Offer Back End Upside to Close an Acquisition
Most of us have been in a negotiation where we just can’t close a deal to buy a domain name, despite being fairly close to closing. When you’re at a standstill on an acquisition negotiation, I want to make a suggestion to help close a deal, especially if the seller is apprehensive about selling to a domain investor.
You might consider offering the domain owner some back end upside to the offer to entice him to sell. Perhaps you can offer a cash bonus or a percentage of your subsequent sale as an enticement. For instance, you might tell the owner you’ll give him $2,000 upon the sale of the domain name or you’ll pay him 10% of your gross / net sale price if you sell it in the future.
There have been a number of times either my name or my email address has let a domain seller know I am a domain investor. Many people assume they are leaving money on the table when they sell to me since I may go out and find a buyer. Despite the fact that we can get close to an agreeable sales price, some people can’t come to grips with the fact that they are undervaluing a name they’ve owned for many years. Offering upside is a good way to get a deal done that gives them some skin in the game, especially if they think you are going to sell it for more money.
Doing a deal like this may make the sales agreement a bit more complicated, but if you are really interested in buying a domain name, it’s a nice way to induce the owner to sell the domain name. You’ll want to make sure that you remember this when you do sell the domain name because you will have the obligation to pay the seller if/when you sell.
This type of deal may not work if you are planning on building a business on the domain name because giving away a percentage of the business may prove to be costly. If you are confident in your business plan, you may offer more cash upon a sale, but you’ll need to be mindful of that commitment. You could also put a cap in place to prevent paying more than a certain amount.
I’ve found that this can be an effective tool to closing a deal, and I thought you might be interested in it.
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