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strategy Scaling Up A Domain Name Portfolio

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The long term goal for some domainers is to grow their portfolio so that domain names become a full time job, or at least a serious part time income stream.

In a survey conducted mid-2021, almost 20% of NamePros respondents indicated that they were essentially full-time, and another 33% had that as a long-term goal.

But how do you know if scaling up a portfolio is for you? How quickly could one reasonably achieve a large enough portfolio? What is the smart way to approach scaling up?

Some weeks ago I reached out to several successful investors, asking them to share their insights on the topic of scaling up a portfolio. Here is what I found, along with a few ideas of my own.

The Investors

I wanted input from domain name investors at various stages of portfolio growth. These are people whose views informed this article:

Brad Mugford bmugford
One of the most consistent contributors to NamePros, Brad built a quality portfolio with regular sales. Brad joined NamePros in 2007, and aggressively expanded his portfolio particularly around the time of the 2008 financial correction. He currently has a portfolio of more than 6000 domain names.

AbdulBasit Makrani AbdulBasit.com
AbdulBasit Makrani has been building a portfolio since 2010, and currently has more than 7700 domain names. That portfolio produces a steady stream of significant sales. He offers insights for domainers both here on NamePros, and through his own blog.

Tony @blogspotter
While Tony has been highly involved in domain investing for just a couple of years, he has already built a significant portfolio through a high rate of sales. He directs all funds from sales into portfolio growth and improvement. Some of his advice was featured earlier in the NamePros Blog article Insights from Tony. In the most recent month, August 2022, he had 17 domain name sales, with an average price of about $2000, accounting for $35,400 sales in the month.

I did not ask each person specific questions, but rather accepted input on any aspect of scaling up. At the time of submission, they did not know what the others had commented on the topic.

What Is Scaling Up?

While we might at first think of scaling up as increasing the number of domain names, that is not always the case. Tony views scaling up as increasing the probability of your next sale.
For me scaling means improving the portfolio, whether in terms of quality or quantity or both. The goal is to increase the chance of making the next sale. The better quality names I have, or the more names I have of the same quality, the chance of making the next sale increases.

The balance between number and quality was stressed by AbdulBasit Makrani:
I can say that both quantity and quality matters a lot. Without either one, this business model is highly unlikely to flourish.

Brad expressed a similar view.
I have always said I think you really need quality and quantity to have a sustainable business model.

Scale With Quality Names

Emphasizing quality, achieving a portfolio with a higher sell-through-rate, will help save on the drain due to renewal costs of large portfolios.

Brad stressed buying fewer, but better, domain names.
If I was starting with say $10,000, and months of time, I would more than likely pick up domains in the $50 to $500 price range, pretty much just .com. Not only are you going to get significantly higher quality domains, you are going to make renewals less of a factor. If you are paying a $10 renewal on a $200 domain it doesn't eat into value as much as paying renewals on a domain worth registration fee. These higher quality domains are more likely to sell, and for higher prices.

Tony had earlier emphasized the key importance of building the portfolio with names with strong business use. As he summarized,
I only buy names that other people will like.

Brad stressed the end user pool in his comments:
I generally look for domains that already have a pool of potential end users. It is just easier to find buyers if they already exist. Also, over time that pool tends to grow larger.

How To Build A Portfolio

But what is the best way to build a portfolio? Options include:
  • expiring auctions
  • closeouts
  • recently dropped names
  • hand registration
  • wholesale acquisitions
Brad suggested some combination of expired auctions, closeouts and wholesale acquisitions, as the primary methods.

Tony builds his portfolio through those ways, but also at times, particularly for trending technologies or certain extensions, still does hand registrations. He uses ExpiredDomains.net extensively, and has provided NamePros readers with an excellent guide with tips for using ExpiredDomains.

AbdulBasit Makrani feels that closeouts should be the primary acquisition mechanism during the early years.
My strong suggestion for anyone with a limited budget to build a portfolio is to start from GoDaddy Closeouts. Don't bother looking elsewhere, just laser focus on the closeouts. You'll find plenty of gems every now and then. When you sell any of the domains from those closeout acquisitions, keep buying more domains from the closeouts only. That will keep your average cost under control.

Even though he is now well past the early stage of investing, he still uses closeouts extensively.
Even today, I keep hunting closeout domains not because of having cash only for closeouts, but the main reason is to keep a balanced portfolio. Most of the time, sales are happening in the low 4-figures range. Around 50% of my domains are priced from $1,988 to $4,888. More sales are happening in this range, and for that I need to keep buying closeouts level domains.

He shared a few names he has acquired from closeouts in recent years to demonstrate the potential:
  • Pawticular.com
  • EastsideGarage.com
  • FreedomExpressions.com
  • HomeCheckInspection.com
  • TriPillars.com
AbdulBasit suggests that once your cash flow is consistent enough that you don’t need to worry about having funds for acquisitions and renewals, that is the time to begin investing in higher-priced domain names.
Once you have a strong enough cash flow, you can start buying domains in the low to mid 3-figures range. Make sure that if sales are down, it won't affect much your purchasing. The key is to keep buying domains on a consistent basis.

Are You In A Position To Scale Up?

Most will scale up, in early years, by putting almost all proceeds from domain name sales into acquisitions and renewals. As Tony explains
I spend whatever cash flow I get from sales into buying better names everyday. Which is a no brainer. Most domainers do the same.

In order to do that, you need to be in a position to not depend on revenue from domain names for living expenses. Not everyone has those circumstances, so aggressive scaling is not for everyone.

When you are scaling up, job one is finding great names. As Tony previously wrote:
This business is all about buying. As veterans often say, ‘You make money on the buy.’ It is kinda obvious, but you gotta keep grinding.
Being disciplined enough to search daily, and only to acquire names with legitimate quality and at the right price, is the secret to success.

When acquiring domain names at auction, or in negotiated wholesale purchases, it is critical to not overpay. As Brad wrote,
Don't be afraid to walk away if the price is not right. Try to avoid emotional bidding. There will always be more opportunities.

How Big A Portfolio Is Needed?

AbdulBasit suggested that some might use outbound in early years to help improve cash flow or to scale up more rapidly. He also suggested the size of portfolio required for it to be self-sustaining and provide an income.
To keep sales happening on a regular basis, one can always do outbound marketing. I stopped many years ago, and the inbound sales now happen by themselves. To reach this level, you need to have at least a few thousand domains of decent quality.

Looking At Projections

Model 1: $10,000 initial, $100 acquisitions, $2000 average net, $1.5% STR:

Brad suggested the importance of projections. A smaller portfolio, of better quality names, are more likely to sell, and also command better prices. He suggested a model with a $10,000 initial investment, spread across names with an average acquisition cost of $100 per domain name, allowing 100 names initially. With that, he suggested that it is probably realistic to achieve a 1.5% sell-through rate (STR). I assumed an average net sale of $2000. When commissions are taken into account, that means the actual final selling price needs to average about $2300.

I did a 15-year projection for that model. I assumed that no funds were taken out, with all reinvested in domain names, or spent on renewals. For simplicity I kept the sales price and acquisition price constant, and the renewal at $10 per year. While all will likely increase in price over the time period, since both revenue and costs are increasing, the impact might not be very much.

Here are the results. The first column is the year, and the second give the number of domain names. The assumed 1.5% sell through rate suggests $3000 in revenue after one full year, but we need $1000 for renewals (100x$10). That leaves $2000 for new acquisitions ($2000/$100), so with the additional 20, and subtracting the 1.5 sold, you have 118.5 domain names for the next year. I allowed for modelling partial domain names, although of course in the real world one either has 1 or 2 or 3 or some other whole number of sales.

Number
Number Sales
Net Sales
Renewals
New Acquisition
1
100.0​
2
118.5​
1.50​
$3,000​
$1000​
$2000​
3
140.4​
1.78​
$3,555​
$1185​
$2370​
4
166.4​
2.11​
$4,213​
$1404​
$2808​
5
197.2​
2.50​
$4,992​
$1664​
$3328​
6
233.7​
2.96​
$5,916​
$1972​
$3944​
7
276.9​
3.50​
$7,010​
$2337​
$4673​
8
328.1​
4.15​
$8,307​
$2769​
$5538​
9
388.8​
4.92​
$9,844​
$3281​
$6562​
10
460.7​
5.83​
$11,665​
$3888​
$7776​
11
546.0​
6.91​
$13,822​
$4607​
$9215​
12
647.0​
8.19​
$16,380​
$5460​
$10920​
13
766.7​
9.70​
$19,410​
$6470​
$12940​
14
908.5​
11.50​
$23,001​
$7667​
$15334​
15
1076.6​
13.63​
$27,256​
$9085​
$18171​

Progress is consistent but relatively slow. By year six you are selling about 3 names a year, about $6000 revenue, but need $1972 for renewals, putting the other $3944 into acquisitions.

By year 15 you are averaging more than one domain name sale a month, with a portfolio size of 1077 names. You take in annually about $27,260 from domain sales, needing $9085 for renewals. At this point you could begin to pay off that $10,000 initial investment, and also start taking out an income, but probably not enough to live on.

Model 2: $10,000 initial, $100 acquisitions, $3000 average net, $1.5% STR:

There is nothing magic about any particular set of numbers. For example, I looked at a more optimistic goal of average $3000 sales, rather than $2000. I assumed no change in acquisition cost and kept a 1.5% STR. With that assumption, you would be generating over $192,000 from sales by year 15, and have a portfolio of about 5700 names.

Model 3: $10,000 initial, $25 acquisitions, $2000 average net, $1.0% STR:

You can build much more rapidly if it is possible to achieve the same STR and average price through purchase of closeouts at lower prices. To try this out, I assumed a $25 average acquisition price, representative of mid-closeout range. I assumed $2000 net sales price, as before. I did edge down the STR to 1%, since the names are not quite as strong, supposedly.

This time, one starts with 400 names ($10,000 / $25). Over a 15 year period, with all revenue reinvested in acquisitions, one would grow to a portfolio of more than 40,000 names by year 15, with about $578,000 per year from sales, although renewals will eat up just over $289,000.

Model 4: $10,000 initial, $25 acquisitions, $1200 average net, $1.0% STR:

I also looked at a model with the average sales price $1200 net, which would make the growth of the portfolio much slower. I kept the $25 acquisition cost. Now there are just over 1000 names in the portfolio by the end of year 15, with annual sales revenue of $11,567, but the renewals are eating up $9639 of that. This really stresses that rather modest changes in the assumptions have a big impact over a long period.

I ran a number of other models as well, but show the growth numbers below for the four models mentioned. Note that the vertical scales on the graphs are very different.

Image - 4 Graphs REV.png


There are some costs that I have not reflected in these projections, such as membership, hosting and accounting fees. Since annual costs, these would have relatively minor impact on the projections, but would reduce rate of growth slightly. I also did not include revenue from holding the domain names through paid parking or other methods.

Thoughts On Pricing

The model simulations illustrated the importance of both the sell-through rate and the sales prices. Brad shared his view on the topic of pricing:
I think there is a fine balance between pricing domains and maximizing sales. I tend to price average to good domains, and leave higher upside domains (especially high quality .com names) unpriced and available via negotiation. I think that setup provides a good mix of cash flow and higher end sales.

Get Names Effectively Listed

A key part of achieving a sell-through rate that will support scaling up a portfolio is to make sure your names are easily seen by potential buyers. That involves landers, marketplaces and for some names being in the registrar networks. Brad stressed the importance of the major marketplaces:
To maximize the sell-through rate, it is essential that domains are listed on popular venues, such as Afternic, Sedo, and Dan. The more eyeballs on a domain, the more likely it is to sell.

The NamePros Blog covered the topic of The Many Ways People Might Discover Your Domain Name.

Making Deals And Growing The Portfolio

Some domain investors try to wring maximum value out of each domain name, turning down many offers along the way. Tony suggests that during the growth phase a different approach makes sense:
I try to close any deal I can. While I reject every first offer, it is with the intention to not make the buyers feel remorse that he or she could have asked for less. But I like to close all deals as long as they are more than the current wholesale price of the said name.

He goes on to illustrate with a specific example:
Say, on a $2500 BIN name I will accept a $500 offer without losing a heart beat. That is because most of my $2500 names cost me $10 to $30, and with $500 (say $450 after commission), I could get 10 to 20 similar names, or one much higher quality name for $450, which will increase the chance of my next sale.

By not taking the $500 offer, you are holding on to the $2500 name thinking that particular name has a higher chance of selling than a $450 aftermarket name, or 20 names acquired for acquisition prices similar to this name, which is not true.

A Few Final Reflections

Here are a few thoughts I had going through the input from the three investors, the projections, and the ideas of scaling up in general.
  1. Don’t feel you have to scale up. If you are happy with your current portfolio size, quality and returns, there is nothing wrong with keeping it about constant.
  2. If you do decide to scale up, have a clear plan. It may later change, but having an idea how many years, and to what size, you are aiming makes sense.
  3. Over the years, rather small changes in STR, selling prices or acquisition costs can make a huge difference. The time I spent playing around with the projections were illuminating.
  4. I think it is critically important to keep good records, both for tax and other purposes, but also to monitor whether you are on track with your plan.
  5. In other writing, Tony commented on the importance of feedback. Look at how names you acquired a year ago have performed, and use that feedback to constantly improve your name selection skills.
  6. A single outlier sale may represent an opportunity to scale up faster, but don’t plan around outlier sales.
  7. Some things are out of our control, such as renewal pricing and general business climate. Make sure you will feel comfortable with holding a large portfolio.
  8. Choosing the right names is hard. But really it is not just the most important thing, it is almost the only truly important thing. You need quality names that people will want to use.
  9. My projections assumed a $10,000 starting investment. Many will not have, or not be willing to invest, that amount. There are ways such as entering SquadHelp contests or suggesting names held by them to start with less, or to use outbound on a few startup names, and not acquire more until you have sold those.
Please share in the discussion below what you think, and if you have experience in scaling up a portfolio.

As I was doing the final editing of this piece Tony shared the following positive message on social media
The beauty of domaining is that you can start with very little capital.

If anyone really wants to know model results for some other parameters, just ask in the discussion below. Tell me what average acquisition cost, initial investment, STR, and net sale you want to assume. I have it set up so I can readily turn out results for any set of parameters.

The NamePros Blog interviewed Keith DeBoer on the topic of Making the Leap to Full-Time Investor.

If interested in some of the aspects of scaling up a business in general, not specific to domain name investing, I found 10 Tips For Scaling Up Your Business an interesting read. Point 4, Get Your Strategy Right on a strategic plan with milestones is definitely applicable to growing a domain name business.


Sincere thanks to Brad, AbdulBasit and Tony for their insights and advice.
 
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The views expressed on this page by users and staff are their own, not those of NamePros.

jiy k

Established Member
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Thank you for suggestion. The closest thing that I have yet written on NamePros is the three part series on Domaining, Just The Basics. It does cover some of those issues including transfer and pushing, the lock period, TXT verification problems and how to overcome them, etc. Here are the links:
  • Part 1 Domain Investing Basics – domain terms, extensions, research, registration, buying, renewing, where to list, and developing a plan.
  • Part 2 Domain Investing Basics – characterizing domain names, landers, pricing, payment plans, DNS records and verification, fast-transfer networks, and domain transfer.
  • Part 3 Domain Investing Basics – legal, UDRP, parking, other ways to learn, your own website, marketplace options, inbound and outbound, sources for more information.
I have made note of the topics you have suggested, although we try not to make the blog too much on specific issues that might change with time.

Remember that one can join an appropriate discussion, or start a new one, to learn from others how to overcome any domain related obstacle. The NamePros community is an important shared resource. While I try to organize and present information and links, the true expertise is in the wider community.

Thanks again for your comments and suggestions.

Bob
Yes. I have gone through all the Articles you have mentioned. I agree that these things change on time and also there should be a separate thread for tackling Technical issues encountered in Domaining.
Thank You.
 
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jiy k

Established Member
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Thank you 🙏🙏
Thank you for your comments, but my posts really are a reflection of the expertise and views of the domain community, in particular the NamePros community, and not my own expertise, in most cases.

I don't do any one-one mentorship, for a variety of reasons. I like writing for NamePros, since anything can be commented on by anyone, and is open to all readers without cost. I think that is a better way to contribute.

I might pick up on the passionately aspect to dispel the view that anything I write about is something I personally adopt and am enthusiastic about. I try to reflect the wider expertise of the domain world, not just what I apply or have some limited expertise or interest in. In this case, I personally don't plan, mainly due to my stage in life, to aggressively grow my own portfolio. But I saw that scaling up was of interest to many, so wrote about it, with help from experts who had successfully scaled up.

By the way, at some point I am planning an article on the opposite, shrinking a portfolio successfully, in case there are some readers who are interested in commenting on that please DM me. It won't be for at least a month though.

Bob
Do Domain get added to your portfolio immediately after buying from Closeout? Thanks
 
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spigiv

Top Member
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Thank you @Bob Hawkes , great piece as always!

I would like to add (as I have mentioned here on NP several times before) the importance of selling your names to other investors to improve portfolio turnover. Your model assumes a yearly behaviour pattern with a static portfolio size - I believe you by improving the turnover of names in that portfolio (even for smaller amounts) may bring your profits over time higher. Selling 100 names at 50 with a purchase price of 25 nets you 2500, might be easier to do that than buying 100 names, hope for the 1,5% to hit those and with renewal fee manage a net around 2500. It may take more time but for sure an angle to early investing to explore.

I argue for the above for newbies especially since I have taken that route myself and now see it paying of exponantially.
 
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I would like to add (as I have mentioned here on NP several times before) the importance of selling your names to other investors to improve portfolio turnover. Your model assumes a yearly behaviour pattern with a static portfolio size - I believe you by improving the turnover of names in that portfolio (even for smaller amounts) may bring your profits over time higher. Selling 100 names at 50 with a purchase price of 25 nets you 2500, might be easier to do that than buying 100 names, hope for the 1,5% to hit those and with renewal fee manage a net around 2500. It may take more time but for sure an angle to early investing to explore.

I argue for the above for newbies especially since I have taken that route myself and now see it paying of exponantially.

Different models work for different people based on many factors.

However, in my view this type of model worked better in past years.

While it could work on a limited scale, I don't think it would really scale up in a major way.

The problem is really getting quality inventory. There are around 160 million .COM registrations so the hand register pickings are rather slim. Closeouts and other low cost venues are highly competitive.

The margins are too low on that example scenario. If you buy for $25 and sell for $50 you need a 100% sell-through rate in the first year to double your money. That is not really feasible.

You might be able to create a business model selling to investors, but I doubt with those margins.

Brad
 
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spigiv

Top Member
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Different models work for different people based on many factors.

However, in my view this type of model worked better in past years.

While it could work on a limited scale, I don't think it would really scale up in a major way.

The problem is really getting quality inventory. There are around 160 million .COM registrations so the hand register pickings are rather slim. Closeouts and other low cost venues are highly competitive.

The margins are too low on that example scenario. If you buy for $25 and sell for $50 you need a 100% sell-through rate in the first year to double your money. That is not really feasible.

You might be able to create a business model selling to investors, but I doubt with those margins.

Brad

You know this much better than me Brad, I know that. I will not argue this one more but just conclude that for myself I have managed ok in the build up phase to do this. Then I fully agree that it will not scale beyond year 1 / 2 in the model but up until then a combo will be needed I think. This is me talking from my own experience only.
 
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You know this much better than me Brad, I know that. I will not argue this one more but just conclude that for myself I have managed ok in the build up phase to do this. Then I fully agree that it will not scale beyond year 1 / 2 in the model but up until then a combo will be needed I think. This is me talking from my own experience only.

I agree with the primary point that cash flow can be an issue when you are starting out.
There is really no easy way around that though.

You either need sufficient starting capital, a quick or outlier sale, an above average STR, or an above average sales price to overcome that. Or, some combination of those.

While I am not a big fan of pitching domains to end users, some have found that is a reasonable way to get started or generate some cash flow.

I think it is harder to do now than years ago, but if you go down that path just be selective.
There is a fine line between offering a domain to a handful of people and just bulk spamming.

Brad
 
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Future Sensors

78% of human domainers will be replaced by robotsTop Member
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You either need sufficient starting capital, a quick or outlier sale, an above average STR, or an above average sales price to overcome that. Or, some combination of those.
Good points. Perhaps a model in which you, as a domain buyer, make smart use of LTO payments, will also work. Of course with disclaimers re ownership...
 
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spigiv

Top Member
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I agree with the primary point that cash flow can be an issue when you are starting out.
There is really no easy way around that though.

You either need sufficient starting capital, a quick or outlier sale, an above average STR, or an above average sales price to overcome that. Or, some combination of those.

While I am not a big fan of pitching domains to end users, some have found that is a reasonable way to get started or generate some cash flow.

I think it is harder to do now than years ago, but if you go down that path just be selective.
There is a fine line between offering a domain to a handful of people and just bulk spamming.

Brad
Agree, I am a fan of turnover so lets settle on what ever drives turnover is good ;)

Not an outbound fan myself and do not do that either, to much hustling for me :)
 
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I would like to add (as I have mentioned here on NP several times before) the importance of selling your names to other investors to improve portfolio turnover.
Thanks for your comments. Yes, the model was a simplified year one, as opposed to month by month, and did not assume any wholesale sales. I agree that is part of the overall financial picture. I realize some don't bother with liquidations or wholesale sales, and that is fine.

Personally I see some merit during the learning phase, not that we ever stop learning, of the first year or two to have wholesale sales to other investors a significant part of the picture. By seeing what other investors will buy, and for how much, one can learn the refinements of domains. By having more transactions, one can learn the technical side (listings, pushes, transfers, etc.). And since still learning, not too much invested in any one choice that might be a bad call.

Thanks to everyone for their comments.

Bob
 
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I think this paints an overly optimistic view ...

* Only use rounded-down whole figures for the number of sales/year and number of newly acquired domains

* Remember compounding is good when it's income and bad when it's expense !

* The number of even remotely saleable domains at $100 goes down YoY exponentially
(what you could acquire for 50$ 5 years ago are 100$ now)

Expected acquisition cost average should increase by at least 10% every year (rounded up whole figures)
100 > 110 > 121 > 134 etc

* Renewal costs predictions are a Yazz song, so build in an increase of appx 10% every year (rounded down whole figures)
10 > 11 > 12 > 13 etc

* From my own experience, around 9% of 'cheaply aquired' domains owned get dropped each year as the portfolio is pruned of lower-quality names, "dated" and trend-based names and names with no enquiries.
The current graphs show no "disposal" numbers currently, which on $100 names is likely to be a large number
(constantly renewing duff domains is how many domainers run out of cash)

* 100$ - 2000$ is a 20x markup, whilst it's possible to get that (and higher) on some names, as an average that seems unattainable (generally the x goes down the higher the acquisition cost as well)
Talking with verious domainers as an average that's somewhere between 5x and 9x on $nnn domains and 10x - 25x on $nn domains - there is a definite subset of the industry buying at sub $30 selling at sub $300 (10x) which is very much a full time job

* Average %age number of sales varies greatly at different price-points, for us on names > 3000$ it's 0.6% yet for names < 1000$ it's 4.4%, this 1%-ish figure a lot of domainers talk about seems to be an urban myth


There is some great advice in the article ...
AbdulBasit suggests that once your cash flow is consistent enough that you don’t need to worry about having funds for acquisitions and renewals, that is the time to begin investing in higher-priced domain names.

Being disciplined enough to search daily, and only to acquire names with legitimate quality and at the right price, is the secret to success.
 
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Attached a draft s/sheet for people to play with the red numbers as needed :)
 

Attachments

  • NamePros - Scale Up.xlsx
    14.3 KB · Views: 35
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Thanks so much for your critique and for sharing your spreadsheet, @othellotech

Particularly want to highlight these points:
Expected acquisition cost average should increase by at least 10% every year (rounded up whole figures)
100 > 110 > 121 > 134 etc
* Remember compounding is good when it's income and bad when it's expense !

Agree that costs likely (although not with certainty if major economic depression) to go up. As mentioned in article, one should probably also scale up sales figures, and if two scale by same amount not much impact.

Renewals hard to know. We have two more approved 7% .com increases to take effect, then I guess will see in new round.

Acquisition prices have certainly increased at a more rapid rate as you correctly note. It is hard to know if retail prices have kept pace, I suspect not completely.

* Only use rounded-down whole figures for the number of sales/year and number of newly acquired domains
This is the one point I don't quite agree with. As a scientist, there is absolutely nothing wrong with models that use fractions for things that sell in whole numbers. In fact that is more accurate than truncating down. Now in real world of course you either sell 2 or 3 or 5 or some whole number, but projections should scale per the most accurate values.

Your fundamental point of too optimistic, in retrospect I don't think the article sufficiently stressed that this was model calculations, and thus no better than the assumptions that go into that model. As such is buying $100 or $25 reasonable, for sales at $2000 net and a 1.5% STR. Certainly one needs to be in upper percentiles of all sellers to achieve that in early years I think. Thank you for stressing with your remarks the picture may be overly optimistic.

Thank you once more for great contributions.

Bob
 
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Agree that costs likely (although not with certainty if major economic depression) to go up. As mentioned in article, one should probably also scale up sales figures, and if two scale by same amount not much impact.

I did assume both in the sheet I threw together :)

I'm just aware that the real and ever escalating cost of "holding" a name isn't always considered by more recent entrants to the industry until the bills start mounting up (based on many many discussions with people constantly having to pump money in)

For me it's always helpful to see other peoples projections/methodologies - I have spent some time working on ways to "systemise" our pricing formulae for "stock" names to ensure they cover the initial acq cost+renewals and a %age of overall running costs and a %age towards those dropped etc which is getting ever more complex than just an X multiplier.

There a 2 things I see with domain reg/renew prices

1. Registries see Registrants (of whatever type) as cash-cows and will milk them as hard as possible within the contractual constraints (which have now no price caps)

2. There will be an escalation of the Registry scam/policy to "recategorise" existing names as "premium" so that for names _they_ feel have value the "owning" cost will become significant (unless ICANN is replaced with something that actually cares about Registrants rather than also seeing them as a cash-cow)

Pick your own apocalyptic future for when those 2 collide ;)

This is the one point I don't quite agree with. As a scientist, there is absolutely nothing wrong with models that use fractions for things that sell in whole numbers.

We'll agree to disagree - in my view you can't sell 1.5 domains a year for 2 years when using it to project cashflow - If you sell 3 in 2 years that has to be handled as 1 then 2 or 2 then 1 or 3 then non.
This does make building a model a little more "fun" and IMHO rounding up on expense and down on income is always the right way to "project" (or at least analyse past-performance), YMMV

But a lot of this is based on averages - and who sets out just to be average ?
 
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Thank you for your comments, but my posts really are a reflection of the expertise and views of the domain community, in particular the NamePros community, and not my own expertise, in most cases.

I don't do any one-one mentorship, for a variety of reasons. I like writing for NamePros, since anything can be commented on by anyone, and is open to all readers without cost. I think that is a better way to contribute.

I might pick up on the passionately aspect to dispel the view that anything I write about is something I personally adopt and am enthusiastic about. I try to reflect the wider expertise of the domain world, not just what I apply or have some limited expertise or interest in. In this case, I personally don't plan, mainly due to my stage in life, to aggressively grow my own portfolio. But I saw that scaling up was of interest to many, so wrote about it, with help from experts who had successfully scaled up.

By the way, at some point I am planning an article on the opposite, shrinking a portfolio successfully, in case there are some readers who are interested in commenting on that please DM me. It won't be for at least a month though.

Bob
Not sure what you mean by shrinking a portfolio. But keep 'em coming. I think you are referring to trimming your portfolio of names that are a liability.
 
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About 5 years ago I did some projections on profitability for different domain investing models. As with any model calculations, they reflect the assumptions made. I considered various models including buying quality expiring, investing in cheap discounted names, an optimistic view of a mixed portfolio, a pessimistic view, etc, with different scaling of NameBio to real sales and average or median prices used. I found that most models result in the investor losing money, but a couple were positive, with optimist strongly so. That was a different approach than here, computing a ratio of expected gains to losses. Can read more details of model here.

Until a recent discussion at time of an interview, I had forgotten that Andrew of @DomainNameWire did projections a few years ago. Unlike the model I used here, that assumes a starting amount ($10,000 here as per @bmugford suggestion) and spending a few months finding strong names and then starting the clock at that portfolio, Andrew models on a more realistic assumption of continuous buying. You can see his results, which in general show that break even is achieved between 4 and 7 years, and things become strongly profitable after that. If of course depends on the assumptions!

I don't have the results in front of me, but @Paul Nicks in his keynote at NamesCon 2019 mentioned model calculations, based on assumptions of purchases in expired auctions and closeouts (as I recall). Assuming one put all revenues reinvested in domain names, I think his results showed break even about 4 years in.

The somewhat more optimistic projections in this paper were meant to represent what could be possible with an investor being disciplined, educated and making sound choices consistently. It was not meant to represent what any average person deciding to invest in domain names could achieve. Even with these optimistic suggestions, one does not break even for some years, as the other studies noted found as well.

Thanks everyone for your encouragement, comments and contributions.

Bob
 
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Not sure what you mean by shrinking a portfolio. But keep 'em coming. I think you are referring to trimming your portfolio of names that are a liability.
Thanks for your supportive comments. My ideas are still flexible at this point, but my current intention is to trim a portfolio both for reason you mention (liability names removed to make place for fewer but better names) but also a systematic approach for those who may want to reduce their overall portfolio for other reasons, such as pressure of other responsibilities, need to take revenue out for life expenses, age, loss of interest, etc.

Bob
 
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Until a recent discussion at time of an interview, I had forgotten that Andrew of @DomainNameWire did projections a few years ago. Unlike the model I used here, that assumes a starting amount ($10,000 here as per @bmugford suggestion) and spending a few months finding strong names and then starting the clock at that portfolio, Andrew models on a more realistic assumption of continuous buying. You can see his results, which in general show that break even is achieved between 4 and 7 years, and things become strongly profitable after that. If of course depends on the assumptions!
Yeah, to me that $10,000 is just a starting point to illustrate you need both quality and quantity.
If you own (3) domains it is pretty hard to get started. You need a reasonable amount to get the ball rolling.

I agree with Andrew, to really scale you need to continuously buy over time.

Buy. Sell. Rinse. Repeat.

That is basically what I have done for 15 years now.

Brad
 
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Also, as you start to scale and have steady cash flow you can take more chances on domains.

You also don't need the same ROI on every domain.
Not every domain needs 50x ROI.

It really depends on the wholesale price and liquidity. I would happily pay 30% below market value for a LLL.com because I know I can sell it instantly.

If it is just some random (2) word brand that "sounds good" you need a much higher potential margin, as the odds of selling are much lower. The more liquid a domain is, the lower the ROI is required.

I bought a domain a few days ago for $800. I think there is a reasonable chance that it sells for $10K+ over time, but at the same time there is a large enough potential pool of buyers now that I think I could sell it immediately for at least 2x what I paid. It is not just about the upside, it is about the lack of downside.

I lot of this stuff is very nuanced and you only really learn over time with experience.

Brad
 
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Zouniact

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Thank you Mr. Bob For This article!
Your content helps us a lot to grow
 
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Mytz.com

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Mytz.com

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Maxasll

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Thanks, Bob 🌹
 
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poweredbyme

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jiy k

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It really depends on the wholesale price and liquidity. I would happily pay 30% below market value for a LLL.com because I know I can sell it instantly.

If it is just some random (2) word brand that "sounds good" you need a much higher potential margin, as the odds of selling are much lower. The more liquid a domain is, the lower the ROI is required.
Can you please elaborate this with some example. That would really help.
Thank you.
 
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ileynames

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Super helpful! Thanks Bob and thanks too to Tony, Brad, Abdulbasit
 
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