There are two challenges when selling a premium domain name:
1. Convey the benefits of ownership to potential buyers.  I touch on this here:  Marketing and Domain Names
2. Actually finding these potential buyers.

Locating potential buyers is, at times, difficult.  A great place to start is at a trade show.  If you own a premium domain name that defines a category, consider attending a trade show to make some industry connections.

Example:
I attended the Consumer Electronics Show (CES) in Las Vegas earlier this year.  There are tousands of vendors, both large and small, who operate in the electronics industry.  I went there with my domain name in mind:  Tablets.com.  I wanted to meet with people, face to face, and get a feel for the state of the “tablets” industry.

Attending the show enabled me to make contact with 25 really solid companies in the tablet space.  From manufacturers to distributors and retailers, I was able to get a feel for the direction that the tablet market is heading.  I was also able to talk directly about Tablets.com – from both a sales and partnership perspective.  The CES trip enabled me to hear the thoughts from these companies – as both a buyer and a partner in development.

In the end, I established some interesting potential development partners — and that’s great to have in my back pocket for the future.  I also found some parties interested in buying or leasing Tablets.com — although none rose to the level ($ wise) that I was hoping.  As I stated earlier, timing is important.  Timing includes a combination of good fortune and analysis.  Anyone who had sold a domain name for over $100,000 will admit that premium domain sales involve perfect timing — which often includes a bit of luck and a lot of analysis and effort.

If you own a premium domain name, consider attending a trade show that corresponds with your domain’s industry.  It’s a great chance to meet face to face with potential buyers and partners.  Plus, it’s a tax write off

- Moving Forward

Aron

Enter the new gTLD program – to many frustrated people – the savior to the problem I described above.  Finally (they think) a solution to the problem that has agonized me for the past several years.  Soon (starting in a few months) the new Internet land-rush will be on, and 1400 (give or take) new .ANYTHING top level domains will come out in the largest expansion of the Internet since… ever.  Approximately 500 strings will be approved in the remainder of 2013 and the rest will come to exist in 2014 (most likely).  AHH!  Finally – some choice will be created for frustrated people seeking a domain name.

One problem.  There are 1400 gTLDs coming out.  This still doesn’t solve the first problem:  There are no good .com domains left to register.  There still will be 130,000,000 .com and .net domains in the hands of end-users and investors.

There already are several choices for a global brand, if you don’t receive your first choice of .com:  .co, .me, .biz, .net, .info, .us, .pro etc.  Granted, yes, there are fewer and fewer great names left for registration in those extensions as well.  But do we need 1400 new choices?  Why are so many people and companies jumping aboard this Internet expansion?

1. For some, this is a hedge – protecting their investments in .com and the Internet (hence the umbrella image at the top of the post).
Some people have their life savings invested in domain names and Internet businesses.  Many need to invest in the gTLDs just in case it does become a .com killer.  This isn’t a bad idea – in my opinion.  Protect the millions (or tens or hundreds of millions) that you have invested in the existing Internet and grab a piece of the new frontier.

2.  Many see major opportunity.
I recently spoke with a man who grabbed an opportunity when a major industry was deregulated 10-12 years ago.  He knew little about the industry, but recognized the opportunity when the news broke.  He started a company with one employee and began to sign customers.  Today, his company has over $1billion in annual sales.  WOW, right?  Many gTLD investors see this as a similar situation:  The Internet is being expanded for any regular guy or small company to stake their claim to their own top level domain.  The chance to create your own “.com” means the potential is endless for those with the right resources, people and vision.

I think the thought process for gTLD investors has been this:  If there EVER is a chance for a second land rush on the Internet… or if there is a fundamental shift in the way the domain space operates… I want to jump aboard.

.games, .movies, .love etc. are only available to claim one time… and that time is right now.  Waiting just ensures that you won’t be able to claim the string you really want.

3.  Brand protection.
To put it more directly… fear.  Hundreds of brands are concerned about people tarnishing their image, so they will be registering their company name in hundreds of new .ANYTHINGS as soon as they come out.  A company with ZERO faith in the new gTLD program will still spend thousands of dollars to protect their company.

Along those same lines:

4. Brand proliferation.
In fact, proliferation is a word that accurately explains the new gTLD program:  rapid expansion.  Hundreds of brands want to further their reach and stay current.  What better way to do this than to operate your own top level brand-name domain.

5. Honestly, the opportunity isn’t that expensive.
So it costs $185,000 to apply for the string you desire.  That’s a very small opportunity cost with an unlimited upside.  Worst case scenario:  you’re down $185,000 plus other fees and staffing/partnerships etc.  Oh well.  To any company with a few dollars, this is nothing.  $185,000 to start a new business is a steal.  Plus, it’s already in the space that you operate.  It’s not like you are buying a Burger King franchise (which actually costs more).  Potential best case scenario:  unlimited upside.  The new venture could produce tens of millions of dollars — if we can convince users to select our new TLD over the competition.

Entrepreneurs LOVE opportunities with a measurable (and minimal) downside but with unlimited upside potential.  That’s one way to become successful, very quickly.  Locate opportunities like this.

Do I think gTLDs will be a success?  Will they be widely adopted?  The number of new businesses being formed, and new Internet users arriving online, are staggering.  I won’t share them here, but there will be tens of millions of people coming online in the next few years and many of them will want a domain name.
Will 1400 gTLDs make it?  NO.  Not in 2013 and 2014.
Plus, I guarantee there are a few thousand curious companies waiting for the second round of the program — just sitting back waiting to see how the first round unfolds.

There will soon be 5000, 10,000, 25,000 probably more of these gTLDs.  The price is affordable to any company… and it could very well turn into a “must have” for any business.  Plan on many of these new strings to be very successful – especially those backed by major companies (Google, for instance).  Do you think Google, Amazon and other behemoth companies would jump aboard this program without knowing they will have a certain level of success?

I’d love to own a generic .ANYTHING and give it a try.  Personally, I don’t have the people in place to pull it off, just yet.  Also, one little problem:  it’s too late – until 2015 at the earliest.

- Pondering the future

Aron

Reality is this: foresight isn’t limited to a select few people.  Thousands of people have it.
Someone beat me to Tablets.com.  By 10 years!  So what did I do?
My choices were:
A: Complain and throw a fit
B: Pay market value for the domain

I chose “B” and now I own the name and have for the past few years.  The name has still appreciated in value over what I paid, and now I’m the guy that beat another company to it.
Prospective buyers can either:
A: Complain and throw a fit
B: Pay market value for the domain

Many will complain and move on.  They don’t have a great plan for Tablets.com anyway.  A few will make fair market value offers.  They have big plans and big vision.  Then, they will be the people that beat someone else to the domain.
(and so goes the circle).

The truth is, someone else beat me to ALL of my domains that I really wanted:

XF.com : Someone beat me to it in 1994.
HY.com : Someone beat me to it in 1995.
Symbolics.com : Someone beat me to it in 1985.
Copier.com :  Someone beat me to it in 1995.
March.com :  Someone beat me to it in 1993.
Deadstock.com : Someone beat me to it in 1999.
MKIV.com : Someone bought the name in 1997 and built-out my exact idea.  Well, maybe I should just buy the name and site from the owner.  So I did, and I’ve moved past the fact that I was second.

(and you get the point).

All of my sales I’ve made… someone was way before me in registering those domain names.  Usually by 10+ years, as in the case of the two-letter .com’s I’ve owned and sold and many of the one-word .com domains I’ve sold.

You know what, someone beat you to those oceanfront lots in Florida and California as well.  At one time, they were sold for a fraction of what they are worth now.  In fact, isn’t it frustrating… many people own prime lots along the beach and are doing NOTHING with them!  Don’t they realize that you’d like to build a house or a business on their lot?  Well, they had the foresight to grab a few lots at the opportune moment.

Your opportune moment may be RIGHT NOW — and down the road someone will be looking upon you with envy.

Choosing “B”…

- Aron

For some it may be web development or design, you’re really great at coding and designing sites and you do it better than anyone.  For many it is negotiations, for others it may be domain valuations, and for some it may be a unique ability to scale your business.

Personal instance:
Personally, every time I’ve drifted away from my core competency (of domain valuations and sales) it’s been a disaster.  Those close to me can attest:  a few times I’ve personally operated developed websites with a MASSIVE volume of traffic.  Several million monthly visitors – many needing technical help or account assistance.  I was completely overwhelmed, frustrated and lost – doing this by myself.  I drifted from “what I knew” and didn’t get the help I needed to set myself up for success.

I know it sounds simple, but every strategic business decision should match up with your core competency — and if it doesn’t, you need to quickly acquire the resources and capabilities that are required for success in your new venture.  For me, I should have hired a few people to run this large website full time.  I tried to handle it myself, which just burdened me greatly and I ended up giving up on the project (which had a ton of potential).

I often find myself drifting from what I know and entertaining the idea of some sort of business development that is contrary to what I’m really good at.  I need to remind myself to get back to reality and stick with what has taken me to this point so far.  I’d encourage you to stick with what you know — and if you venture away from your competencies, to acquire the talent and knowledge you may need… right away.

A friend once told me:  “know what you know, and know what you don’t know.”  Meaning, stick with what you know and be aware of when you’re drifting into an area outside of your expertise.

Exploring my options, safely…

- Aron

Not that taking a $25,000 bath would ruin any company, but I want to throw out some numbers to show how much a mistake can really hurt a firm.
I want to show how waste can really impact your financial position.
WARNING:  Boring numbers article ahead…

This is going to be short and simple, but it’s something to think about.

Let’s say a company has an employee that wastes 1 hour every day at work.  For whatever reason, they piece together a few minutes here and there and it adds up to one hour per day wasted.  I don’t think this is totally uncommon.
This is 1 hour X 48 weeks X 5 days per week (assume two weeks vacation and two for holidays).
For the year, they’ve wasted 240 company hours.  Let’s assume they are paid $25 per hour… they’ve effectively stolen $6000 of the company’s money for the year.

Here’s where it really gets sickening…

I want to assume that your company operates on a 5% net profit margin.
It would take $120,000 in additional annual sales to cover the one-hour per day that your employee wastes.  Perhaps the way your company operates, all 100 employees are able to waste 1 hour per day.  Hmm… that gets really bad.

What’s the point?
The same holds true for domain name investments.  A few bad decisions can really cripple you.
The $25,000 that I blew investing in .mobi – if I operated at a 5% rate, I’d have to increase sales by $500,000 to get the bottom line back to where I wanted it to be.
This is MAJOR!
(yes, I realize there are tax benefits to taking a “loss”).

What if I made 4 mistakes like this? I’d have to make $2MM in additional sales to get even.

I think many of us (at least I do) jump into purchases without really working the numbers like this.  This is a worst case scenario evaluation.  Even a domain name that costs $10,000 can have major implications if it gets taken in a dispute or if you never are able to sell it.
If operating at a 5% rate, that $10,000 mistake requires $200,000 of additional sales to cover for it.  WOW.

Before a purchase, please conduct due diligence and a self evaluation.
Is the name a potential liability?
Is it potentially harmful?
Could it be taken in a dispute?
Do you have the capabilities and resources to develop this domain?
Do you have the capabilities and network to sell the name?
What is the name REALLY worth to another buyer?
The risks to your business may be far greater than the purchase price.

Remember that money out the door is terribly hard to replace on the bottom line of a business.   It takes a great volume of additional sales to replace the money you are sending out.

Running the numbers…

- Aron

I REALLY want to know WHY you have the number you do.
WHY do you only have 5?
WHY do you have 1000?
What is the strategy behind your number?

I think that’s most beneficial piece of information – if you feel like sharing.  I share my number and reasons below.
Please fill out the poll, and, if you like – please comment below on why you have the number of domains that you do.

Me?
I like to have about 8-12 domains at one time.  Yep, not very many.  My strategy is quality over quantity, and I like to acquire the very best names that I feel I can develop or easily resell.
For me, it’s just as easy to sell a name in the $100,000 range than it is to sell one for $5000 — so I go for the high value names when I buy.  That’s my strategy.  Keep a low number of names, make sure most of them are very high value and make sure I can easily develop them or sell them if needed.

Granted, I do have some names that aren’t absolutely top-tier… those are for fun side projects or experiments.

Let me know what volume you own and the strategy behind your number.

Thank you!

Always learning…

- Aron

An asset can take many forms:  cash, accounts receivable, inventory, real estate, land or equipment… to name a few.
Everything in this list provides and economic benefit to a company.  These items can be used to generate cash flows in the future or they can be converted into cash.

A liability is any debt or obligation that is owed by a company (basic definition).

It is important to ask yourself, when acquiring a domain name:  Is this an asset or a liability?

Far too many domain investors purchase names, to build up a portfolio — but they are just adding more liabilities to their business.
Every domain name you can get your hands on is NOT an asset.

For me, a domain asset is one that fills any of these criteria:
1. It is marketable.  It is easy to sell.
2. It is easy to monetize.  It’s simple to make money with the domain.
3. It has established value based on recent comparables.  Speculative investments are fine – but until you can establish a baseline value for the speculative name, it might be a liability.
4. There is a recognizable buyer base (or potential buyers) that would want my domain name.
5. It is composed of a word or words that name a market, service or product.  The words must make sense when combined together.
Example:  ComputerMonitor.com (yes).  MonitorsComputer.com (no).
6. It is composed of a generic word that could be used for branding a company or product/service.  AND, the name needs to be easy to sell and spell.
Examples:  Blue.com and Power.com.

That’s it.
If you can’t sell it, make money with it or develop a brand on it, it’s probably a liability.

Liability domains:
1. Violate trademarked terms.
2. Have no real market value.
3. Have no real buyers.
4. Have no way to make revenue.
5. Have no comparable sales.
6. Are random strings of letters that don’t spell out any real word of value.
7. Are combinations of words that don’t make sense together.

Liabilities are the domains that just sit there, not earning revenue – with no well defined buyers or use.

I’m guilty – I’ve bought several liabilites in the past.  I still own a couple of them.
I paid around $25,000 during the .mobi craze – and I landed Jokes.mobi.  Yeah.  Ouch. 
I put up a simple site on it, got some traffic (it still has traffic) - but NO major revenues and there are NO well defined buyers in this space.
What’s it worth today?  Who knows.  Well under $5000 I’d imagine.
This liability has no revenues, no buyers, no recent comparables to give it an established value.

Be sure you are adding assets to your portfolio.  Everyone loves to build a “portfolio” of names, but unless you’re adding names that can be sold or monetized, you’re adding liabilities to your books.

Some examples of domain assets:

1. Shoes.com.  One word.  Names a product and an industry.  Easy to monetize and there are dozens, if not hundreds, of potential buyers.
2. CC.com.  Short, two-letters.  Many companies have these initials.  There are only 676 two-letter .com names and a baseline value has been established on the wholesale market.
3. FileSharing.com.  Has traffic, easy to monetize, good buyer base.  Two words that make sense together and name a market, product or service.

Before buying, please stop to consider if you’re purchasing an asset or a liability.

Still learning…

- Aron

1. Internet puffery is running wild.  Puffery is when you grossly exaggerate accomplishments, credentials, titles etc.  In the age of Internet business, it’s simple to portray yourself any way you wish.  The great thing about the Internet is that the next person doesn’t know if you’re on the 35th floor in downtown New York or in a spare bedroom in your house.

However, it seems people are inflating themselves and their businesses more than ever now.  I suppose they are trying to level the playing field – in order to keep pace with their competitors who may be well funded or well staffed.  I’m reminded of the person who handed out a business card at a trade show.  The card described the woman as President, CEO, President of Sales, CIO etc.  Some people are just trying a bit too hard.

I’m guilty.  I’ve done it before.  It must be born from insecurity, I suppose.

What’s my point?
If you’re a small company… embrace it.  If you’re a one-man-show (like me) – use that to your advantage.  A small firm is more nimble than a bloated behemoth.  A one man operation can provide the value of TOUCH to your customers.  A small boutique operation can give more personal contact to the customer.
Plus, hey, it’s cool to be a one man operation.  Don’t pretend to be something you’re not.  You’re not the CEO of anything, really.  I’m not.  I’m just a guy who makes a living online.
The funny thing is, the people in “power” positions who manage hundreds of people – who put in 12 hour days - they are envious of the entrepreneur who lives freely.  Yet, the single employee entrepreneur longs to build a company that employs 500 so he can switch roles with the power CEO.
Be happy where you are.  Make the most of your business size and use your lack of overhead to your advantage.

Which brings me to my next point:

2. Keep your business lean. 
Why do you want an office?  For legitimacy?  That’s not necessary.  The ONLY REASON to lease/buy an office, hire employees or acquire assets is because you NEED them.  Until then, don’t buy or lease anything.
Stay lean – it keeps you flexible.  Low overhead can give you a position of the cost leader that the 500 employee firm could never achieve.  Then, when there is a downturn in the market – you’re still fine.  You have low fixed expenses and you’ll survive.

The business process in a lean operation is simple:
Formulate a Hypothesis (business idea)
Test your Hypothesis (business idea)
Validate it and Make Assumptions
ITERATE (change what needs changed – continue doing what needs to remain unchanged)
Build a Scalable Process (build a business that scales based on what you’ve learned).

I don’t see leasing office space or hiring 10 people anywhere in that list.  Do you?

I outsource everything.  Why?  It keeps me flexible and it’s cheaper.
We’d all love nothing more than to get a group of 12 people to start and run a business.  Pooling our collective ideas together would be awesome – and I imagine amazing things could occur.
But, it has to be the right timing.  It’s not necessary right now, for me.  It’s probably not for you either.

If you hire, add office space or add to your fixed expenses – it better be out of absolute necessity.  If you can outsource, work from home and do it yourself – do it.  Stay lean.
Being lean gives you a competitive advantage – and that’s something that every company strives for.

Lean by nature (but, that’s a different kind of lean).

- Aron

People often ask me if I use an anonymous email address to make offers on domain names.  Many people do.  They will register a random gMail account and try to hide their true identity – with the hopes of receiving favorable pricing on a domain name.  As I discussed here:  Researching a Domain Buyer  most sellers will try to find out exactly who the person is making an offer on a domain.  Of course, as I stated, some people offer the same price no matter who is inquiring.

I don’t use an anonymous email address when I make an offer. 
There are several tactics that buyers and sellers use when purchasing or selling, such as:
Anonymous.  Don’t reveal your identity (when buying).
The tough sell (when selling).  Short replies – not much information given out – set a price – stick to your guns.
Good cop / bad cop (when buying or selling).  Blaming a business partner (who probably doesn’t exist) for why you can’t increase your offer or lower your sales price.

The tactic that I employ is honesty.  It’s not really even a tactic — it’s just how I handle domain name deals.

If I’m buying:
I tell the seller exactly who I am.  I will be honest and tell them that I have a plan for a project and I’d like to use their name.  I frequently tell a bit about me, but I let them know that my company is a one-man-operation — and I’m not the big fish buyer that they may be waiting on.  If that’s who they are waiting on – that’s fine.
If I can get the domain for the price I want, I’m happy.  If not, being anonymous wouldn’t have helped me, in my opinion.
I like to be open, honest and upfront about myself and my plans.  It develops a small rapport with the seller.
I wouldn’t want someone to yank me around if I was a seller, so I extend the courtesty of being honest to the other party.

If I’m selling:
I don’t create fictitious partners.  I don’t give short 1 or 2 word replies.  This works for many people, I just find it uncomforable.  It’s easy to be tough online, but I try to be myself.  I’m not an abrasive person in real life – so why be that way online?  A short two word reply to an inquiry doesn’t really capture my personality or my nature.  So I don’t act that way in my correspondences.
I am typically honest…
“Hey, I’m not a motivated seller for this domain name… Had you inquired about ______ .com, I’d be more willing to work with you on pricing — since my plans for that name have changed.”
or
“Thank you for the inquiry… we are a bit off on our valuations, but I’m willing to work with you on the pricing…”

Obviously, there are dozens of examples.  You get the point.  I’m always honest about my expectations as a seller – and if the buyer is WAY off on pricing, I don’t turn them away harshly.  Not everyone values names like I do and not everyone has the budget that I’m looking for.

Many people change their tactics based on the inquiry.  If the seller is well funded, if they are low-balling, if they have an abrasive tone… sometimes people vary their responses based on the initial contact.
There is no one-size-fits-all that will work in all situations.
However, I’ve found that being myself and being honest has taken me farther than trying to be someone I am not.  Have I left money on the table by being this way?  Who knows.  Maybe.  But I’ve been pleased with every purchase and sale to this point.

Still learning…

- Aron

It’s very important to keep track of the replies to your inquiries — and keep a record of where/why the negotiations may have fallen flat.  This can be as simple as keeping your old email correspondences or you can create a ledger that lists the domains you are interested in, the seller’s contact information and the current status of the negotiation.

For whatever reason, “deals” aren’t always made right away.  Sometimes the seller isn’t motivated.  Most of the time the difference in perceived value is too great.

I often follow up with the sellers of domains I want every 6 months.  For the names I REALLY would like to acquire, I may follow up every 2-3 months.  I even follow up on negotiations that may be “dead” — domains in which the seller and I were FAR APART on valuation.

Why do I do this?

1. Needs change.  A seller’s economic situation may have changed.  They may need cash – or they may be more willing to sell.  Someone with a “firm” price may be willing to negotiate when you revisit.

2. Persistence pays off.  I’ve bought several names that took me over a year to acquire.  One in particular took me a couple of years.  The seller’s price gradually came down, down, down over the years.  My persistence kept me in the game.  Also, the needs of the seller changed — he was needing quick cash for his business.

It doesn’t take long to reopen a sales conversation with a domain owner.  Many times, you’ll find that the seller has lowered their price — especially if they have sat for 6 months with minimal inquiries.
If anything, it keeps you (the buyer) on their radar — and they know you are serious about buying their asset.

Of course, this also applies if you are a seller.  I’ve followed up with companies that wanted to buy names in the past — and have closed a few deals with a follow up.

Some people call it persistence.  Some people call it hustle.  I call it “keeping yourself in front of a seller”.

Always offering…

- Aron