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Developing a Domain Into a Business - Part 1

Developing a Domain Into a Business - Part 1

So you’re all excited about developing that really special domain name and you’re wondering what the first steps are. Most people immediately jump into getting a website up….whatever you do this is the completely wrong approach!

In this article I want to touch on a number of things that I look for in start-up businesses and then as the series progresses discuss how to actually build a successful business. I've founded many successful startups and there is nothing quite as satisfying as creating something from nothing.

Escrow.com

I've found that successful businesses typically start with a well thought out business plan. The technical implementation of a website is only one small but important aspect of the plan. The first thing that you need to work out is how you’re going to make some money. You may only have a vague concept about how you are going to do this but nevertheless, get it down on paper!

For example, I love writing my blog on the domain industry, business and even my weekly personal musings. From my very first article I had a clear direction that it would be an advertising based business....it may seem obvious but there are many other things that I could have done. Speaking of which....reach out to me if you are interested in advertising!

I was recently approached to invest in an online business and the first question I always ask is, “How are you going to make money?” This seems an obvious question but believe it or not it’s often forgotten in the excitement of getting a pretty website up and running. If you can’t answer the question then stop whatever you are doing and work on that problem because it impacts everything else that you do.

The second question I end up asking is, “How fast can you earn your first dollar?” Like the first question this one is vital as it helps scale how big an investment you require to really understanding if you will actually have any customers.

Once again, I see many budding entrepreneurs believe that they need everything nailed down, automated and working at peak performance. I personally don’t really care about many of those things. I’m more interested in them actually earning the first dollar.

Jeff Bezos started processing his first online payments by literally taking a disk out of one computer and walking it across to another computer. He nick-named this sneaker-net. He didn’t have all of the automation in place but he knew how to collect the money…..the automation came later.

So I come back to the question, “How fast can you earn your first dollar?” Forget all the bells and whistles. I want to know how long it will take you to get a client to buy your product or service. From an investment perspective this proves so many things about your business:

1.    That there is a market.
2.    The really basic technology works.
3.    Your product/service works.

Once you have this in place then it’s just a question of scaling.

It’s like me with the science fiction book that I’ve written called “Battleframe”. I’ve never written a book before and it’s been quite a journey but now that I have my product I need to think of innovative ways of getting it into the hands of customers. I need that first customer that I’ve never met before (ie. not a friend) to buy the book and say that they enjoyed it. Once everything’s in place I then need to scale…..and write book two!

A number of years ago I met a domainer that had built a website into a business. They’d spent $6m on it before they had earned a penny. I must admit it that I just don’t get this mentality. What happens if the market rejects your product? You’ve just spent $6m on something that is pretty worthless.Once you’ve answered my two above questions then you need to answer the third one, “Do I really need any investment.” I’ll cover this in the next part in the series.

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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. Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face.
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What's Your Business Model?

What's Your Business Model?

It’s critical that every one of your domains has a business model associated with it so that you can make appropriate decisions about how to best increase their value or realise there value.

So what are the business models that I use?

Traffic domains – these domains are those that receive traffic and are monetised. The key is to extract the maximum value out of the traffic each and every day.

High Value domains – These are more often than not two letter or single word domains – for example, ab.com or vodka.com. These are the “rainbow” domains….in other words, if a large corporate decides to buy one then you’ll get the pot of gold at the end of the rainbow. I would highly recommend that you outsource these domains to a qualified good broker who knows how to create a market.

Stock Items – These domains are often multi-word domains and should all be priced and ready to sell at sub $1,500. You may get more…..which is great but it’s all about moving the stock. The ultimate goal here is to sell around 3% of your domains per year.

Development – You can’t develop everything….you just don’t have the time to impact thousands of domains in a meaningful manner but you do have the time to build a business on a few. My advice would be to build some domains into profitable businesses and then sell them off…..then repeat.

We could refine these categories a bit further but the message should be clear that every domain needs a business model. So take a look at your domains and ask yourself, what business model am I applying to it? In future blogs I'll see if I can unpack the different categories a bit further.

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My 10 Rules For Doing Deals

My 10 Rules For Doing Deals

My daughter is in the process of trying to find her first car…always a great experience! She went and looked at one with a friend and instantly fell in love with it. “Dad, this is the best car in the world! I have to have it!”

I openly admit that I know nothing about cars….computers….we’ll that’s another thing. So Sarah returned to the seller’s house to place a deposit on the vehicle but this time she took a friend’s father who happens to be from the automotive industry. It took him ten seconds to glance at the car and say, “No.”

This raises the point, if you want to invest in diamonds don’t ask the butcher for advice, ask the jeweler – it’ll save you a packet! I have domain investors coming to me all the time with a wide variety of deals that they’ve been offered to ask my advice on whether it’s a good deal or not. If you’ve been in the industry as long as I have then you never get surprised by the garbage that some people try to sell at incredible prices.

My 10 rules of buying:

  1. Never buy when I feel pressured and take your time to think it over.
  2. Good assets are worth the price, you just need to find the good assets.
  3. You can ask whatever you want but I’ll pay the price that I’m offering.
  4. Telling me over and over again how good something is will not change my mind. If it’s a dog it’s a dog, if it’s not then it’s not.
  5. Fancy deals normally end in tears….keep it simple.
  6. If it looks too good then it probably is.
  7. Go for repeatable income not just look out for the big one offs.
  8. Investigate the person selling the asset as much as the deal itself. If they’re right then the majority of the time the deal will be fair.
  9. Never do transactions, do deals where everyone wins and both parties will want to do business together into the future.
  10. Get good advice and then make up your own mind.

Do you have any rules that you use in your own deals? Please add them in the comments below.

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Being An Entrepreneur

Being An Entrepreneur

For the past 30 years I’ve been building businesses and the majority of them have been in the Internet industry. As fate would have it I was talking to a friend of mine last night on skype and he was lamenting the pain of his new startup. Investors didn’t invest what he really needed and technology wasn’t coming together fast enough. All the typical birthing pains associated with a new venture.

If you’re looking at your domains and thinking to yourself, “I really need to start developing some of these” then be ready to go through some tough times. It’s never easy doing something new and what you think is a great idea, other people will trash.

Which brings me to another point. Over the years I've found that the worst sort of people in the world are those that cheer you on no matter what. For example, my wife and I had to give our daughter a bit of tough love near the end of her final year in high school. Essentially it boiled down to, “Don’t be an idiot!”

She came back and told us we weren’t very supportive and that we needed to be more encouraging. I thought about it for a few milliseconds and replied, “People will cheer you on as you leap over the edge of a cliff, we’re not those sort of people honey.”

Now that she’s passed her exams and been accepted into university she’s told us that our advice (which was really tough) was the best advice she’s ever received.

The real secret with being an entrepreneur is knowing whom to listen to and then taking all of that good advice so that you can make a better decision yourself. Once you’ve made that decision, be bloody minded about it and as tenacious as a bull terrier. Never, I say never let that bone go and push through every obstacle!

So what did I say to my friend going through the tough times in his business? I consoled him a little and then said, “Suck it up princess.” What did you expect? If it was easy don’t you think that other people would have run with your idea already? It’s tough love but sometimes people just need to hear it…..I’m absolutely confident that he’ll make it a success…..and that it will take him about twice as long as he initially thought to do it.

So back to your domains. My advice is get good advice, make your own decisions and then be ready for the obstacles. One last point…..the opposite of those that cheer are those that jeer. It’s always easy to tell a person why it won’t work. I use these people to inspire me forward with a, “I’ll show them mentality!” So go to it and get off your backside and change your world. :-)

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Cutting the Grass

Cutting the Grass

A few minutes ago the doorbell sounded and upon answering it I discovered our friendly lawn mower man smiling back at me. In my opinion his dark sun tanned wrinkled face had seen altogether too much of the Australian sun but that was his job and he loved it.

During the few minutes of idle banter I remembered that we had a now thoroughly dead Christmas tree down the side of the house that needed removal. I asked him if he’d take it away and he quickly replied, “Not a problem but there is a disposal fee of $10.”

I know that the local council will charge something but it’s nothing like $10. Despite this I quickly replied, “Not a problem!”

So why did I do it? The value in not having my wife Roselyn ask me to remove the tree was worth more to me than the $10. For that matter he probably could have asked for $15-$20 and I would have agreed! My problem would have been at that price Roselyn would have made me do the tip run the following year with the pine needles from the dead tree filling up my sports car. She pays the bills in our family and there’s nothing getting past her.

From our mower man’s perspective he normally gets $35 per cut so he’s just dramatically increased his take from his client. It works out really well for him, for me and that’s what business is all about.

I speak to a lot of people about business and it surprises me that time and time again many of them think that it’s all about trying to get the most out of the other guy. That’s a transactional mentality. At some stage the person on the other end of the transaction will get smarter, feel ripped off and go elsewhere.

I personally think that it’s better to have a more long-term view with clients. This means that every transaction needs to be fair and work for all parties. I don’t just want a deal now I want to deal multiple deals into the future. With the result that we’ve had clients for seven plus years with ParkLogic and whenever there is an issue we have a relationship with them that’s stood the test of time…..I think that’s a much better way to go.

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