Importance of Having Cash on Hand | DomainInvesting.com

Importance of Having Cash on Hand

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While it is generally a good business practice to keep an adequate amount of cash on hand to cover expenses for at least a few months, there are plenty of reasons why it is necessary to do so if you are in the domain industry. Aside from the lost opportunity of not being able to purchase a domain name that can help your business, you never know when unexpected liabilities will pop-up, and money will be needed.

A perfect example is the LH.com legal situation. While we can all assume FMA has adequate cash to pay for the defense of LH.com, smaller domain investors might not have had the cash. I would peg the re-seller/need to liquidate quickly value of LH.com in the ballpark of $300,000 (not taking the offers received or anything else other than the 2 good letters into consideration). Had a domain investor saved up and purchased LH.com as his prize investment, there is a good chance he would have been drained of his cash reserves. While he holds a high value domain name, you can’t really pay the bills with this paper worth.

Now say a UDRP is filed against the domain name. The ballpark cost for a UDRP defense is anywhere from $5,000 – $15,000 (very high) if you hire a competent domain attorney. With that said, if the UDRP defense was unsuccessful, the domain owner would be on the hook for the defense fees, and he would have lost this $300,000 hypothetical paper value. If a federal lawsuit would follow this action, as it could be the only way to recover the domain name, the cost of this could be in then tens to hundreds of thousands of dollars. While it is possible to sue for attorney’s fees, I don’t know the success rate of that.

The point of this is that we often jump on great domain deals when they come up, but as business people, we need to be mindful of the cash we have in reserve. Even though the interest rates in American banks are very low and we all assume that most of our premium domain names are fairly liquid, we need to realize that our domain names could be frozen and contested by overreaching corporate entities, and we need to be prepared to defend them.


About The Author: Elliot Silver is an Internet entrepreneur and professional domain investor. Elliot is President of Top Notch Domains, LLC, a domain investing company that has sold seven figures worth of domain names in the last five years. Elliot is the publisher of DomainInvesting.com.

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Comments (5)

    Seyi

    Great post, Elliot. I don’t know if any one have red the book called “The Art of War”. My point here is that while a domainer have every right to fight and defend his property, litigation in not always the best way. The theme in that book is: always use diplomatic approach to save your energy, time, and hard earned resources if possible. I don’t know what’s what behind the scene in LH.com case but I think it could have been a win-win situation if both parties had settled for “buy-sell” instead of court. A good lesson here for domainers is not every lawsuit worth fighting no matter how loaded you are financially. Even a proxy fighter like Carl Icahn settles, sometimes, rather fighting for every stake.

    April 29th, 2008 at 11:23 am

    David J Castello

    You said the ballpark figure for hiring a lawyer to defend in UDRP arbitration is $5,000 – $15,000.

    True, but this shouldn’t scare anyone away from defending their names if they don’t have the money because you can easily defend yourself.

    This is precisely what we did with Caution.com. And in case anyone thinks this was a slam-dunk, the Complainant had a trademark for the word Caution.

    Arbirtation is not the same as a court of law (where the old saying goes that anyone who represents himself has a fool for a client). When the Complainant had us served for Caution.com, I read through it and could easily see the holes in his strategy. The UDRP response forms are easy to fill out. However, it is essential to back up your defense and counter-claims with as much paper evidence as possible to prove your point.

    In the end, he lost because his attempt to prove we acquired Caution.com in Bad Faith was ludicrous and the panelist saw right through it.

    ***UPDATED BY ELLIOT***

    Great point. If you don’t feel 100% confident in your abilities, you may want to ask an attorney to review your defense before it’s submitted. I am not sure if anyone offers this type of service, but I am sure there are a few domain attorneys who would be willing to do it.

    April 29th, 2008 at 12:58 pm

    Chad

    $5,000 – $15,000 sounds awfully high.

    I pay less than $2,000 for UDRP defense.

    Shop it around.

    April 29th, 2008 at 1:02 pm

    Frank Rudner

    Solid sound advice as usual Elliot.
    David does have a good point, but you need more than confidence you need experience in the industry where new domainers may be more likely intimidated and seek pro services or at least a consultation, if they believe in what’s theirs is THEIRS.
    so it’s not just a question of court or arbitration

    April 29th, 2008 at 10:42 pm

    damir

    Legal info – thanks

    April 29th, 2008 at 11:00 pm

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