Taking Less Money is a Difficult Decision | DomainInvesting.com
101 Domain

Taking Less Money is a Difficult Decision

7

When I am in the process of evaluating a domain name to buy, I will “appraise” it in my head. This appraisal is very basic and consists of two numbers – what I think I could get for it should the right buyer come around and what I am sure I could get for it if I wanted to sell it quickly.

I’ll give you a quick example to illustrate how I consider the value of an acquisition. I think I could sell Drafting.com for $75,000 if the right buyer comes around, and I am very confident I could sell it at this moment for $18,000 if I wanted to liquidate it for some reason. You may have a differing opinion, but these numbers are what helps define my personal risk tolerance when buying a domain name, and we all have various levels of tolerance based on our businesses.

One issue most of us face is that sometimes the best and most obvious buyer for a domain name inquires about it, but he (or the company) doesn’t have the ability or interest in spending close to the value you hold for the domain name. For instance, a major CAD software company might want to buy Drafting.com, but the most they will spend is $30,000.

When this happens, I need to consider a few things to determine whether I should sell the domain name to this company for their best offer, or if I should hang on to the domain name and hope that a company with deeper pockets inquires or the company decides to up their offer at a later point.

In a situation like this, there are several things I consider:

  • Do I want the  cash instead of the domain name?
  • What are the tax implications of selling?
  • Can I improve my domain portfolio by selling this name and replacing it with another domain name?
  • If I see saw this on DNJournal’s sales report, would I think “wow, that was cheap?”
  • How many inquiries have I had on this domain name?
  • What are the odds that someone else will want to buy it for more money in the future?
  • Could I be wrong about my valuation of the domain name?
  • Have I already contacted other prospective buyers without any interest?

Although my business relies on the sale of domain names for the majority of its cash flow, I am probably not going to sell a domain name at a price I will regret in the future. However, there are times that it’s in my company’s best interest to sell a domain name for less than I think it’s worth.


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.


Reach out to Elliot: Twitter | | Facebook | Email

Comments (7)

    Raider

    All good points, except for the one about your sale showing up on DNJournal or anywhere else for that matter, keep your sales private and you’ll never have to worry about what others think.

    December 2nd, 2013 at 12:46 pm

      Elliot Silver

      There was a typo in that bullet point… should be “If I saw.” Point being, if I didn’t own the name and randomly saw that it sold for that price, would I think the buyer got a great price.

      Sidenote – I do keep the vast majority of my sales private. In addition, nearly all of my sale prices remain private unless the buyer wants it made public.

      In reply to Raider | December 2nd, 2013 at 12:49 pm

    GraveDomainer

    Maybe “taking less money” would become a matter of routine starting 2014 when the new wave of TLDs starts flooding the market.

    December 2nd, 2013 at 12:49 pm

      Elliot Silver

      Says the wishful people who are hoping that the new gTLDs will bring on another “gold rush.”

      Sadly, I think most people will still miss the boat.

      December 2nd, 2013 at 12:51 pm

    Anon

    You’re bright enough to grasp the concept of avoiding “results oriented thinking” where inoptimal/stupid decisions can still outwardly display favorable results but are nevertheless massively inferior to other strategies.

    Imagine an island with a buried treasure. Problem is, its surrounded by very aggressive and hungry sharks and because of tricky reef, theres no way to get to the island by boat. You must swim in the last mile. You’re standing on a ship offshore, contemplating how to get to the island when somebody says fuck it, jumps in, swims the mile to the beach and in spite of being surrounded by sharks numerous times during his passage, makes it unscathed. He triumphantly stands on the beach and waves you in. “NO PROBLEM! EASY AS PIE! COME ON IN! SEE? I JUST DID IT!”
    Do you follow?

    Imagine an idiot son inherited $100,000,000 worth of stock.
    Each year, it threw off about $3,000,000 in dividends. He lived very well in the best neighborhood, drove expensive cars, attracted all the beautiful women that money tends to do… He decided that he was going to manage his 100mm worth of equities by applying a simple formula. He would only sell when they exceeded their 52 week high by 20%.

    Even though he has all the tacky trappings of ‘new money’ (the cars and five figure wristwatches, etc, etc) and lots of people would look at him and say WELL HE’S OBVIOUSLY DOING SOMETHING RIGHT, is his management strategy optimal?

    The old Russian maxim “good enough is best” works here. If the price is ‘good enough’, then take it and compound your profits elsewhere. If you wait for perfection, you wait forever.

    December 2nd, 2013 at 3:28 pm

    Lloyd

    Elliot,
    Is the price you paid for a domain name not a factor in your selling or not selling or is that a mute point and your main consideration is the market value now or in the future.

    December 2nd, 2013 at 4:49 pm

    Larry

    “What are the odds that someone else will want to buy it for more money in the future?”

    To me the most important factor is simply how long I will have to wait
    until another buyer comes along willing to pay the same amount that
    I am considering turning down.

    Of course we don’t know the answer to that question but as someone who
    has been doing this since the mid 90’s I can say that getting a buyer
    who even is willing to pay some of the numbers you are throwing around (18k, 30k etc.) can be a very very very long wait.

    With respect to this:

    “I am very confident I could sell it at this moment for $18,000″

    That’s one of the reasons that when you buy (the other side of this type of transaction) *anything* you never
    state it as an open offer or for practical purposes “good anytime”.

    By doing that you don’t draw a line in the sand which
    makes the buyer make a decision and jump off the fence.

    December 2nd, 2013 at 5:07 pm

Leave a Reply

Name *

Mail *

Website