Hello everyone,
Here is a small guide that can help domain beginners (or veterans) in deciding selling price for a domain name where they want to cover up for any fees associated with the sales process.
The concept is pretty simple, known as "Markup Pricing".
Most of you may have already learned about it in school and must be using it in setting prices of domain names. However, I have observed that some people are not aware about it and use incorrect markup methods like a flat percentage increment. So, I have decided to write a small guide about it.
There are three scenarios when you may like to cover up fees:
Lets assume that you are selling a domain name where fees/commission is 10%. You absolutely want to make sure that at least $1000 comes in your hand.
If you quote/list a price a price of $1000, 10% will be deducted as fees and you will only receive $900 as net proceeds.
If you quote a price of $1000 + 10% = 1100, you will only receive $990 because $110 will deducted as fees from quoted price.
In such a case you will need to use a simple markup formula mentioned below:
Net Proceeds You Want / ( 1 - ( Fees in percentages / 100 ) )
Using the formula above, our calculation will now come as follows:
1000 / ( 1 - ( 10 / 100 ) )
1000 / ( 1 - 0.10 )
1000 / 0.90 = 1111.111111111
Now if you quote a price of $1111, after a 10% deduction of $111, you will get full $1000 as net proceeds.
The above formula may look a bit complicated to some users but there is a very easy way to remember it.
Lets say you want $1000 but you also want to bear and split 10% fees on a pre-decided 50:50 ratio. One method is to complete the sale at $1000, receive $900 after deductions and then ask the buyer to directly pay $50 again, which is a really bad option I think and no one in his sane mind would use it. If your marketplace supports splitting fees, you can use that as well.
However, you can use the same markup rule above and directly quote a price that covers up 50:50 split. In such a case we will use the formula below:
1000 / 0.95 = 1052.6315 (0.95 because you will only bear 5% fees and the rest 5% will be on the end user)
Now the marketplace charges you 10% fees (which comes to $105) and deducts it from selling price. You will receive $947 (1052 - 105). You paid a fee of $53 instead of $105 and thats a 50:50 split (slightly inaccurate figures because I am ignoring decimal places here).
Note that in negotiations, markup pricing has a side effect where end user may object that selling price is being inflated. It all depends on how much the end user understands or is willing to understand. If there is any sort of argument, just come to terms on any other agreement for splitting fees and make buyer happy but don't risk loosing a sale
What to do when there is a flat fee and fixed percentage fee as well and you want to cover up for both?
Just add flat fee to your net proceeds. Example:
$10 flat fee plus $1000 net proceeds will be now = $1010
Fixed percentage fee = 10%
1010 / 0.90 = 1122.22
Net proceeds in hand after completing sale:
1122 - 112 = 1010 ($112 is 10% fixed percentage fees)
1010 - 10 = $1000 ($10 flat fee you paid)
This should cover most of the cases.
Just remember that successfully completing a sale is more important than getting back commission fees and other charges. So don't pester end users to bear the fees. You can suggest once, if they agree, fine. Else bear them yourself.
P.S. My head hurts after writing all this. So if I am wrong somewhere please be gentle and suggest the correction.
Here is a small guide that can help domain beginners (or veterans) in deciding selling price for a domain name where they want to cover up for any fees associated with the sales process.
The concept is pretty simple, known as "Markup Pricing".
Most of you may have already learned about it in school and must be using it in setting prices of domain names. However, I have observed that some people are not aware about it and use incorrect markup methods like a flat percentage increment. So, I have decided to write a small guide about it.
There are three scenarios when you may like to cover up fees:
- You want to set a BIN price on a marketplace but must receive a certain fixed amount after all deductions.
- When you are negotiating with an end user and you want him to bear all fees.
- When you are negotiating with an end user and you want to split the fees.
Lets assume that you are selling a domain name where fees/commission is 10%. You absolutely want to make sure that at least $1000 comes in your hand.
If you quote/list a price a price of $1000, 10% will be deducted as fees and you will only receive $900 as net proceeds.
If you quote a price of $1000 + 10% = 1100, you will only receive $990 because $110 will deducted as fees from quoted price.
In such a case you will need to use a simple markup formula mentioned below:
Net Proceeds You Want / ( 1 - ( Fees in percentages / 100 ) )
Using the formula above, our calculation will now come as follows:
1000 / ( 1 - ( 10 / 100 ) )
1000 / ( 1 - 0.10 )
1000 / 0.90 = 1111.111111111
Now if you quote a price of $1111, after a 10% deduction of $111, you will get full $1000 as net proceeds.
The above formula may look a bit complicated to some users but there is a very easy way to remember it.
- If there is a 10% commission, you divide $1000 by 0.90 to get appropriate selling price.
- If there is a 30% commission, you divide $1000 by 0.70 to get appropriate selling price and so on.
Lets say you want $1000 but you also want to bear and split 10% fees on a pre-decided 50:50 ratio. One method is to complete the sale at $1000, receive $900 after deductions and then ask the buyer to directly pay $50 again, which is a really bad option I think and no one in his sane mind would use it. If your marketplace supports splitting fees, you can use that as well.
However, you can use the same markup rule above and directly quote a price that covers up 50:50 split. In such a case we will use the formula below:
1000 / 0.95 = 1052.6315 (0.95 because you will only bear 5% fees and the rest 5% will be on the end user)
Now the marketplace charges you 10% fees (which comes to $105) and deducts it from selling price. You will receive $947 (1052 - 105). You paid a fee of $53 instead of $105 and thats a 50:50 split (slightly inaccurate figures because I am ignoring decimal places here).
Note that in negotiations, markup pricing has a side effect where end user may object that selling price is being inflated. It all depends on how much the end user understands or is willing to understand. If there is any sort of argument, just come to terms on any other agreement for splitting fees and make buyer happy but don't risk loosing a sale
What to do when there is a flat fee and fixed percentage fee as well and you want to cover up for both?
Just add flat fee to your net proceeds. Example:
$10 flat fee plus $1000 net proceeds will be now = $1010
Fixed percentage fee = 10%
1010 / 0.90 = 1122.22
Net proceeds in hand after completing sale:
1122 - 112 = 1010 ($112 is 10% fixed percentage fees)
1010 - 10 = $1000 ($10 flat fee you paid)
This should cover most of the cases.
Just remember that successfully completing a sale is more important than getting back commission fees and other charges. So don't pester end users to bear the fees. You can suggest once, if they agree, fine. Else bear them yourself.
P.S. My head hurts after writing all this. So if I am wrong somewhere please be gentle and suggest the correction.
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