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Part 1 – Why Domain Portfolio Optimisation Works

Part 1 – Why Domain Portfolio Optimisation Works

I recently had the privilege of conducting a session at Domaining Europe on the topic of monetisation. Many domain investors have fallen into the trap that monetisation is dead and let me share with you that nothing is further from the truth. Domain monetisation is alive, well and thriving.

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What has happened, is like any industry there has been an evolution in technology. Those that have kept up with the technological curve remain successful while those that don’t struggle to remain in business.

This is not dissimilar to the days of the buggy whip manufacturer. During the days of horse drawn carts they made an absolute killing. Then a strange contraption initially known as a mechanical horse came onto the market. This technological innovation was really expensive so the buggy whip makers all laughed at the early version of the motor car and continued to make their whips. The rest is history and other than the handful of craftsman buggy whip makers are no more.

It’s the same thing in the domain industry. On one of my recent trips around the world I was talking to a domain owner that had been in the industry for years and he was decrying that monetisation was dead. I asked him one question, “What are you doing now that you weren’t doing five years ago?”

He replied, “I’m doing the same thing.”

I then said, “So you are expecting a different result by doing the same thing? You do know that’s the definition of insanity, don’t you?”

Of course, he wasn’t insane but how many domain investors behave in exactly the same manner? Five years ago they placed all of their domains with a single company, watch their revenue line fall and then claim that it has nothing to do with their own behaviour but the industry. The problem with these domainers is that they are still trying to make buggy whips rather than innovate.

So in this series of articles I’m going to share with you what I do with my own domain portfolio and more importantly why I do it. Since I’m a numbers guy, as much as possible I’m going to track everything back to facts rather than fiction and gut reaction.

When I think about optimising my domain portfolio I place each asset into one of four main buckets.

1.      Development
2.      Traffic
3.      Stock-items
4.      High value

In terms of development, I have whizzbangsblog.com and after a hiatus of about five years I’m in the process of rebuilding my aviation website downwind.com. Why these two domains? I’m passionate about both sites and I really enjoy engaging with readers. For example, those of you that have left comments here at whizzbangsblog quickly discover that I really enjoy replying to questions and helping other domain investors out in any way I can.

Developing a website that you’re passionate about is really important as it will spur you on to write or work on the site into the years ahead. I was speaking to a domain investor about developing a website into a business and I shared that it was actually really easy to do. In my case, all I had to do was write an average of three articles a week for nine years. Voila! Success :-)

I’m actually really proud of the articles here on whizzbangsblog and I often find myself trawling back through the archives to review how my thinking on a topic has developed over the years. I also find that I do much of my thinking about the domain industry and all of the opportunities within it while writing articles. It may sound strange but it’s my way of relaxing.

Every domain investor should have a couple of projects that they are developing into real businesses. In the case of whizzbangsblog I have the privilege of Escrow.com and Epik sponsoring my blog and this helps fund my time for writing.

I'm really careful about the number of sponsors and who sponsors my blog as I'm tying my own reputation to the services being offered by the sponsors. If their services aren't any good then it reflects badly on me.

With the relaunch of downwind I will be seeking aviation industry advertising as the traffic grows.

What’s really important is that when you develop a domain, develop it into a business. Don’t try and make something pretty because you like pretty websites. Focus on the end goal of how you will make money from the site so that what you develop is sustainable over time.

For the record, it doesn’t take much to get a good website up and running. There’s many different platforms available for managing the content. I personally use Joomla but wordpress is just as good.

If you spend over $1,000 getting an initial launch of a website put together then you’re probably spending too much. Make sure you get your first dollar of revenue in as fast as possible and whatever happens, learn from customer feedback!

In the next articles I’m going to dive really deep into my thinking around the four business models and how they help me optimise my domain portfolio for greater profitability. In the process I also plan on revisiting the series on pricing domains.

Recent Comments
london555
Hi Michael-great post so thank you. We own the name eEconomist.com and have thought it would be a great name for a worldclass econ... Read More
27 June 2016
mgilmour
John, I'm glad I could be of assistance. Feel free to reach out to me if you want to chat about your domain.
28 June 2016
mgilmour
It's easy to say yes to money and then realise that you've made a BIG mistake.
28 June 2016
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For Heaven's Sake! Be Professional!

For Heaven's Sake! Be Professional!

There is a massive difference between a business relationship that you have with suppliers versus partners. Many domain investors view their registrar, brokers and traffic monetisation providers merely as suppliers of services. They then go ballistic if anything goes wrong and lash out at anyone that is convenient.

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For a start, do not assume that the other person on the end of the skype call is out to defraud you. My experience has been that the vast majority of the people that work in the domain industry are honourable individuals that are trying to put food on the table for their families. So dial back the angst and be nice.

I’ve heard of parking company account managers getting absolutely abused and sworn at by customers for the smallest of things. It’s amazing the stories you will hear if you just sit at the bar at conferences….. To be quite honest with you, I’m stunned at the behaviour of some individuals.

If something really does go wrong, then the best advocate you have is your account manager! Look after them, be polite and work with them when there is an issue. We all work in the technology industry and quite often at the bleeding edge so things WILL occur from time to time. It’s called, “Stuff happens….so get over it.”

Get it out of your head that parking companies are out to steal your money and they have a secret stash of margin ferreted away. In this highly competitive environment any company that behaved in this manner just wouldn’t survive……just think about it for a second, those companies that have behaved in this manner are now closed.

I don’t really know of any company that tries to defraud customers by playing with their revenue share. I’m not saying that this doesn’t happen but I’m not aware of it. There may be rogue individuals that try things on from time to time but they get quickly dealt with.

Also, given that ParkLogic’s algorithms route traffic to the winner at that point in time it’s really pointless trying to play with revenue shares as the traffic just automatically migrates away. As I said to one parking partner, “You will get precisely how much traffic you deserve.” I wasn’t being mean….I was just stating a fact.

When something goes wrong (and remember it will) then contact your partner (ie. account manager) and work with them on the problem. I can almost guarantee there will be a time when you need to ask a favour for some special assistance and let me assure you that those people who are pleasant are more likely to get the answer “Yes”.

It’s all about communication….discuss any issues in a respectful manner with your business partner. The communication must also be transparent. If something has gone wrong, then your business partner needs to openly discuss this and the resolution/compensation that will be provided.

If your business partner tries to hide what really is the core of the issue in question, then my advice is to move on. Whether they are a monetisation provider, registrar or someone else there needs to be open and honest communication so that all parties can take remedial action.

So take a deep breath, keep calm and be professional so that you can grow your business with close reliable partners.

 

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What To Think About in Running a Start-up

What To Think About in Running a Start-up

I’ve founded a lot of different businesses over the years and there is one thing for sure, running a start-up is very different to running an established business. So what’s a few key things that I’ve learned?

The biggest mistake that many entrepreneurs make is they believe their cashflows and assume that success is only moments away. A cashflow is the result of modelling the business in Excel and often bears little resemblance to reality. There are a lot of assumptions that you are able to identify that are built into any cashflow and then there are a lot of other assumptions that never make it to your analysis because you never thought of them.

Escrow.com

For example, today I was looking at a cashflow for a new business unit I’m working on and one of the major assumptions is the price of the new offering. When I put the cashflow projection together I really thought about the pricing and made sure that it at least looked sensible. Despite this, now that we are market testing the service I’m going to be looking at what real customers tell me more than my guestimates.

Many entrepreneurs also make the mistake of trying to make the perfect product/service prior to taking it to market. Don’t do this! You could end up spending a huge amount of time and money on something that no one will actually pay for.

My advice is to get something together as quickly as possible and get it in front of real potential buyers. Then, do a lot of listening. You’ll soon learn what they value and what they don’t. Don’t be surprised that this may be a LOT different from what you initially thought they’d want.

So here’s a good saying that we constantly say at ParkLogic, “Build the rusty mini-bike before the shiny Harley Davison.” In other words, cobble your product/service together before you automate everything and make it all perfect.

Where is your first dollar of revenue going to come from? This is the number one question that entrepreneurs should really be able to answer. It encompasses what you are selling, what value you bring and more importantly, who’s going to pay for it.

Really understanding the value you bring to your market is critical to the success of any new venture. Are you solving a complex problem? Making a task easier?  Or saving your potential clients money? Once you understand the value proposition then you can work on ways to build barriers to potential competitors.

One of the things that I really like doing is solving really complex problems. A lot of people shy away from tough problem solving but I must admit that I really enjoy it. I know that if I can crack the tough nuts then I’ll have loyal clients and large barrier to entry for any potential competitors. By their very nature, tough problems are also often the ones that get paid to be solved.

The next thing I look for is how to productise solutions that I developed for one client and run it across many. This will provide the scalability and impetus to really accelerate the growth of the business.

For example, when I’m looking at buying or selling domains I like establishing standardised relationships. I may lose a few percentage points by adopting this strategy but it allows me to scale my business by selling many domains very quickly. A lot of the hidden costs in buy and selling is setting up the relationships with either party. If you can give away a little bit of margin for a large volume of transactions then it’s a no brainer.

So there’s a few things that I look for in start-ups...most of them hinge around speed of execution, scaling and really understanding your customer. Let me know your own thoughts on what you like me discuss in future business related articles.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

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How To Get Business Investment

How To Get Business Investment

There never seems to be a shortage of people wanting you to invest in their brilliant idea that is going to take the world by storm. So what do I look for in an investment opportunity?

Just to be clear, I’m not going to invest in a business where the money goes to paying off loans, scooped of the table by founders or pays off some other obligation. The purpose of investment money is to GROW the business so that it is successful…..not clean up messes.

Escrow.com

When I invest in a venture, I’m actually investing in a person so I really listen to not just the content of the pitch but whether the person giving it really understands the value proposition. If they can’t articulate the value proposition in about 1 minute, then I become completely disinterested. I’m not deliberately being rude; I just don’t have the time for someone that hasn’t clearly thought about it themselves. It may be a good idea but a potential founder who hasn’t thought about why it is of benefit to customers is not investable.

The second thing I look for is the background of the founder and how they came up with the awesome idea. I’m wanting to hear passion in the voice and why they are going to put everything on the line to get the business up and going. Entrepreneurs tend to have a succeed at any cost mentality that allows them to push through or around any obstacles in their path. If that attitude isn’t there, then you’ve lost me.

Assuming I’m still interested I’ll request a deck. The deck needs to synthesize the entire business in about seven slides. Any more than that and you’ve lost me again…. The slides tend to be:

1.      Summary page – (eg. Including how much you are seeking for what valuation)

2.      What is the problem being solved?

3.      How is the problem going to be solved by the new business?

4.      Market size and how it is going to be reached.

5.      Potential competitors

6.      Financials / Investment

7.      The team

 

I want to be absolutely convinced that you’ve thought about all of the issues for the new venture. Trust me when I say that breaking the business down into a very short deck will help you really think about all of the issues. Behind each slide there should be a lot of research that you can provide me at a moment’s notice. It’s all a part of the business plan that you will execute once you’ve received the investment capital.

Whatever you do, please be realistic on the investment and valuation. I had a startup business come across my desk the other day that had an insane valuation. They had no revenue or product and were giving up 5% of the business on a $13m valuation. They were essentially value an idea and it really wasn’t that great anyway….

If the business is a going concern then whatever you do, have your financials up to date. I am never going to invest in a business where the founders have a cavalier attitude towards the books. If you are a completely new start-up, then put together a cashflow and make sure you really understand all of the assumptions underpinning the “hockey stick” retained cashflow of the business.

BTW – I’m yet to see a business plan that doesn’t have somewhere in it that it’s a sure thing and going to make millions. I can guarantee you that despite all of the care you’ve taken with the business plan you have still underestimated how much time it will take to get started.

In the cashflow I’m going to get really focused on how big a hole is being dug and also what are the assumptions that drive the cash burn. If I’m still really interested, I’ll probably dig around to see if the cashflow can be adjusted to minimise the level cash burn. From here I’ll calculate the “go/no go” point.

When someone invests in a business there are basically one of three decisions that need to be made at some point in the ventures early stages. If the business is going gangbusters then everyone is happy and congratulations are all around. If the business is going out the backdoor then the decision is simple, close it down.

The third one is a bit harder, if the business is “struggling but may make it” then it requires a LOT more thought…..and this is where businesses typically end up somewhere in the first twelve months. The business is neither thriving or dying but just limping along. These businesses tend to soak up time and sadly, it’s often better to just kill them.

If you are really after a particular investor for their skills and what else they bring to the table, you may want to offer some equity just for them being involved. I’ve done this a number of times over my business career. I’ve dramatically reduced the valuation (to almost nothing) just to get particular individuals into the business. I’ve never regretted having a smaller percentage of a large pie over a big percentage of a small one.

Please let me know any of your thoughts on this topic and if you would like further articles on how to get business investment.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

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Upcoming News

Upcoming News

In this video I will be chatting with Sarah about what’s to come for WhizbangsBlog. We discuss how she has been going with her most recent blogs and the overwhelming amount of positive feedback she has received.

ESCROW

We also touch on the upcoming webinars that will be happening in the future. We would love for you to leave a comment on this blog about any questions or topics you may want us to discuss.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

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