How to Run Your Domains as a Business

How to Run Your Domains as a Business

I recently had a great time speaking at DomainFest in Fort Lauderdale. It was more of a chat than a formal session and it allowed for me to share some of my experiences in the business of domain names. I thought that I’d share some of what was covered in this article as it could benefit many readers.

The first lesson in business is really simple, revenue less expenses equals profit. In my experience, in their love for their domains an incredible number of domain investors forget this simple equation. They have a little story about how they acquired or registered each of their domains and like Gollum from “The Lord of The Rings” they constantly say, “my precious”.

Escrow.com

Yes, your domains are precious but if you forget the fundamental business equation then you’re not running a business, you’re enjoying a hobby. That’s fine to do but don’t expect to get business outcomes if you aren’t running your portfolio as a business. If you are running a business then you may have to drop a few domains into “Mount Doom”.

As much as I love my domains I’ve discovered that my wife loves my bank account far more. As she so lovingly puts it, “It’s very hard to cook a domain and serve it to the kids for dinner”.

The second mistake that many domainers make is to focus on the revenue side of the business to the exclusion of all else. These domainers are always holding out for the ultimate sale which is going to pay off the mortgage and allow them to sip margaritas on a far off beach. Seriously, for many of your domains you have more chance of winning the lottery than getting your asking price. My advice, get realistic with your pricing.

I was speaking to a domainer this past week and they were at their wits end because they had only sold a couple of domains in the past few years. They absolutely believed that their domains were worth millions. Here’s the problem, when the market tells you that your prices are too high then you can either listen or continuously fund the renewals out of your own pocket. It's your choice.

The biggest problem with the market is that it’s what we all live and die by. Promises and wishes are great but unless you actually convert a deal then they are pointless. I’ll quote my wife as she reminds me time and time again, “The deals not done until the cash is in the bank!” I couldn’t agree with her more.

If you aren’t selling your domains then either examine the price or your business model. For example, most domain sales are aimed at the small to medium sized business….I don’t know any businesses of that size with a spare $20K to spend on a domain. I know plenty that have $2K or $500 per month though!

Let’s get back to our equation and the other little factor that we have to consider, that is, expenses. Expenses go much, much further than renewal fees. Please, oh please, don’t forget to count the cost of your time. If you value your time at zero dollars then don’t be surprised when other people do so as well and waste a whole lot of it.

The time spent renewing your domains, keeping track of any PPC revenue and ensuring nameservers are set correctly is a direct cost to your investment. By the way, around 10-15% of your domains have incorrect DNS settings – if you don’t believe me then go and check. While you’re at it, don’t forget the costs of your accountant, any legals, bookkeeping etc. You may soon discover that your profit takes a significant hit.

Speaking of profit…..never get confused of the difference between cash in your bank account and profit. Just have a chat with the tax man and I’m sure that they’ll educate you on the difference. I’ve seen many domainers spend their cash only to forget about the fact that they need to pay their taxes.

Some of the hidden value in a portfolio can also be access via how you treat your domains for taxation purposes. My recommendation is to get some really good advice on this for your jurisdiction. I hate to say it but your little local accountant is unlikely going to cut it….there are just so many variables when it comes to domains.

For example, are they assets, expenses, contract rights or and expiring contract like an insurance agreement? If they are an asset then how is it that they can potentially be taken away from you? All good questions for an accountant in your own country.

Now that you have the most basic business equation under control let’s take a look at the next step….more on this later.

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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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Comments

whizzbang on 10 November 2015
great advice for crap domains like Whizzbangsblog.com

this is great advice for crap domains like Whizzbangsblog.com

this is great advice for crap domains like Whizzbangsblog.com
mgilmour on 11 November 2015
RE:great advice for crap domains like Whizzbangsblog.com

Many years ago I founded whizzbangsblog off the back of my reputation in the forums under the pseudonym of whizzbang. it was a great experiment to see if I could develop a brand from basically nothing....it seems to have worked as you commented here :-)

I think one of my proudest moments was when I had gained enough traffic that a domainer had typoed whizzbangsblog.

Many years ago I founded whizzbangsblog off the back of my reputation in the forums under the pseudonym of whizzbang. it was a great experiment to see if I could develop a brand from basically nothing....it seems to have worked as you commented here :-) I think one of my proudest moments was when I had gained enough traffic that a domainer had typoed whizzbangsblog.
Guest - Leonard Britt on 10 November 2015

Good points - the market is what customers are willing to pay. However it can be frustrating as a financial professional to see how much companies spend on IT costs, professional services, advertising, travel, executive perm's etc and yet they place so little value on branding that any price more than $100 seems to be outside their budget.

Good points - the market is what customers are willing to pay. However it can be frustrating as a financial professional to see how much companies spend on IT costs, professional services, advertising, travel, executive perm's etc and yet they place so little value on branding that any price more than $100 seems to be outside their budget.
Guest - Steve on 11 November 2015
You want how much for that domain!?!?!?!

Yes, it's amazing how many companies will spend more on ONE piece of equipment then they will on thier online presence. Amazing really. When people are that far out in left field I just move to the next person and keep smiling. Sheeple and sheeplebusiness's are required to keep the World moving. They are great for the auction houses and wholesalers when their business's crash and burn. Also all of that discounted equipment and products can be rolled forward to a new business that might "get it". All good.

Yes, it's amazing how many companies will spend more on ONE piece of equipment then they will on thier online presence. Amazing really. When people are that far out in left field I just move to the next person and keep smiling. Sheeple and sheeplebusiness's are required to keep the World moving. They are great for the auction houses and wholesalers when their business's crash and burn. Also all of that discounted equipment and products can be rolled forward to a new business that might "get it". All good.
mgilmour on 11 November 2015

Couldn't agree with you more....but the market is what the market is. The challenge is to educate the market and create a competitive situation.

Couldn't agree with you more....but the market is what the market is. The challenge is to educate the market and create a competitive situation.
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Tuesday, 24 October 2017