My Biggest Domain Portfolio Challenge | DomainInvesting.com

My Biggest Domain Portfolio Challenge

19

There are quite a few challenges with operating a domain name business, and I wanted to share thoughts on what I find to be my biggest challenge these days.

My business needs to regularly buy domain names in the aftermarket. These domain names can cost anywhere from $69 to five figures, although the majority are in the 3-4 figure range. I need to continually buy good domain names to increase the likelihood of a sale. I liken this business a bit to fishing. The more lines you cast, the greater the chance of catching fish.

On the other hand, I need to keep revenue flowing in order to fund these domain name acquisitions. For this, I rely mainly on domain name sales. My company has other revenue streams (thanks for reading this blog, BTW!), but selling domain names is what really funds the investments.

It can take a while to sell a great domain name for a price that is commensurate with its value. A domain name could be worth $50,000 all day in my eyes, but the right buyer with the right budget doesn’t come knocking every day and sometimes never. Nobody, myself included, likes selling their domain names for less than they are worth.

I think this is the biggest challenge with running a business like mine. There are ways to overcome this challenge (such as selling domain names at less than ideal prices via auction or to other people who buy domain names), but it can be frustrating to make a great acquisition only to sell it for much less than ideal price.

I think every type of business has a challenge like this. Companies can run various sales and special offers to drive revenue for their business when needed. With a domain name business, though, each domain name is unique. Underselling a one of a kind asset can be frustrating, especially if the person who buys it ends up selling it for significantly more money.

Many people have asked me about business challenges, and I think this is the greatest challenge to my business. Although this is probably not surprising, I figured I would share my biggest business challenge.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (19)

    Francois

    One of the solutions is to get a loan against your domains, so you can wait longer for this end-user sale. At Lend.me lenders compete to provide you the best one.

    June 6th, 2016 at 11:04 am

      Elliot Silver

      I am not a fan of debt.

      In reply to Francois | June 6th, 2016 at 11:08 am

      Ron

      Domain loan sharks are the worst, they will never give you anywhere close to full value, and then high interest rates.

      Do not go this route people, even if it s last resort.

      Some of the best known domainers are using their personas to sell you crap you don’t need.

      Each day is a new day in domaining, knowledge is endless, and other than bankrolls you have the same opportunities buy.

      Be smart, ask for high prices, and don’t pay people 25-30% to broker or sell your quality domains.

      In reply to Francois | June 6th, 2016 at 11:13 am

      Francois

      Probably nobdody like debts… but personally if I have no other solution and have a cash urgency I will prefer to make a loan agaisnt my domains better than against my home.

      Eliot, how much do you estimate the average end-user/wholesale sale price ratio?

      In reply to Elliot Silver | June 6th, 2016 at 11:28 am

      essential domains

      @Ron

      Respectfully disagree re no need for broker.

      A good broker is worth the commission – if they get you the NET $’s you reasonably are due.

      Note: ‘good brokers’ (ie market knowledgeable, hard working, persistent) are few and far between in all realms, including real estate, small business sales, large corporate mergers & acquisitions, etc

      Owner 2 Owner negotiations inevitably are complicated / success inhibited by the respective parties’ egos. The use of an emotionally uninvolved, knowledgeable, diligent intermediary is usually most useful to help prevent / repair misunderstandings that accompany any negotiation. The success fee paid for such services likely to result in higher after commission NET than absent such assistance. Why only 20% of residential sales are FISBO (for sale by owner); even in good market times.

      Disclosure: have made my living as a real estate broker for 25+ years; and made millions in NET profit for my clients.

      In reply to Ron | June 8th, 2016 at 7:42 am

      STRIKER

      Perhaps it’s time to consider bringing on outside capital (for equity). This is how businesses grow (organic growth is great, but if you have a proven business plan you should scale it if you can get fair terms from an investor).

      In reply to Elliot Silver | June 9th, 2016 at 8:24 am

    Tom T

    Great post Elliot!

    Doing the domaining thing full time in my opinion takes away to some degree the most important aspect of the business which is patience.

    If you constantly have to churn inventory it makes it difficult to land that BIG fish as you so correctly put it.

    Love that fishing analogy.

    June 6th, 2016 at 11:07 am

    Frank Schilling

    Maybe a pen approach where you sell the name for a less-than desirable number but then if you sell another name in your portfolio for more money, you can buy your resold name back for what you paid, plus a little bit.

    We’ve been toying with implementing such a solution inside the Uniregistry Market but are swamped working through other issues.

    June 6th, 2016 at 1:02 pm

      Koosah

      +1 sign me up for this whenever its out

      In reply to Frank Schilling | June 6th, 2016 at 2:16 pm

      Elliot Silver

      I dislike the pawn approach for the same reason I dislike the loan approach. I also think the lender / pawn company would need to value the domain name at a substantial discount to incorporate their default risk, and that wouldn’t make sense for me. Finally, with the pawn idea, it tells friends/competitors that you’re hard up for cash, which is both embarrassing and potentially harmful to business, especially if you compete at auctions or private sales with that person.

      Selling a name to someone else and receiving a % of their subsequent sale is something that could work though.

      In reply to Frank Schilling | June 6th, 2016 at 2:19 pm

    Frank Schilling

    pen = pawn :)

    June 6th, 2016 at 1:02 pm

      Francois

      It’s much better now Frank, now I understand.

      Looks a great idea, strange I did had it before … lol

      Maybe because I do not have enough cash flow to do it.

      In reply to Frank Schilling | June 6th, 2016 at 1:55 pm

      Francois

      My memory, my memory…

      In fact I realize now I had it before!

      The first collateral loan I got myself was a 6 figures loan against a very premium domain, and it was a loan where the interest was due at term. It was great, but when I created Lend.me 3 or 4 years after things get worse, all the few rich domainers that use to lend money were now requiring higher rates plus charge interest quarterly (some even wanted to deduct the first quarter on the loan payment). So I had no more choice to setup Lend.me the way lenders were now working (bye bye the initial loans like pawn that will have better help domainer wait a big sale!).

      In reply to Francois | June 8th, 2016 at 1:01 am

    Danny

    For the most part, any name in my portfolio has a price. I’m personally just looking for a fair offer, that helps me turn the inventory and grow my portfolio with better names.

    June 6th, 2016 at 5:26 pm

      Jeff Schneider

      Hello Danny,

      The .COM Asset Pipeline and its qualities are your best bet. Try buying 5 great .COM domains and divest away from other Non-Legacy new TLDs.Too many investors are loaded with low demand extensions.This will help your bottom line.Just a suggestion we are making to our followers.

      Gratefully, Jeff Schneider (Contact Group) (Metal Tiger) (Former Rockefeller IBEC Marketing Analyst/Strategist) (Licensed CBOE Commodity Hedge Strategist) (Domain Master https://www.UseBiz.com )

      In reply to Danny | June 6th, 2016 at 5:42 pm

      Scared To Visit

      Jeffy,

      Your connection is not secure

      The owner of http://www.usebiz.com has configured their website improperly. To protect your information from being stolen, Firefox has not connected to this website.

      In reply to Jeff Schneider | June 7th, 2016 at 12:26 pm

    168

    I share your biggest challenge,
    One of my recent query’s got it right. You want what ? FOR A NAME ?!
    Then comes the explanation of what a Name really is. An asset. An investment. Intellectual Property that can be resold. A brand. The most important tool for business online!
    90% of joe public has made it clear they just don’t equate value to a NAME.
    Finding a buyer isn’t that hard. Explaining the value of a NAME is a challenge.
    We tout the benefit of “re-brand” to clients because it works. The domain industry
    would greatly benefit from a re-brand of it’s product with vernacular that more clearly aligns it’s product with with it’s value.
    I agree loans, pawns bad investment strategy.
    A good broker is worth a commission but I think the double digit percentages are outrageous and selling for less than 1k should be a simple listing fee.

    June 8th, 2016 at 3:57 pm

      STRIKER

      A good broker is expensive (as it should be).

      In reply to 168 | June 9th, 2016 at 8:26 am

    Jeff Schneider

    Hello 168 ???

    You seem to be confusing Speculative new TLDs with proven secondary Market valutions that the .COM Asset class are receiving. New TLDs are more aligned with Speculative DEBT Obligations than Assets. There is no Economic Comparison between New TLDs and PROVEN .COM Assets. The new TLD Bait and Switch comparisons comparing New TLDs to .COM Assets is a FARCE. Plain and simple.

    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger) (Former Rockefeller IBEC Marketing Analyst/Strategist) (Licensed CBOE Commodity Hedge Strategist) (Domain Master https://www.UseBiz.com )

    June 10th, 2016 at 4:45 pm

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