Do you have any ideas or thoughts on how to better run a business? This is the place for these blogs.

Part 1 - Building a Business - Moving From the Idea

Part 1 - Building a Business - Moving From the Idea

So you’re having a shower (where all truly great ideas come from) and it suddenly hits you like a blinding light from heaven…..the most incredibly brilliant business idea to build out a domain you’ve ever had! There’s just one problem, what’s next?

Escrow.com

So many great ideas remain just that, a great idea and nothing more. Just today I was approached by a domainer to purchase a domain name and as a part of their pitch they told me that it would be fantastic as a particularly type of business. Based upon this “idea” they believed the price of the domain was justifiably inflated.

My immediate thought was to ponder, if it was such a great idea why didn’t they build the domain into a business themselves? Let’s face it, they were trying to price the domain based upon all the work that I would do to create a profitable business. That just doesn’t work for me….

A domain has value but don’t fall into the mistake of pricing in, not just the value of your domain but also the value of a mythical business that the buyer would have to create on it. Many domain owners make this mistake and wonder why they don’t sell any of their inventory.

Let’s put the pricing discussion aside for now as it’s the subject of another blog series. So how do you move from an idea to a profitable business?

For the past 34 years (time does fly!) I’ve been identifying opportunities, developing, selling and building businesses….most of them online or back in the days of bulletin board systems. A solid grounding in my MBA (Master of Business Administration) tempered with experience has helped me to quickly analyse opportunities to ascertain whether they are real or not.

I get pitched ideas all the time but I hate to say it most ideas are a complete distraction from what I could be doing. Every now and then something comes along which is worth further investigation but it’s rare to find the diamond in the rough.

I’ll be completely open and honest so I do apologise if I’m a little blunt. Most successful entrepreneurs DO NOT have a shortage of opportunities. They are in a deal stream that allows them to pick and choose which one to put their effort and possibly finances into. When you pitch your idea to get a successful business person involved then you need to be aware that it has to be really compelling.

Likewise, be careful whom you pitch to. Some people are sharks and will devour you with preference shares and equity ratchets, while others are fair and reasonable. The question you need to ask is what does the potential investor bring to the party…..and it had better not just be money.

As an example, let me share with you how my company, ParkLogic was founded. I will cut a long story short in an effort to focus on the pertinent points I'm raising.

I’d just sold a large domain portfolio which allowed me to enjoy six months touring the USA with my family, get my pilot’s license and do some other really cool stuff. I wasn’t in a hurry to leap into a business for business sake but I was very interested in learning how to improve myself personally. In Maslow’s hierarchy of needs, I wanted to spend some time working on “self-actualisation”…..the top tip of the triangle.

This sounds introspective but it was an important personal goal that focused my attention on why I would found my next business. I did a personal “check up” and concluded that I had a lot of strengths but like most people I also had a lot of weaknesses. Rather than going out solo I decided that it would be in my best interest to find a partner that complimented my skill set. This would allow me to learn how to improve my weaknesses and ideally improve myself.

As I said, I wasn’t in a hurry so I thought about a lot of people I knew and settled on one individual who has been my current business partner and co-founder of ParkLogic for the past ten years. He has an incredible amount of experience and our skills almost perfectly complement one another. Also, high on my list of potential partners was the fact that he is highly ethical.

So how did I get him onboard? I pitched the opportunities in the domain industry and essentially gave him half the business. From my perspective, ParkLogic was worth zero at the beginning and since I wanted to get a partner involved whom I could learn from I decided to make the offer compelling.

So what’s it been like over the years? Ninety-nine percent of the time it’s been fantastic and the one percent has been either one of us learning a great deal from one another. I’ve learned an incredible amount and my co-founder has as well. ParkLogic has grown dramatically and has gone from strength to strength where we’re now optimising domain traffic for people all over the world.

So many people get hung up on equity and how much they are giving away but they really haven’t sorted out why they are getting into business in the first place. They try and drive crazy deals or pitch to anyone that happens to have some money. In my opinion, this is a highly questionable strategy.

Remember, if you really want a partner, don’t rush, and get the right one. Go after them and make your pitch really compelling! Right now, your equity is essentially worthless but with the right partner it could be worth a LOT more. Think about yourself and what you want BEFORE you launch your business.

In the next article, I’m going to use myself as a case study and propose how you may get me involved in your new or existing venture. What do I look for and what do I bring to the table? Hopefully you will be able to use these thoughts to attract someone to your business.

Greenberg and Lieberman

Recent Comments
Charles
Nice business tips. I have always wondered how to generate some momentum and move past the idea stage. Thanks for sharing... Read More
10 February 2017
mgilmour
Thank you for your kind comments Charles.
10 February 2017
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Being Focused

Being Focused

One of the biggest challenges many businesses face is deciding which opportunities they should focus on and which they should leave for another day. It’s so easy to become seduced by one opportunity after another, only to find that none of them are concluded and their value isn’t realised.

Escrow.com

Over the years, I’ve watched a number of businesses go bankrupt by mismanaging opportunities and becoming confused over what they should be working on. The owners didn’t make the difficult decisions to shelve a great idea, not do some development or say no to a fantastic potential partnership.

If you find yourself surrounded by opportunities and wondering which one you should pursue then there are a number of questions that you may wish to ask yourself. By addressing these questions then you’re very likely to gain a clarity to your thinking that will help you make wiser decisions.

Why am I in business?

This may seem obvious but it really gets down to the bedrock of why you’re doing what you’re doing. Some people get into business because they want to make money, others for the lifestyle and yet other individuals just want to create something. There are innumerable reasons for starting a business and the great majority of them are very personal.

Let’s imagine you enjoy the lifestyle provided by your business, then selecting opportunities that will take up all of your time is probably not a good option. Everyone assumes that all businesses need to grow….this is not always true and asking this question will help you come to grips with what you really want.

What does the business do?

Working out what you are good at and where you add value for clients is critical to understanding where your focus should be. Believe or not, your business can’t do everything.

I’ve walked away from a lot of deals because they would be a distraction to our primary business of monetising domain name traffic. I’ve had untold numbers of people approach me about partnering with them to develop an awesome domain but in the end, I inevitably way no. Developing websites just aren’t our thing right now….they may be in the future but not now.

So many domain owners believe they are domain managers, traffic monetisers, stock item salespersons and are awesome at selling their premium domains. Their time is soaked up with a multitude of tasks and although they are busy they really aren’t focused on what they are good at. To be quite honest with you, each of those tasks require specialised skills and to expect yourself to do all of them well is nigh impossible.

Where’s your business going?

Sounds pretty obvious but thinking about where you would like to be in the future is an important consideration that will have a direct impact on the opportunities you pursue. If you plan on becoming a domain monetisation specialist then you really have to ask yourself why you’re brokering domains.

Having a clear picture of what your business will look like in the future is the only way I know that will allow me to build towards that future. By not having a vision for your business would be like building a house without a set of plans.

Of course, there is only one thing worse then a lot of opportunities…..and that’s no opportunities. If this is your case then you have a very different kind of problem to solve and my guess is you’ll need to address it very quickly or you’ll end up burning a lot of cash.

So this past couple of weeks I’ve been working like mad expanding one of our product lines. It fits in with the three questions but even still my business partner wisely insisted that we do a check against the third question. This has brought crystal clear clarity to the project that would have otherwise not been evident.

These questions have really helped me stay focused on what we do at ParkLogic and I hope they can help you in your own decision making. I look forward to catching up with you all at NamesCon in Vegas.

Greenberg and Lieberman

Recent comment in this post
vanclute
So what were your answers to the 3 questions?
03 December 2016
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Maximising Domain Revenue

Maximising Domain Revenue

After publishing the article, “Getting Dirty in the Domain Data”, earlier this week I ended up having an interesting discussion with a domain investor. I thought that it would be worthwhile continuing to pull apart the data from the previous post to help many domain investors understand why optimising traffic across multiple monetisation solution is so beneficial.

Escrow.com

I will be referring to the data from the previous article so you may wish to read it if you haven’t done so already.

Sampling by Changing the DNS

Many domain investors sample different parking providers by changing the DNS. This method is fraught with many problems that largely stem from comparing results from single sources across different periods of time. Some of the challenges are:

1.      What are you measuring?
Revenue is not a good measurement of success as there will be different levels of traffic at different points in time. Since parking companies count traffic different you can’t rely on the produced Revenue Per Thousand Visitors (RPM) numbers.

2.      Data Distortion
When testing different parking providers over different periods of time you can get massive distortions in the data from seasonality in both the domains and the time of year. In the example from the previous article the domain had massive results in May to July due to it being a travel related domain.

3.      Traffic Leakage
There is a propagation delay each time you change the DNS and this creates more traffic leakage and no new information. In some extreme cases where the TTL (Time To Live) for the domain is long the DNS may not update for months for some users.

The Cost of Information

Some investors believe in splitting traffic equally across multiple solutions and then at some point in time sending all the traffic to the monetisation company that pays the most. This is one of the worst ways to optimise domain traffic and here is the reason why.

There are a lot of strategies around sampling but they basically boil down the single question, “What did the information cost?” In other words, if I was earning one dollar with one company and then sampled another company and found they were paying 90 cents then the information cost me 10 cents.

Minimising these "information costs" is crucial to optimisation. From the example domain, A.COM, in the previous article if we sample the traffic equally across the different parking companies then the portfolio would have earned $1611 versus $2217 or 38% less overall (ignoring direct advertisers).

Every domain needs its own sample regime. At the most simplistic level domains with less traffic should be sampled less often compared to domains with high levels of traffic. In each case, what you are after is a statistically significant result that allows you to decide where to route the traffic. If you don’t have a statistically large enough sample, then you’re guessing.

Real-Time Decision Making

All traffic routing decisions need to be made on a real-time basis. Based upon the data, decisions need to be made literally milli-second by milli-second. I can only speak for my company, ParkLogic, as we use dynamically changing data from multiple inputs to alter not only the routing decisions of traffic but what is displayed on the page and ultimately which advertisers are engaged.

As an example, we track over 250 different metrics for every domain every day and process this data to alter how the traffic is routed. Layered over the top of this daily data we then can then incorporate external dynamic data such as geo-based weather.

Everything must lead to a decision....otherwise it's just intellectually interesting but pointless.

Winning Solutions Constantly Change

If you sample other solutions (however you decide to do it) and then lock that solution in for an extended period of time, then you will be losing. The data from the previous article clearly shows that even for a single domain the winning parking company changes constantly (see below table).

For example, if we routed ALL the traffic through to Voodoo (average winner) and applied Voodoo's payout rates each month then Voodoo would have paid out $436 for the ten-month period. The domain actually earned $4531 for the same period of time (including direct advertisers). The reason for this was a combination of an advertiser paying a lot for the traffic in May-Jul and other parking solutions beat Voodoo the majority of the time.

This doesn't mean Voodoo is bad....as they actually did win for a couple of months. Remember the data is summarised on a monthly basis and can only testify to the fact that the same behaviour exists at the daily and even changes milli-second by milli-second.

Winners

Benchmarking Results Must be Done Simultaneously

I mentioned this point briefly when discussing the problems with sampling via DNS but it is important to reiterate it. Testing new solutions must be conducted at the same point in time otherwise distortions in the results will occur and incorrect decisions made.

Let’s imagine I used the domain’s revenue results in June as the baseline data and compared this to any new parking company in September. I could erroneously conclude that the new company was hopeless! Remember that A.COM (in the previous article) is a travel domain and has extraordinary performance in June.

Understanding Data

I’m in a discussion right now with a customer where about one hundred of their domains just aren’t performing. I’m not worried about this customer leaving ParkLogic as we are both working through the data to understand why their performance is down.

Too many domain investors immediately bail on their existing partner and whip their domains out somewhere else in the vain hope they will perform better. This syndrome has a saying, “The grass is always greener on the other side of the fence.” In other words, you will always think somewhere else is better than where you are.

My advice is don’t do a knee jerk reaction and move your domains. Sit down and dig into the data and really understand what’s going on with the traffic. We are in an industry that is built upon data and if you wish to get abnormal returns then it’s vitally important that you get your arms around it or work with a partner that can help you do so.

 

I hope the few items I’ve raised here in this article will help give you a fresh perspective on your own domain portfolio. Over the years I’ve found that earning more from domain traffic is not always the solution that investors are after. What they want to know is they are maximising their returns and there is proof that this is being done.

Anyone can have a good or bad month but knowing that there are systems and experts in place that are monitoring and understanding the results is really where it’s at. This is particularly the case if you must report to investors or a board. Having the data to confidently know that everything that can be done is being done often alleviates the concerns of the most aggressive directors!

Greenberg and Lieberman

Recent Comments
mgilmour
I agree.....we take that responsibility on at ParkLogic and aggregate all payments into a central single monthly payment. This is ... Read More
01 November 2016
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What is My Daughter Doing Now?

What is My Daughter Doing Now?

As many of you are aware, Sarah, my daughter, has over the years helped me on and off with Whizzbangsblog. In my recent travels I had a number of people ask me what she is doing now…so here it goes!

Over the last five months Sarah has been working as a specialist make-up artist for “The Body Shop” in their flagship store here in Australia. It’s really allowed her to hone her craft as a make-up artist and more recently showcase some of her work on social media (Instagram).

She’s been reading everything there is about how to grow a following on Instagram and then posting a new photo each day. It hasn’t taken her that long to gain close to one thousand followers….which from a standing start is pretty good going.

She now has her sights clearly set on her next target of ten thousand followers. Apparently at around this number you can begin to get some sponsorship onboard.

The reason why I’m writing this particular blog is I’m wanting to help Sarah grow her Instagram followers. To see her Instagram page just click here or the link at the bottom of the page. If you’re into Instagram, then any “likes”, a follow or even a repost would be awesome!

If you have any expertise in social media and growing a following then I'm sure Sarah would be all ears. She plans on attending NamesCon in January so don't be surprised if you are confronted by a really enthusiastic young lady that is focused on learning everything she can.

Yes, I know that I’m shamelessly promoting my daughter…..but that’s what Dad’s are for JSo do a guy a favour and help me out…..if you’re a father or a mother then you know exactly what it’s like to have a daughter you’re just so proud of.

CLICK HERE FOR SARAH'S INSTAGRAM PAGE.

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Is the Global Economy About To Crash?

Is the Global Economy About To Crash?

I watched the recent debate between presidential hopefuls Hillary Clinton and Donald Trump. Since I live Australia, you may ask why? I wanted to see whether either of the two candidates really seemed to understand the economic knife edge the world is currently balanced upon. Sadly, I was disappointed in what both of them had to say.

Other than a number of sound-bites there was nothing on issues such as China’s burgeoning debt Crisis and the impact this will have on the global economy.

Back on the 11th May 2016 the Financial times reported the Chinese Communist party’s flagship newspaper, the People’s Daily, published a front-page interview with an “authoritative figure” who warned that the country’s soaring debt levels could lead to “systemic financial risks”. This doesn't sound good....

On the 29th August the Australian Financial Review reported that prominent investor, George Soros, as seeing an “Eerie resemblance between conditions in China now and those in the US leading up to the financial crisis in 2008.” Remember, Mr Soros was the man that broke the bank of England in one of his currency trades.

What’s concerning is that Chinese debt levels are around 282% of GDP and China still hasn’t taken the foot off the debt accelerator. For example, right now debt is growing at around 13% and the IMF is forecasting China’s growth to drop to a 25 year low of 6.6%. This roughly means that it takes $2 of debt to fund $1 of growth….clearly unsustainable.

Some people are sitting back and saying, “So what! It’s China, that’s not us.” This is a naïve perspective of a highly interconnected world. As the world’s second largest economy (after the US) if China screeches to a halt then it will impact everything and I mean everything.

So what does this mean for domain investors? You only have to reflect on the last twelve months to see the impact of debt on the domain market. In an effort to get their money out of China and into more flexible assets many Chinese investors raised margin loans against share positions. They then took these loans off market (you can’t do this in most markets) and bid up the prices on short letter/number domains with the ultimate goal of flipping the assets into US dollars.

Last year, I attended DomainFest.Asia and upon returning home my business partner and I sold every domain we could get our hands on at top dollar rates. This year I attended the same conference and I can now buy the domains I sold last year for around 35% of the price I received for them.

So what happened? Debt combined with key market makers is what happened. This created a rapid downward spiral to the present valuations….it will be interesting to see what will happen to the price of all of the Chinese held domains in the event of a Chinese economic meltdown.

I remember writing about the crazy inflationary domain prices post the New York TRAFFIC conference. At the time key market makers pushed up prices and debt first entered the domain space (eg. companies like Domain Capital). This easy access to debt fuelled the price boom in much the same manner as the one Chinese investors just experienced.

So what else am I concerned about? Since the Global Financial Crisis of 2008 I’ve been keeping a close eye on the world’s major central banks as they tried to stimulate their way into recovery. This was attempted through combinations of lowering of interest rates, government spending (fuelled by debt) and quantitative easing (ie. Print lots of money).

Despite the massive injections of stimulus nothing has really worked. As can be seen from the chart below the global growth is still at a lackluster rate of 2.4%. In the case of Japan, the central bank has recently issued negative interest rates. This means it costs you money to keep your savings in a bank…..sounds crazy but true.

Global Growth Rates

The main goal of dropping interest rates is to devalue the local currency by making it less attractive to foreign currency traders. Put really simply, if you can borrow money in the US at 2% and get 3% for depositing it in banks in Australia you can effectively make 1% for doing absolutely nothing. This effectively makes the $AU more in demand and increases the value of the $AU versus the $US.

So when the reserve bank in Australia lowers interest rates the margin gap between the borrowed and deposited money shrinks and this increases the risk. The $AU receives less demand and it sinks in value against the $US. This will ultimately mean that Australian goods and services are cheaper if paid with $US….which in turn stimulates the Australian economy. Sounds great in theory but there’s a problem.

In the case of the Global Financial crisis all the central banks simultaneous dropped interest rates/printed money. This has meant the competitive gap between nations didn’t materialise and central banks ended up scratching their heads while they played a global game of chicken with each other…..who will drop first?

Here’s what I’m concerned about, when central banks approach zero interest rates (or below) where do they go from there? All of their “gun-powder” has been used and we’re now rapidly approaching the 7-8 year economic cycle.

For years, economists have talked about a 7-8 year cycle as being like the heartbeat of the global economy. Guess what, back in 2008 was when President Obama first took office and literally weeks later he faced the sub-prime mortgage fiasco that caused the global economy to nose dive.

So now, after an interminably long campaign, we have Trump and Clinton coming up for election. If we imagine the two candidates as the captains on the economic titanic, as far as I can work out, Hillary is saying, “steady as she goes” while Trump is saying crazy things that amount to, “we need to instantly build a submarine.”

Let’s face it, both candidates are more focused on themselves then acknowledging the global problems that the US is caught up in. Neither is actually espousing a concrete plan with some sense of vision. I’ll be interested in viewing the next round of debates to see if there is any light at the end of the dark tunnel. It's sad to say but I think everything is down to how we all cross our fingers and hope something good will happen.

What the UK Brexit debacle has proven is a lack of decisive leadership around complex global issues leads to disaster. We elect leaders to lead and not to hand back their leadership in a referendum so they can say, “The disaster wasn’t my doing but the people’s”.

My hope is that once elected, either Clinton or Trump will rise to an unseen level of leadership that will inspire the entire US nation rather than foster the division that seems to be prevelant.

There are a lot more economic indicators than I’ve mentioned in this article that are pointing to troubling times ahead. So as a domain investor, what am I doing? Two words, gold and cash.

I could be wrong with all of my doom and gloom but there’s one thing I’ve learned over the years…..I’ve never regretted having excess cash. Cash provides the flexibility to move quickly and seize opportunities. If I’m right and in the first half of 2017 there is a financial meltdown, then there will be bargains aplenty for a person with cash.

I remember after the 2008 crash I picked up heavily discounted domain portfolios as people struggled to pay crazy high mortgages and tax bills. I’ve been enjoying the proceeds of these portfolios ever since. This time I think that I will be also looking at the more traditional markets and once again, domain data will help me pick the right companies to invest in. What I really want to keep an eye on is the Chinese domain market…..will it fall further or are there other opportunities that will play out in a downturn?

Just an aside, a recent report by management consulting firm McKinsey and Co. showed that Israel was one of the few countries in the world that was rapidly retiring debt. There’s one thing I know about the Jewish community, they’re generally pretty savvy when it comes to money.

So reduce debt, get cashed up and hang on for the ride….hopefully the cycle will pan out just fine but if it doesn’t, then make sure you’re ready.

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