadsheet to track all of your assets, it’s imperative that small businesses avoid placing control of their digital assets in the hands of just a single individual, but rather create a system around the distribution and access of these assets.
Giving up and passing on a family business is a major, life-changing event with a host of complex issues and potentially difficult decisions. While it may result in family strife, if done well through proper planning, inclusive of digital assets. it also has the potential to be a golden opportunity to realize business, family, legacy and philanthropic goals after years of hard work and dedication.
