Potential Problem with Paypal Subscriptions | DomainInvesting.com

Potential Problem with Paypal Subscriptions

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I’ve had a good amount of success with DogWalker.com, and there are around 250 paying advertisers on the site right now (maybe more). Nearly all of them pay annually using a Paypal subscription, which is connected to my company. As every business owner knows, recurring payments can be an important revenue stream (just ask Domaintools, Apple, and every other company that employs auto-renewal subscriptions).

Perhaps due to the website’s success or the fact that it’s a very good domain name, DogWalker.com has been my most inquired about asset. Offers from entities ranging from dog walkers to large companies outside of the domain space have inquired about buying the domain name and website. As with everything I own, there’s probably a price for which I would part with it, so I’ve thought about the feasibility of selling the website.

The Paypal account I use to collect payments is associated with my company, and it is attached to bank accounts, email addresses, and websites that aren’t related to the DogWalker.com website. I’ve searched, and there doesn’t appear to be a way for me to automatically change the billing/subscription email account for the current advertisers without having to get them to re-subscribe.

Herein lies a big problem. If I were to sell the website, the buyer would have to contact all of the advertisers with auto-renewing subscriptions and have them sign up again on a different system. It’s not the end of the world, but as my experience tells me, the cancellation rate could be significant, and it would wipe a considerable amount of recurring revenue from the books in the future.

If you build a website and use Paypal or any payment collection service, make sure it’s independent of your other websites, email addresses, and separate entities. If I end up selling the website, it will be a process to convert the current advertisers.

I am fairly certain that I am going to spin off this website into its own entity in the near future, and it will have a separate bank account, payment account, and be completely independent of my other businesses. Had I known that I would have this many advertisers in less than a year, I would have done this from the start. I have also learned that there are tax advantages to selling a business rather than selling an asset of a business, although that’s not something I am entirely familiar with yet.


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 (22)

    George Pickering

    yep, big problem. When I buy companies/sites where billing isn’t integrated, I automatically devalue the yearly revenue by 50%.

    August 23rd, 2010 at 4:52 pm

    Rob Sequin

    Contact paypal. They may have a bulk solution that they have access to that is not in the user interface.

    I’m sure they’ve seen this situation before.

    Otherwise, let the new owner have your business paypal account and change over the fewer advertisers.

    August 23rd, 2010 at 5:37 pm

    Trip

    Paypal chained payments is one way to do it where all website payment address route to your main one.

    http://www.timnash.co.uk/11/2009/parellel-and-chained-paypal-adaptive-payments/

    August 23rd, 2010 at 5:47 pm

    adinfinite

    I think paypal must have some experience with situations such as these so just give em a call and see. By the way, the site looks awesome and it ranks no. 1 in google to boot! I have a lot of respect for domainers who actually create businesses around their names. Good going.

    August 23rd, 2010 at 5:54 pm

    James

    Great post – i’m setting something up right now and what you have just said would have caused quite a few problems down the road.

    August 23rd, 2010 at 5:59 pm

    ValueDrops.com

    great to know, thanks. You would think that Paypal would have some kind of solution for such cases.

    August 23rd, 2010 at 6:16 pm

    Mark Jeftovic

    This is a big problem. Especially in cases where the buyer and seller are in different countries, then Paypal will not transfer the subscribers between accounts (retarded, I know).

    I try to buy websites where I can take over the paypal account. Failing that, I write a clause into my PSA that obligates the seller to remit trailing paypal payments to me (I start with “forever” and work down from there).

    I wish paypal would get with it and see this is a real issue.

    August 23rd, 2010 at 7:46 pm

    Dan

    Hi Elliot,

    Our company, Recurly provides subscription billing management. We integrate with a variety of payment gateways, including PayPal. We actually store credit cards on behalf of our customers so that they don’t ever find themselves in this position.

    However, I’m not sure if we have a solution that will help extract yourself from the current situation you find yourself in.

    Here is a recent post I wrote about why it makes sense to use Recurly instead of PayPal’s recurring payment API. Hopefully this will be informative and directly related to your post here.
    http://bit.ly/9dOTWh

    -Dan

    August 23rd, 2010 at 8:13 pm

    Domain Sales

    Nice idea and website Elliot, congrats on the success. I never thought I would be so interested in seeing a dog walking website but I had to look. I guess there exists a good market for everything if done correctly.

    August 23rd, 2010 at 8:29 pm

    Dave

    Interesting problem with PayPal, but I am sure you will find a way to make it work. Great website!

    August 23rd, 2010 at 10:58 pm

    Elliot

    @ Dave

    It’s not an urgent need right now, but I will figure something out eventually :)

    August 23rd, 2010 at 10:59 pm

    Louise

    May I ask something? I’m tired, but off the cuff, if you set up an email for each website, and just added that email to your Paypal account, would that make the transfer cut-and-dried? The new owner has the paypal email; you delete it from your account, and he adds it to his account.

    August 24th, 2010 at 12:36 am

    Louise

    That is, for instance:

    payment@dogwalker.com.
    payment@domaininvesting.com
    payment@lowell.com

    Thanx for bringing it to our attention, Elliot. doing emails this way seems like good foresight. The new owner takes over the email of his domain.

    August 24th, 2010 at 10:52 am

      Elliot

      @ Louise

      Not sure if you can do it like that. I think they would all be connected to one account or you would have to set up separate bank accounts for each.

      August 24th, 2010 at 10:54 am

    Louise

    Hi, Just got off the phone with Paypal cust svc., MJ. She said, you can have up to 8 email addresses added to your account. You should be able to log into your Paypal account with any of the 8, and your password. All payments sent to any of those emails will reach your account.

    When the website changes hands, it’s a simple matter that the new owner has to create an email address:

    payments@dogwalkers.com

    and add it to his account, after you delete it from your account. Then he confirms it from the security email.

    Get this, there’s no interruption in payments. If any payments send in between deleting the email from one account and setting it up at the new owner’s account, it goes unclaimed until the email at the new account is secured.

    Whew!

    August 24th, 2010 at 11:34 am

      Elliot

      @ Louise

      Good solution for going forward… will still need to convert the current advertisers, although hopefully those 250 will be a drop in the bucket :)

      August 24th, 2010 at 12:09 pm

    Collabo

    @Louise
    I think Elliot is right. Even though you set up multiple email accounts, that still doesn’t solve the problem of having those accounts tied to one bank account (which won’t be the new owners bank account).

    August 24th, 2010 at 12:07 pm

    Louise

    Hi, a different email address is only necessary for advertisers who know your email address and pay through their Paypal account. Subscribers on your site don’t see your email address. I stepped through it to have a look. Your signup leads to a Paypal subscriber button. All the new owner has to do is program a button from his business or premier Paypal account, and swap it for the button that is on there – voila! No need to tell your subscribers, but you might want to send them a note, if they dealt with you one-on-one . . . Paypal has all the subscriber info. That’s all there is to it, I’m sure. The new guy has to set up a Premeir Paypal account, and create his own button the way you did, and pop it in there.

    August 24th, 2010 at 8:15 pm

    Ross

    Hey Elliot,

    Well done Louise!

    I think that should work.

    Elliot, you shouldn’t need to convert the other 250 people because they are all subscribed to your paypal email address.
    E.g payme@dogwalker.com

    Who ever has that email in their paypal profile will receive payments from your subscribers. The paypal account is NOTHING, its the EMAIL ADDRESS thats everything with paypal

    (i think)

    Ross
    P.S. I am happy to help you test this idea out :)
    Just before your first subscriber is about to automatically renew their subscription. Delete that email address from your paypal profile (just add a replacement) that is associated with these dogwalker paypal subscriptions and I will add that email address to my paypal account to see if this idea of Louise’s works or not.

    August 26th, 2010 at 1:56 pm

      Elliot

      @ Ross

      The initial subscribers are subscribed under my general Paypal account not the new one. Going forward, the new signups would be fine but not the originals. In any case, that’s not an issue I need to consider now though.

      August 26th, 2010 at 1:58 pm

    scotty

    Yep, especially the last 3/4 weeks, we’re bombarded with spoof paypal mails….And their quite good, at first glance….

    September 12th, 2010 at 1:57 pm

    Ross

    Just to let you know Elliot, last week I changed primary email address on my paypal account and have noticed that the subscriptions are still coming in and going out okay with the new email address which is displayed on each paypal invoice too.

    Ross

    October 26th, 2010 at 4:54 pm

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