Succession Planning for E-Commerce Brands

E-commerce has changed the way the world does business, offering even the smallest enterprises and solo entrepreneurs 24 hour-a-day access to customers from around the globe. While the opportunities are substantial, if you’ve created a successful e-commerce store, you know how much work and dedication it takes to flourish in this highly competitive environment. But if you’re focused exclusively on managing supply chains and acquiring new clientele, you may be forgetting something: planning for your business’s future.

Posted on November 5, 2018

If this sounds like you, you’re not alone: according to a recent survey, nearly 60% of small business owners do not have a succession plan in place. While some of the survey’s respondents said that they were simply too busy, many associated succession planning with leaving the business that they’ve created. Succession planning, however, doesn’t mean that you’re intending to step away from your business. Just the opposite, in fact: having a succession plan provides the owner of an e-commerce business with the flexibility to stay involved with their creation for as long as they like, in the capacity that they prefer. Moreover, a solid business succession plan ensures that your loved ones, who may rely on the income generated by your e-commerce business, can continue to do so even after you’re gone.

If you’re ready to start planning, here are a few things to consider:

Do You Have A Potential Successor?

E-commerce business models offer owners a number of benefits, including low operating expenses. For example, you can sell thousands of products each month without renting a large retail space. Also, e-commerce businesses can be run successfully with a limited staff. And we do mean limited: all you need is a laptop, a cell phone, a website, and perhaps a virtual assistant.

While the ability to operate a lean business is great, e-commerce brands are often highly owner-dependent. In other words, without the owner running the day-to-day, the business would likely cease to exist. Needless to say, this presents challenges when it comes to succession planning.

The key question is how you see the business carrying on if you’re unable to manage it. If there is an employee or family member that you believe has the interest and ability to take your business into the future, it’s best to start preparing them sooner rather than later. If not, selling your stake in the business, and providing a cash inheritance to your loved ones, may be the best course of action.

Selling Your Share

Successful e-commerce businesses have built unique brands with loyal followings. In other words, even if you run a dropshipping site (which doesn’t have physical inventory), your name and customer base are valuable assets. And there is no shortage of investors looking to purchase a ready-made, established e-commerce brand. The critical question is valuation. While there are a number of ways to value a business, e-commerce brands are a bit different than traditional brick and mortar stores. For instance, in addition to revenue and expenses, the value of an e-commerce business is affected by:

  • Web Traffic: The number of people that visit your site each month, including whether your traffic is primarily paid or organic. Businesses with a strong organic search volume will enjoy a significant increase in valuation.
  • Supplier Agreements: While developing your e-commerce brand, you’ve cultivated relationships with a range of suppliers. Are they willing to continue to do business with a new owner under similar terms?</li
  • Customer Acquisition Cost: A buyer will pay close attention to how you attract new customers, your conversion percentage, and what the cost of acquiring a new customer is.
  • Mailing List: Email marketing and retargeting are one of the most effective ways to drive new sales. Potential buyers will pay a premium for an established contact list.

Business Planning Documents

Whether you’ve chosen a successor or would prefer your e-commerce business be sold once you are unable to run it, you’ll need to provide the next owner with the information they need to seamlessly step into your shoes. While the documents you should include depend largely on the nature and size of your business, any e-commerce succession plan should include:

  • Organizational Chart: A list of staff members, including job descriptions and responsibilities.
  • Strategic Plan: An outline of your goals for the business and context regarding past strategic decisions.
  • Standard Operating Procedures: A detailed description of how you operate core aspects of your business, such as marketing or new product acquisition.

Usernames and Passwords

E-commerce business owners can easily have dozens of important login credentials for a range of essential services. While password management tools like Google’s Password Manager or Apple’s Keychain can be lifesavers, it’s best not to rely solely on them. Consider making a copy of your login information on a password-protected flash drive or giving your estate planning attorney a sealed envelope containing your password list. And, when creating your list, don’t neglect the less obvious services your e-commerce business depends on, like stock photo sites or Wordpress plugin subscriptions.

Business succession planning isn’t just about the wellbeing of your e-commerce brand; it’s also about ensuring that you and your loved ones obtain maximum value from your entrepreneurial endeavors. So whether you have an e-commerce startup or an established digital brand, if you haven’t created a succession plan, the best time to start preparing for the future is now.

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