After spending over a decade in the domain industry I’ve come to discover several different myths new investors are bound to hear and read throughout their adventures. Whether you’re just get into buying and selling domains or have already been doing it for a while, keep these in mind when creating a business plan for your domaining business. Listed below are three different domain industry myths that you will come to find are not always accurate.
Wholesale Domain Flipping is Easy – Some domain investors look into wholesale selling so they can make a quick buck. However, many do not realize that what works against them in this situation is the psychology of domainer to domainer sales. Unless you happen to find the perfect buyer who is also an investor, most will immediately think “why is this other domainer selling?” Other domainers usually don’t want the seller to profit, so sales can stall when going this route. That means you’ll be forced to lower the price until you’ve made very little profit, or possibly even none at all. To successfully flip domains at wholesale, pricing should be both simple and affordable. You need to find a price point where you would personally buy the domain yourself if you were on the other side. It may hurt to think of things that way, but that’s where there is liquidity. Wholesale domain flipping isn’t always easy and most of the time it won’t be very profitable. However, it can be a good route to consider if you’re wanting to unload some inventory at discounted prices. If you have domains that haven’t sold in a few years after proactively marketing them and don’t want to pay renewal fees on them anymore, then the wholesale route might be your best option. Just remember, it’s not likely going to be an extremely profitable one.
Liquid Domains Return Quick Profits – If you think like most domain investors, the easiest thing to do when trying to build your portfolio is buy more new names. People often tell themselves “if I could just buy a name today and sell it tomorrow then I’ll make some good, quick cash.” This makes investors more tempted to go after names that are liquid (such as LLL and LLLL). The fact is, unless you have a good source of getting those liquid domains for below wholesale prices, you’ll have to outbid other domainers to get them. That means you’ll be more likely to pay regular market prices and less likely to turn a big profit unless the perfect buyer comes along. In order to make good returns on your investments you’ll want to wait and see the market move up to make your name for valuable. So, what should you do when you need more cash? The answer is to buy more domains. You should be treating domain investments like lottery tickets, hoping someone will email you tomorrow and want to purchase. If you don’t sell any domains this week then next week you buy more. You’re essentially trying to pick where lightning will strike during a storm. If you’re buying your names at affordable prices then you’ll quickly begin to build a larger portfolio and put the odds in your favor of somebody wanting to acquire one.
You Will Sell 1%-2% Of Your Portfolio Per Year – Investors are likely to read (or hear) that they can expect to sell 1% or 2% of their portfolio each year. Although over a long period of time most domainers should expect to sell a small percentage of their portfolio, there is no way to assure this will happen every single year. People hear this myth and immediately think they can rush out and register 500 new domains right away and then expect to sell 5 of them over the next year. The truth is, you might need to purchase 1000 domains before you even complete your first sale. My personal belief is that most investors have a group of domains that will sell for sure (if they’re priced right). But, for that group of names waiting and actually evaluating the offers which come in can be the most important step to making sure you get the most money from them. These investors will also have another group of names that may not sell, but will produce even better margins if they do. In the early days of investing you need to focus on building a large portfolio instead of assuming you’re going to sell 1-2% each year. Also, try to include a variety of different types of names in your portfolio: liquid, brandable and keyword domains are all excellent choices!