So many business owners have an incredible desire for profit but so few actually understand why it’s so important or how to attain it. So I’m going to first ask a really dumb question, “So why is profit so important?”

At its core, profit is a measure of a business’s sustainability. If year after year a business is not profitable then it will ultimately fail. Yes, you can keep on raising capital but at some stage investors will stop investing and demand a return on their investment. This will either be in the form of a dividend or a capital increase.

So in terms of a domain portfolio, unless you are earning a profit then your business will fail unless you (ie. the shareholder) keep on funding it through cash injections. This is very different from running short of cash to pay domain renewal fees….more on that later.

So the question needs to be asked, why do domain business often fail? I personally believe that there is a really simple answer to this question. Most domain businesses aren’t businesses at all. They have more of the characteristics of a hobby than a business where the owners are collectors rather than investors.

Just ask yourself the following questions:

1.      Do you have a cashflow?
2.      When was the last time you looked at your balance sheet and profit and loss statements?
3.      Do you have a clearly defined business model for each of your domains?
4.      When was the last time you cleared out non-performing assets?
5.      Does your accountant about how to treat domain names?
6.      Why is tracking both the purchase and the sales price so important for your business?
7.      What is the return on your investment and could you gain a better return elsewhere?
8.      How much do you value your time in your business plan?
9.      When was the last time you seriously considered outsourcing to free up your time?
10.  Do you understand the difference between cash and profit?

Let me tackle point number ten with a little story as it’s often really confusing for people to understand. It’s very easy to have a highly profitable business that doesn’t have any cash....let me show you how.

Imagine a domainer looks at their bank account and sees a whole lot of money has accumulated for the year from their domain parking earnings. They clap their hands with glee and go out and spend it all by purchasing a $30,000 premium domain that they've always wanted to own.

Sadly, even though they’ve spent the $30,000 in cash they actually can’t expense it. In most countries the accounting/tax rules insist that they take this sized item to the asset side of their balance sheet. Here’s the problem, let’s imagine they have $10,000 worth of expenses during the year. This means their profit is revenue less expenses or $30,000 less $10,000 = $20,000.

The government will put its hand out for their fare share of the profit. In the case of Australia, they want 30% or just under $7,000. But hang on! The domainer just spent the $30,000 and don’t have a spare $7,000 lying around.

I hope that this simple example illustrates the traps that many domain investors fall into. They completely confuse both cash and profit. This often compounds if they’re able to defer their taxes and can result in what seems like a double whammy if they continue to make the same mistakes.

So let’s imagine they managed to borrow some money from a friend to cover their taxes and this is secured against the $30,000 domain. If the friend is charging interest on the money then the domainer can expense it during the financial year that it was incurred BUT the capital payments will ultimately need to come out of the following year’s profit (not going to get involved with depreciation here). Yep, it’s starting to feel like a knotted ball of string already!

Suddenly, the ultimate business opportunity arises for their $30,000 domain. A major developer would like to partner with them to develop out the domain on a 50/50 basis. The developer is the ideal fit and they are absolutely convinced they’re going to make a killing. All they have to do is put their domain into the venture and the developer will match it with $30,000 of development.

Hang on a second……they’ve now essentially encumbered the domain twice. Their friend’s $7,000 is secured against the domain and if they default on the payments they won’t be too happy if the domainers gone into a partnership that involves the domain with someone else. At this point in time I’ve seen many domain owners say, "I just won’t default"….and try to slide the second transaction on through.

As time goes by, this scenario gets played out across more partnerships and more domains. Documentation of the transactions becomes scarce and before they know it, the wheels come off the cart and the domain owner is in a complete mess, defaulting on payments and trying to understand how they got into the mess they’re now in.

Fundamentally what it all comes down to is that the domain owner really doesn’t understand business but they love their hobby. They didn’t really know what profit is and how it’s different from cash. This level of naiveté is played out across all of their other business dealings.

Here’s a few sage words of advice, “Have a good account that you talk to regularly. Avoid all deals which involve forming equity partnerships…..they rarely, if ever work out.”

I’ll share more on business thoughts in future blog posts.

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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.

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”.

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.

Why is it that the lights at an electrician’s house don’t work, taps malfunction at a plumber’s and domainers seem to forget why they bought their domains? At the recent domain conference in Florida I found myself sharing about domains and I thought to myself, “It’s about time that I reviewed my own portfolio!”

Too many of us are so busily acquiring domains, working on projects or just having a good time that we risk forgetting that we’re actually running a business. Unlike a hobby, a business needs to have an outcome that involves some sort of profit….and in many cases it’s really simple to generate but we just don’t seem to bother.

Take me for example. A few days after they poured me off the plane (it’s a 30 hour journey from Fort Lauderdale) I began working through my personal domain portfolio and noted beside each of them what business model I was applying to them. This isn’t really that hard as there are 4 primary business models to think about.

1.      Traffic domains – revenue comes from domain traffic

2.      Stock turn domains – selling the domains for around $X,XXX

3.      High value domains – selling domains for $XX,XXX+

4.      Development

The next thing I did was contact Chris Leggatt at domain holdings and said, “Hey Chris, how’d you guys like to broker gx.com.au?” It’s a two letter com.au that would be great for a forex website as it could stand for “global exchange”. I’ve had the domain for years I thought that it was about time I did something with it or sell it off to someone that will.

I then looked at another portfolio that had about 30 three and four letter .com/net domains in it that once again I’d been happily renewing year after year. I called up Tessa Holcomb at Igloo (like Chris, she’s an awesome broker) and passed these across to her. If you’re interested in these domains then reach out to her at “sales at igloo.com”.

Making sure that my traffic domains were looked after was a breeze….after a review, I handed them all over to ParkLogic. Even though I’m one of the founders of ParkLogic, let me say that I eat my own dog food….!

The developmental domains are already secure in various businesses that are progressing forward quite nicely (whizzbangsblog.com is one of them).

So once the brokers have completed (or not) a series of transactions I will just move through my list. Anything that doesn’t have a business model gets rejected and dropped.

What am I actually doing here? I’ve essentially outsourced all of my domain management to experts in their fields. I’ve been in the industry for way too many years and there’s one thing that I’ve learned….don’t try and do everything yourself! Speak to experts in their fields and get them onboard working for you.

I will unabashedly say that I’m an expert in traffic monetisation….there’s very little I don’t know about how to squeeze every last penny out of domain traffic. Although I also know quite a lot about selling domains I pass the challenge onto experts who do this day-in and day-out. This will maximise my sales and also frees up my time to focus on other opportunities.

I said it at the Florida conference that one of the problems that domainers often have is that they value their time at $0. Don’t fall into this trap…..outsource your different tasks to experts and move on. Whatever you do….don’t be like the electrician and plumber!

Have a great weekend!

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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.

So it’s been a few weeks since my last post about how I’m marketing my science fiction book, Battleframe. I’m using this experience as a case study for marketing without spending any money. Many of the lessons learned are directly applicable to any online business. So what’s been happening?

I had a bit of a road bump with Amazon where they had a bug in their system that effectively delisted my book and this resulted in zero sales for about five days. This wasn’t too good but after a brief email exchange they returned Battleframe back to the shelves for sale….thank goodness!

I’m now linked into a number of author communities and taking part in the various discussions. This is time consuming but quite a lot of fun. Whatever industry you are in I would highly recommend getting involved with people who are already working in it….you never know what could result.

So in the process of getting to know other authors I discovered that although they were great at writing many of them lacked marketing skills. Each of them was trying to sell their books in isolation and develop their own readership….this is REALLY hard work! So while I had some time off with the flu I put my brain into gear around how to solve this problem for my fellow authors.

The result is that I have now built SFFAuthors.com (science fiction and fantasy authors). The website allows authors to have their own social profile share what they are up to either via the built in blogging platform or pull in their own RSS feed. The activity stream then displays the latest articles from SFF authors. I’ve now integrated Twitter so that authors and readers can pull in their twitter feeds and post directly to Twitter from the website. There’s heaps in site and I plan on expanding it further.

So what’s my business goal? I’m a firm believer in, “What goes around comes around” and so the platform has been designed so that authors can effectively share with each other’s readers. This means that readers of Battleframe may buy another author’s book because that author posted some really interesting blogs/comments. The goal is that readers can really get to know authors and authors that don’t have very much technical expertise can now interact with their readers…all good. I’ve let a few people know about the website and the response has been really positive. I’m now encouraging science fiction and fantasy authors and readers to join the community.

So what lesson have I learned? Sometimes when you enter an industry for the first time you can end up viewing it in a very different manner from the incumbents. By applying your own perspective you may suddenly find yourself providing a service that you could never have imagined when you first embarked on your journey. For example, I had no idea that I would be setting up SFFAuthors.com when I started writing my book…..but here I am.

So what’s happened to my sales? It’s a rare day that I don’t sell a number of books….so something must be going right. The biggest issue that I had to overcome was getting reviews on Amazon (real ones, not fake bought ones) as reviews have a huge influence on whether a person will by a book or not. As of writing this blog I now have five reviews (4 five star and 1 three star) and some pretty respectable feedback.

To take my book to the next level I plan on giving away some ebooks and inviting some other authors to do likewise. I will very likely make it part of a campaign where only members of SFFAuthors.com can win a free book…..so hint, hint…..sign-up and win :-)

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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.

If you have ever developed a website then one of the things that you’ll be looking for is traffic. I’m a numbers guy and I need information to determine how successful my marketing efforts are for each channel. This article will provide insight into what I’ve built to do all this….

First of all let me say that there is absolutely no point in spending huge amount of time telling people about your product or service if there isn’t any response. You need to clearly define what your goals are and then measure them to see if you are succeeding. For me with the marketing of my Battleframe I’m ultimately after two things:

1. Sales

2. Sign-ups to my website

Since I’m a new author I’m less concerned about item one and I really want to focus on how to get the sign-ups happening.

So what have I built to track all of this information? If you’re wondering why I decided to build a system then here’s the answer. I’m a firm believer in forcing myself to keep my development skills up to scratch. As one of the founders of ParkLogic it allows me to more fully understand both the challenges of our development team and also what our client’s may be wrestling with. It’s also one of the reasons why I maintain my own personal Unix server.

I personally believe that clients should have the confidence that I not only know ParkLogic’s offering but that I can intelligently discuss solutions that may involve some additional development to meet their needs.

Secondly, when I looked at the different products for tracking advertising I either found them, too complicated, expensive or written by a person that has no idea about the business requirements.

So back to my simple tracking system…. The first thing that I wanted to do was build something that would scale across multiple websites. Each website would then have multiple campaigns and each campaign multiple redirection links where I can track both impressions and clicks.

Although it looks pretty rudimentary the tracking system does all of these things plus a few more. For example at each stage (website, campaign and redirect) I can get a quick report that tells me how they are going.

The website tab lists the websites and I can either bore down to the campaign level, Archive the website, get a report on overall performance, add a tracking SubID (work in progress) or edit the website details.

As can be seen from the Campaign’s tab I have a number of different traffic sources that have similar functionality to the websites tab but at the campaign level.

If I select one of the campaigns it displays a list of all of the redirects that are currently being used to track the traffic. It’s important to realise that each redirect is simply a URL and this means that they can be applied to links, images or anything else.

At any stage I can Archive a website, campaign or redirect. This means that they will be removed from the reports but it doesn’t mean that they link will break. I will build a series of reports that will show the archived items at a later date.

So as you can see it’s a work in progress but it’s getting there.

The most important next step for me is to start interpreting the data so that I can more fully understand where to focus my efforts. The science fiction book market is incredibly fragmented and it would be really easy to waste a lot of time on marketing channels that really produced no results. So wish me luck as I take these next steps :-)

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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.