Technology is at the forefront of innovation across all industries. In fact, recent estimates predict that digital transformation spending is expected to topple $1.8 trillion dollars in 2022 (Sava, Statista). It comes as no surprise that economists are forecasting this spending to hit $2.8 trillion dollars by 2025.
Despite the expanded benefits, technology presents new threats to business owners. Without proper preparation for digital property, a business can experience complete devastation. And the impact is quite severe, causing disruption or closure of the business that can reach the owner’s family and officers. Before discussing the impact of technology succession planning has on a business, it’s necessary to understand what are digital assets and property.
What is Digital Property?
Digital property has a broad definition that includes online accounts, apps, the contents of those accounts, and devices. Almost every business today depends on technology for some of the most important fundamentals of branding, customer services and operations which include:
- Devices: computers, tablets, mobile phones, servers
- Services: domain subscriptions and management, security, data storage, email management, social media,
- IP: domain name, process patents, trademarks
- Financial: Investments and banking
- Operations: Payment processing, Customer Service, files
When running a business, the use of technology delivers the products and services to their customers, partners and vendors. Without a CRM, accounting, and email application systems, operational and communication functionality will be interrupted, obstructed, or even collapse.
As online opportunities continue to become more prevalent, professional advisors such as insurers, lawyers, and financial advisors can’t ignore their client’s growing dependence on technology to simply carry on with their lives. Digital property must now be included with estate, wealth, and property planning and preservation.
The Importance of Domain Names,
The first point of awareness for many businesses is their website and app presence. It’s how customers learn about the products, services, and relationships begin. One of the first areas to be considered by business owners is their domain names and URL support. The domain is the first point of contact for building a connection with potential users. According to Sweor “ it takes about 50 milliseconds (that’s 0.05 seconds) for users to form an opinion about your website that determines whether they like your site or not, whether they’ll stay or leave.” This means domain names and their content can carry significant value both from an investment as well as a branding perspective. From creating a relationship of trust to building brand image, generating consistent revenue often revolves around the domain name. This can also be said for social media-based businesses such as influencers and affiliate programs.
For Domain names, we often think the business owns the IP but in reality, it’s leased. They often require a subscription payment to a provider to keep it active and out of the open market. Most importantly, they can expire. Once the domain name expires, the name goes back to the general pool and can be picked up by a new purchaser who may want to use it for their own business, investment, or as a way to blackmail the previous owner and to receive a large payout. And the business that originally had it is now at a deep loss. For several reasons, protecting domain names is critical to avoiding a business’s operations failure. Whether the name expires because a personal representative from the estate or trust wasn’t aware of the subscription or missed the subscription’s renewal date, an entire business is at stake.
Take the famous example of Google’s domain name expiring. An ex-employee of Google, Sanmay Ved, was able to purchase the domain name google.com for a mere $12. This not only gave him access to confidential internal information, but he was the owner of a trillion-dollar company. Sanmay Ved eventually turned the domain name back over to Google in exchange for a donation to a charity of his choice, but this example shows the importance of using digital technology to manage clients’ domain names. Google lucked out with a donation instead of a multi-million-dollar payout (Carson & Joseph, Insider). Now imagine if the loss is a result of the domain owner’s death, and the estate didn’t renew the domain name’s subscription on time. Everything would be permanently lost. Although your client’s business might not be a trillion-dollar company, they still face the risk of domain name losses when individuals with domain name control pass away. The pain can go beyond just the business, there’s also a risk of claims made by customers, vendors, staff and more, against the business or even the estate.
Domain names are just one example of the many potential problems associated with digital property. Other subscription services that are in harms way can include security providers, data storage providers, payment processors, and media management, each having their own terms of service agreements executed by an individual and not necessarily by the corporation…even if the signor is using the business’s email address. Because of this, there may be expanded legal limitations that the business needs to consider for its technology management. Innovation and technology can provide the tools required to stay on top of a business’s portfolio of service provider subscription renewals. Compliance with myriad fiduciary access laws, privacy laws, and terms of service agreements requires a proactive succession strategy to safeguard the business’s asset portfolio and operation. Preventing a situation like Google’s is vital to ensure your clients are maintaining ownership of their intangible property, such as email communications and social media.
What are the Effects of Foregoing Digital Property Planning?
Skipping succession planning for digital property can produce disastrous results and adversely impact a business. Revenue can stop almost immediately, reaching well beyond just cash flow. Salaries, business owners’ family income, and vendor payments can abruptly stop or at the very least, slow to a crawl. Business owners and influencers can find themselves scrambling to rebuild what they spent time, money, and energy to create. And it may not even be possible to cause a total collapse affecting more than just the loss of assets. The loss of access to information and assets can mean a lawsuit against the business to cover any financial losses from potential breached account holder privacy and data, or unrecoverable accounts, holding IP, accounting, and confidential communications. These lawsuits, too, can be devastating for the business, and the staff resulting in a business breakdown, lost household income, and a tarnished reputation for years to come.
How Can You Get Started Using Digital Technology?
There are new innovations that can preserve all that your clients have worked for. The team at Directive Communication Systems makes it simple to safeguard a business’s and influencer’s digital property portfolio. To learn more, visit directivecommunications.com or call 1.800.372.8121.
Sources
Carson, Biz and Joseph, Devan. “This guy bought ‘Google.com’ from Google for one minute.” Insider, 30 Sep 2015, https://www.businessinsider.com/this-guy-bought-googlecom-from-google-for-one-minute-2015-9. Accessed 23 Oct 2022.
Sava, Justina. “Spending on digital transformation technologies and services worldwide from 2017 to 2025.” Statista, 16 Feb 2022, https://www.statista.com/statistics/870924/worldwide-digital-transformation-market-size/. Accessed 23 Oct 2022.