discuss Did we get the entire ROI concept wrong?

[abstractdomainer]

Lately, I realized that I have been calculating the entire domain investment ROI pretty wrong.

Here is what I calculated:

Bought 200 domain names at $10 a piece
Sold 3 domain names for $1,000, $2,500 and $2,000. Platform fee and other charges - $500.

Thought Process
Domain 1 - Bought for $10, sold for $1000
Domain 2 - Bought for $10, sold for $2500
Domain 3 - Bought for $10, sold for $2000

ROI - 100x or 10000% on domain 1
ROI - 250x or 25000% on domain 2
ROI - 200x or 20000% on domain 3

That is how most domain investors share their ROI. But is that correct? I don't think so!

Here is what is missed out:

1) The domains which did not sell - I actually made $5,000 over an investment of $1000. So my profit is $4,000 or 400%.
2) The profit is on the portfolio and not on a domain name
3) The profit should be per year (Revenue (Sale) - Cost (renewal+acquisition+platform fee))

So I think any profits (not sales) should be:

1) Reported per year and not per domain name
2) Should factor in acquisition cost, renewals, platform fee, PayPal fee, escrow fee etc.
3) Should factor in the opportunity cost (what you would do and earn if you didn't do this)

Do you agree?

 

[Alop]

Minus tax

Tax would be an expense

 

[MadAboutDomains]

Tax would be an expense

No it isn't, you get taxed on your profits.

 

[Alop]

No it isn't, you get taxed on your profits.

That depends from country to country

Tax is an expense. Time is an expense

 

[MadAboutDomains]

That depends from country to country

Tax is an expense. Time is an expense

hmmmm expense seems like a bit of a strange way to categorise it, I suppose it depends on what you're trying to calculate too.

 

[abstractdomainer]

Minus tax

How could I forget t

 

[Soofi]

Subscribed

 

[karamakate]

Minus tax

Depends on your location and knowledge to trick the system.

 

[karamakate]

No it isn't, you get taxed on your profits.

From the mercantile point; technically every kind of thing is an 'expense' when you're forced to pay: buying domains, renewing domains, venue commissions, taxes, electric bill, rent, food, etc.

The 'profit' is what's left after all those fundamental cuts and the money that you can freely spend.