Dan.com
NameSilo
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.

Yusupbabay

presiden.comTop Contributor
Impact
7,802
Great article and very helpful information for domainers

Thank you @Bob Hawkes
 

bahaba

Established Member
Impact
130
I don't know why I was disappointed in selling the domain and why I feel that these sales are fake and are just advertising for domain registration companies!
Look at our situation. We sellers buy from each other, and there is no final customer, but a seller who buys from a seller!
To confirm my suspicions, I researched the domain sales reports. Most of the domains that were sold at fantastic prices are not available online, or when you try to access them, you get a warning through an anti-virus program.

I won't go away and I will speak for myself, I have more than 800 domains since 2 years I have not sold any of them! 800x10=8000 $
When I see xxxxxx sales reports, my eyes pop out and I buy more domains hoping to see luck smiling at me! But I did not see XXXXX, nor her cousin XXXX, nor even her aunt xxx or her grandmother xx. But once I got lucky once and I sold my domain through Dynadot User Action for $1.

We sellers are just fuel for domain registration companies.
They play with our weakness, our need for money. They put out huge sales reports and we fall into the trap of greed. The result is that we lose more money and domain registrants earn more of our money!

Then they tell us to buy more, when you buy more Dominas, your chances of selling will increase!!!
Yes, two years ago, until now, I paid $8000 and i won -$8000 and I'm still buying more every day when i see any X report and I'm still falling into the trap every day hoping luck smiles on me.
 

AbdulBasit.com

DomainsWeb.comTop Contributor
AbdulBasit.com
Impact
13,295
I don't know why I was disappointed in selling the domain and why I feel that these sales are fake and are just advertising for domain registration companies!
Look at our situation. We sellers buy from each other, and there is no final customer, but a seller who buys from a seller!
To confirm my suspicions, I researched the domain sales reports. Most of the domains that were sold at fantastic prices are not available online, or when you try to access them, you get a warning through an anti-virus program.

I won't go away and I will speak for myself, I have more than 800 domains since 2 years I have not sold any of them! 800x10=8000 $
When I see xxxxxx sales reports, my eyes pop out and I buy more domains hoping to see luck smiling at me! But I did not see XXXXX, nor her cousin XXXX, nor even her aunt xxx or her grandmother xx. But once I got lucky once and I sold my domain through Dynadot User Action for $1.

We sellers are just fuel for domain registration companies.
They play with our weakness, our need for money. They put out huge sales reports and we fall into the trap of greed. The result is that we lose more money and domain registrants earn more of our money!

Then they tell us to buy more, when you buy more Dominas, your chances of selling will increase!!!
Yes, two years ago, until now, I paid $8000 and i won -$8000 and I'm still buying more every day when i see any X report and I'm still falling into the trap every day hoping luck smiles on me.

You must not be buying the right domains.
 

bahaba

Established Member
Impact
130
You must not be buying the right domains.
You can see Domains portfolio my friend, you will know I already have a good domains and I'm not talking nonsense
 

ReallyBigIdea.com

i-Purchase.com - MarketplaceTop Contributor
Impact
1,459
!
To confirm my suspicions, I researched the domain sales reports. Most of the domains that were sold at fantastic prices are not available online
I have sold many domains that was parked on the same nameservers for years sometimes whois not updated even. i am tired asking buyers to update the whois email.

One of my domain bought Elon Mask transferred to godaddy still parked on Epik. Lol
 
Last edited:
Impact
925
Great post Bob!

I do have a question: With GoDaddy's Discount Domain Club I see .COM registrations go from about $20 to $9.45 roughly.

Does this 50% approximately savings apply to renewals too? What about if I have 100 renewals coming up next month, can I join their Discount Club (for $239 I think my offer was) and instead of paying $2k for my 100 COM renewals, pay $945 (plus the $238 annual fee).

I just can't seem to find if this savings applies to renewals or just new purchases.

Thanks again for the write-up!
 
Impact
925
Great post Bob!

I do have a question: With GoDaddy's Discount Domain Club I see .COM registrations go from about $20 to $9.45 roughly.

Does this 50% approximately savings apply to renewals too? What about if I have 100 renewals coming up next month, can I join their Discount Club (for $239 I think my offer was) and instead of paying $2k for my 100 COM renewals, pay $945 (plus the $238 annual fee).

I just can't seem to find if this savings applies to renewals or just new purchases.

Thanks again for the write-up!
Nevermind! Just read that the $9.45 applies to Registrations, Transfers, and Renewals.....

Sorry about my ignorance!