Legal succession process of e-commerce sites
To this day, business owners still need to understand the importance of having a succession plan. In a 2021 survey of 580 human resources (HR) professionals, 56 percent of the participants said their companies did not have a succession plan.
Succession planning is crucial for the longevity and survival of a business. Even entrepreneurs doing their business online can significantly benefit from having a succession plan. This short guide outlines what you need to know about the succession planning process for an e-commerce company.
Succession planning: what e-commerce business owners must know
If you created a profitable e-commerce business, you know the dedication it takes to succeed in a highly competitive environment. However, some entrepreneurs get so focused on managing the enterprise that they forget something fundamental: planning for the business’s future.
Some owners cite time constraints as the main reason they do not have a succession plan. However, others associate succession planning with leaving their business, discouraging them from creating one.
Remember that succession planning does not necessarily mean you are planning to leave the company you’ve worked so hard to build. Having a succession plan allows you to get involved with the company for as long as you like. Moreover, it ensures the survival of your e-commerce store even after your death.
A succession plan is a contingency plan so an organization can continue operations even if the current leaders are out of the picture.
Successful succession planning requires constant reevaluation, meaning the process is not a one-time event. Instead, leaders and other stakeholders must constantly review the plan as changes occur within the company.
In large enterprises, the board of directors oversees succession planning. The process affects owners, employees, and shareholders.
Meanwhile, small- to medium-sized business owners train mid-level employees to take over higher-level positions. For small businesses, succession planning involves training the next generation to lead after the leaders depart.
For e-commerce businesses, owners must still have a succession plan, so their platform continues to thrive even when they cannot run it. They can sell their store, or they can name a different owner.
If they choose the latter, they must give their successor all the information they need to lead the e-commerce business. While the documents you need for the succession process depend on the nature and size of your business, they usually include the following:
3 advantages of succession planning for e-commerce store owners
- Strategic plan – This plan outlines your e-commerce company’s goals regarding past strategic decisions.
- Organizational chart – This document lists staff members, including detailed job descriptions and responsibilities.
- Standard operating procedures – This document describes how the new owner operates the core aspects of the business, such as product acquisition or marketing.
The flexibility to move on from the company whenever you want is only one of the advantages of having a succession plan. Read on to learn how succession planning can help your e-commerce store.
1. Protects your e-commerce business
Entrepreneurs too busy to develop a succession plan must realize they are failing to protect their business.
Look at it this way; business owners install security systems to defend against theft. They buy insurance to protect the organization from floods, hurricanes, and fires. They use backups to save their company’s sensitive information.
By planning the succession process, business owners can protect their business from falling apart even after they leave or cannot run it.
Some entrepreneurs may think they’re too young to experience any severe illness. Some forget that other e-commerce companies could lure potential leaders away from the firm. These scenarios can leave a business vulnerable.
Remember that succession planning is another crucial step to protecting the company. The conversation about succession may indeed be daunting. However, the sooner you develop a succession plan, the quicker you can protect your e-commerce firm.
2. Helps identify future leaders
Formal succession planning requires your e-commerce firm to identify the positions most critical to business success. It also helps you find internal candidates with the skills, values, expertise, and desire to take on crucial roles.
By taking these steps in succession planning, you can get a clear picture of your company’s organizational chart. This step can help your leadership team identify potential vulnerabilities, which prompts them to offer cross-training opportunities to key employees.
It is also possible that there are no internal candidates suitable for leadership positions within the firm. This situation indicates that the company needs to look for external candidates who can fill leadership roles.
Another crucial advantage of succession planning is recognizing and acknowledging the hard work of ambitious but less-experienced internal candidates. You can help these employees advance their careers by offering them managerial positions.
3. Supports long-term business plans
If your e-commerce company knows its goals, you can plan for the future better. Planning can give you the confidence that your business will be fine even after facing leadership changes.
By having succession as part of your company’s plans, you develop a path for retiring employees to hand off their years before they leave. They can teach what they know and transition meaningful working relationships for seamless succession.
3 factors to consider before developing a succession plan
You will need a strategy if you want a succession plan to benefit your e-commerce firm significantly. This section outlines the factors you must consider when creating a succession plan.
1. Potential successors
Many entrepreneurs choose e-commerce business models because of advantages like reduced operating costs. They can profit from their products without paying rent and operate with few employees.
They can also work from anywhere, keeping operations running even while traveling. They only need a laptop, an Internet connection, a website, and a phone.
However, it also means that e-commerce companies depend highly on their owners. If the owner is not involved, the business may struggle. This disadvantage can pose a challenge when planning for the company’s future.
If e-commerce owners want longevity for their business, they must consider how the company will operate if they can no longer run it. They must prepare successors for the transition if they have a family member or an employee with the skills and abilities to take over.
2. Usernames and passwords
As an e-commerce business owner, you will have crucial login credentials for various digital services. Most entrepreneurs use online solutions like password management tools to keep track of their login details. However, solely relying on them comes with certain risks, including cybersecurity vulnerabilities.
To keep your login details safe, make a copy of your login data on a password-protected flash drive. You can also provide your estate planning attorney or digital executor with a sealed envelope containing your login credentials.
Your usernames and passwords are crucial once you give up control over your e-commerce company. Keep them safe for your successor so they can access everything they need while leading the store.
3. Assets or shares to sell
If you have a reasonably old e-commerce business, you have loyal followers contributing to the brand’s longevity. Your brand and customer base can be valuable assets even if your company has no physical presence.
Today, many investors buy an established brand with a massive following rather than starting their own company. If you do not plan on passing your responsibilities to a family member or an employee, you can choose to sell the assets you own. However, it would help if you first determined the valuation of your shares and investments.
There are different ways to get the valuation of a business. However, for e-commerce brands, other factors affect valuation other than expenses and revenue, including the following:
- Supplier agreements – What are your agreements with your suppliers? Are they willing to continue working with your brand, even with a new owner?
- Web traffic – This term refers to the number of site visitors your store gets in a certain period. The platform has a higher valuation if your site has a robust organic search volume.
- Mailing list – Does your brand have an established contact list to drive new sales? If yes, potential buyers will be willing to pay higher for your business.
- Customer acquisition cost – A potential buyer will evaluate how your brand attracts new customers and how much you spend on this effort.
How to create a succession plan for an e-commerce business
Creating a succession plan ensures your business can continue growing even after your departure. Here’s a step-by-step guide on how to develop a succession plan for your e-commerce brand.
Step 1: Identify crucial roles
First, you need to identify the positions most in need of successors. Criticality and vulnerability are two crucial elements to consider when prioritizing positions.
Vulnerable positions are those with no obvious successor. Meanwhile, critical roles heavily impact the brand’s ability to achieve goals.
Identifying these roles can help you find successors easier. This process highlights potential vulnerabilities in the organization and prepares you to overcome them.
Step 2: Determine eligibility requirements
At this stage, you must identify the qualifications and requirements for potential successors. To help in this effort, ask yourself the following questions:
- What selection criteria would I use to find the best-qualified employee if this is a vacant post?
- What knowledge, abilities, skills, and competencies must employees have in this position?
Step 3: Find a talent pipeline
Now that you know what qualities to look for, you can look for a talent pipeline. To make this process easier, look at positions with similar responsibilities to the successor position. Employees in these roles may be qualified to apply if the company needs a successor.
Answer the following questions below to find a talent pipeline for successor roles:
- Are there aligned duties between the two positions?
- What are the gaps or differences between the two roles?
- Do the employees have similar day-to-day responsibilities as the successor role?
Step 4: Name potential successors
When naming potential successors, look for the following qualities:
- Sustains high performance regardless of the tasks assigned to them
- Works hard to improve
- Has a positive impact on other employees
- Represents the e-commerce brand’s culture
- Demonstrates the company’s values
Step 5: Prepare successors for transition
Now that you have potential successors, you must prepare them for the transition. The following are examples of successor development opportunities to try:
- Provide training and learning opportunities aligned with the successor position
- Offer coaching opportunities
- Act for the incumbent while the latter’s away from the office
- Have successors work on special projects to improve skills relevant to their new role
Step 5: Evaluate succession planning efforts
After developing the succession plan, you must evaluate the succession planning efforts. This way, you can improve your strategy or make any changes to the program if needed.
Are you ready to move forward?
Thorough planning can ensure business continuity and sustained growth for your e-commerce brand. With an effective succession plan, you can protect your business even after you or other employees in senior management roles depart.