You can choose one of the two approaches:
- Each name is unique, I want to do deep research into the potential value and price it to a) max b) reasonable c) bargain for fast turnover
OR
- I am concerned with the stable cash flow on overall portfolio level. I am pricing to maximize profits, as well as smoothing the cash flow out through the year. Hence I group my names into several categories based on some predictor parameters and for each price at the point where price times STR gives me the highest return. I am not concerned if for any specific name I am leaving money on the table.
First approach is better suited for smaller portfolios and the latter for the very large ones.
Interestingly, Mike Mann seems to apply Approach 1 even though he has portfolio of 300k+ names. Even though he makes astonishing sales here and there, overall he might be losing money, as that kind of pricing is probably really hurting his STR. If he chose the approach where he priced 95% of his names at around $3k average (leave 5% for the shoot-for-the-moon stuff), he might be making around $9 million a year (minus $1mm commissions, $3 million for renewals, $5 million net before overhead and taxes). With his current approach, I estimate that he makes considerably less.