It's the 21st century, and everything is digital, that is, online. In your business, you have digital assets that maybe you haven't thought about. These assets, like all your business assets, are valuable and should be protected.
What Are Digital Assets?
Your business has assets - things of value. These assets include everything from cash and accounts receivable, through business equipment and vehicles, to land and buildings.
Your accountant has probably included the cost and current value of your assets on your balance sheet, but maybe they forgot digital assets.
Digital assets are assets that exist online. Some of your digital assets might exist on your own servers or they may be "in the cloud." Digital assets include:
- Business photos that you have created. They could be photos of your business or business processes. These are assets because they could be sold.
- Business websites or blogs. The content has value, and the "look" of the site could be valuable if trademarked.
- Business processes (on spreadsheets, for example) that your employees have developed and that could be duplicated and sold.
- Apps that your business has created, either to sell or for your own use.
- Email contact lists and client or customer lists, including newsletter mailing lists, have value because they can be sold.
- Subscriptions to online journals have value for the term of the subscription.
- Intellectual property—copyrighted material, trademarks or service marks (your company's logo, for example), patents. These assets may exist in paper form, but most often they are only digital.
- Products in an online store, which are part of your business inventory. They should be under your control, even if they are stored online. If you are an Amazon seller, for example, the products might be in their warehouse, but you get the sale.
Why Are Digital Assets Important?
Like all valuable things owned by your business, digital assets are of great benefit to your business.
- You can claim expenses related to purchase and use of assets on your business tax return. The cost of short-term assets (supplies, for example) can be taken as an expense immediately, while the cost of long-term assets (those lasting at least a year) can be expensed over time (either through depreciation or amortization).
- You can sell many of these assets or license them while you still own them.
- Assets are valuable to investors or someone buying your business. The amount someone might pay to buy your business depends in great part on the value of the business assets.
- Some digital assets, like lists of customers or lists of newsletter subscribers, are particularly useful in establishing goodwill. The value of goodwill from an accounting and valuation perspective is based on these lists.
- Protecting accounting and employee records online means they are available for audits. Not having accounting records means you may not be able to prove expense deductions. Not having employee records may mean you are at risk for fines and penalties.
Where Do I Start to Protect My Digital Assets?
Locate and List. Begin by making a comprehensive list of all of these assets. Use the list above as a starting point, but be creative. Think of anything that you have online or on your business' server that could be valuable. You are looking for things that are proprietary (that your business owns), things that no one else has and might want to buy - or take. Consider these digital assets as possible items for sale. Which would you want or consider valuable if you were buying this company?
Establish Ownership and Value. Look at the digital assets you have listed. Who owns them? Before you can protect these assets, specific ownership must be established. For example, can you prove that your company owns employee emails or email lists? Check with an attorney to write up policies establishing ownership.
While it may be difficult to set a specific value to some of your company's digital assets, it's a good idea to have some sense of that value sooner rather than later. Yes, the value of these digital assets may keep changing, as you add customers to your list or pages to your website or make updates to processes, but a baseline value can be set through valuation. Find a business appraiser who can give you an estimate now. It's a lot easier to value something that exists rather than something that has been stolen or destroyed by a disaster like a flood or fire.
If you have products you are selling through an online seller like Amazon or eBay, read the agreement to make sure you retain ownership.
Create Protective Agreements. Protect your digital assets through agreements with those who could steal them. Consider having employees, clients, and consultants sign non-disclosure agreements. These agreements put others on notice that theft of digital assets might result in legal action.
Register Your Ownership. Many digital assets can be registered, to tell the world of your ownership. Business photos, processes, and the content of websites and blogs can be copyrighted. Digital assets like logos and designs can be trademarked. And don't forget patents for processes.
The U.S. Copyright Office has introduced two group registration process to make it easier to register online content.
You can register groups of short online content like blog entries, social media posts, and short online articles using the Group Registration for Short Online Literary Works (GRTX). The online application for this registration will be released in August 2020.
You can register published photos using the GRPPH process and unpublished photos using a similar process (GRUPH).
Plan for the Future. What happens to your company's digital assets if something happens to you? Include your digital assets in your company's agreements. For example, digital assets owned by a partnership need to be accounted for in the partnership agreement, along with other assets. If you have a small single-person or family business, include these assets in your succession plans.
Backup! It's important to find a backup system to protect all of your digital assets. Having a backup of a backup isn't crazy. You might also want both a hard drive backup and online backup to make double sure.
Finally, Establish Protocols for Protecting Digital Assets
Now that you have set up your digital asset management system, document it. Set up specific ongoing tasks for backups and timelines for reviews and updates.
Much of your business is online; keep it humming along nicely by protecting these online digital assets