analysis Turning $10,000 into $1,000,000 in 6 Years of Domaining

[Ategy]

As many of you know, I'm constantly confronting and challenging people about how the math behind their portfolio will not lead them to profits. When I do so it's because I actually DO THE MATH as opposed to many who just blindly guestimate.

Obviously when it comes to domaining there's as much art as their is science. Having a few years under your belt might not make you an industry expert, but at least at that point after making several sales you're able to generalise and categorise domains well enough to make approximate long-term averages ... and from that we can then develop a detailed portfolio projection based on math.

I've posted more details as well as charts with actual numbers over at NameCult. but just as a bonus for NamePros members, here are the raw numbers behind a couple of projections discussed in the article.

If you'd like me to post a personalised alternate projection based on your own variables (or numbers you're curious about), then please post in the comments at NameCult or in the following NamePros thread.
https://www.namepros.com/threads/get-your-1-000-000-domaining-path.1175267/#post-7614555

Full article ... [Namecult]


Example #1: $1,000,000 in 6 Years.

Example #2: $1,000,000 in 10 Years.

Original article: http://namecult.com/turning-10000-into-1000000-in-6-years-of-domaining/

 

[Ostrados]

@Ategy

Your replies are very long please try to summarize you answer in shortest form possible otherwise the discussion will be very hard to follow.

What you see in the pictures I post is just a tiny summary revue of all the calculations. That being said, it's still tiny compared to the computer-crushing epic spreadsheet system I have to maintain my lists for NameCult.

I advice you to start using mySQL or similar database software, excel sheets are very slow and unpractical for heavy DB tasks!

It's rather big and more importantly an on-going work in progress .. so likely not at this point. But again, feel free to post some replacement variables and I'll definitely share the results!

Regarding your numbers they are not accurate, you need to consider the following:

1- STR vs Selling price relationship, for an example:

• Selling Price below $1000 => 2% STR
• $1000-$2000 => 1.5% STR
• $2000-$3000 => 1% STR
• and so on

These are just random numbers, it is your job to find the accurate numbers if you want to make an accurate model

2- There is also relation between Selling Price and Acquisition Cost, higher acquisition means higher quality (in theory) and higher selling price. so for:

• Acquisition cost below $20 => Selling Price < $1500
• $20-$50 => Selling Price < $2500
• $50-$100 => Selling Price < $3500
• and so on

Again these are just placeholders, you need to find the correct numbers to develop an accurate model.

3- Higher domain quality translates to higher STR, so there is indirect relationship between STR & Acquisition cost, you may take this into account and find an STR modifier for different acquisition costs, but this one is very tricky and hard to derive, for simplified approximation you can just ignore this one and just focus on the above 2 factors.

 

[Ategy]

Regarding your numbers they are not accurate, you need to consider the following:

I think you're missing the point of this. STR is deliberately a variable to be set by the portfolio owner specifically so they can assign domain quality (something that actually cannot be assumed by a theoretical projection.

Everything should be set to what your actual numbers are.

Some domainers buy quality "Q" domains at $50 .. while other domainers manage to find the same quality "Q" domains at $20. That's a skill .. which deliberately should not be assumed because everyone is different and it can't be a constant.

 

[Recons.Com]

@jamesall let me explain with more detail.

Take your current portfolio for the beginning of 2019 and the end of it. Assume that the growth was gradual and take the middle point of those two numbers. Calculate the average acquisition cost for the names that did not sell in the year. You may adjust for appreciation, changes in value per market etc. Multiply the average by the total number of names by mid year point.

Take your total income for the year after the commissions and deduct the renewals you paid during the year. Take the income number you arrived and divide it by your total investment you calculated above. That is the approximation for your annual IRR, internal rate of return. Meaning, the interest you are earning on your capital employed without factoring in the value of the time spent. Of course, if there were any salaries paid, deduct that before IRR calculation.

Now, plug the IRR number into the formula

Future Value of my Investment = Present Value of Investment x (1+IRR)^x

put a year for which you want to know the future value, for example, year 6, and you will arrive at how much you should have, provided that IRR is sustainable and that you are reinvesting every dime back.

example:

FV of my investment in 5 years = PV $100000 x (1+50%)^5 = $759375.

 

[Ostrados]

I think you're missing the point of this. STR is deliberately a variable to be set by the portfolio owner specifically so they can assign domain quality (something that actually cannot be assumed by a theoretical projection.

Everything should be set to what your actual numbers are.

Some domainers buy quality "Q" domains at $50 .. while other domainers manage to find the same quality "Q" domains at $20. That's a skill .. which deliberately should not be assumed because everyone is different and it can't be a constant.

lol.. you said:

It's rather big and more importantly an on-going work in progress .. so likely not at this point. But again, feel free to post some replacement variables and I'll definitely share the results!

So I gave you replacement variables (that you need to derive ) , please share the results! (EX: modify the excel sheets in your first post with accurate STR for each case)

 

[Ategy]

I advice you to start using mySQL or similar database software, excel sheets are very slow and unpractical for heavy DB tasks!

Yeah .. the problem is that I've never really used mySQL, and the last time I even did minor school stuff with a database it was with Lotus123! lol (CORRECTION .. seems Lotus123 actually was the popular spreadsheet before Excel .. I did take a short course on a database software .. don't even know the name anymore .. it was a looooong time ago ... lol).

I did hack my old PHP/mySQL forum to death, so I probably could figure it all out .. eventually. But I don't really have the time at the moment to learn all that and then redo everything from scratch.

For my daily lists, again, there's a ton of stuff I get to see that does not show in the final lists, so there is extra benefit for me there to see certain random details in a large grid format with live changes.

But essentially take a look at my daily expiring auction list thread right here at NamePros which I started in May 2017. Not sure if I'm allowed link to it from here, but essentially it started out simply enough .. and as time progressed it got more and more complex as I added more and more data points that I felt were important. Then I started posting the lists at NameCult as well and things got even more complex.

If I had to start from scratch today using a database most certainly would be the way to go .. but unfortunately life doesn't really work that way! lol

 

[Ategy]

So I gave you replacement variables (that you need to derive ) , please share the results! (EX: modify the excel sheets in your first post with accurate STR for each case)

Oooohhh .. lol .. I thought you said the way things are calculated weren't correct (the actual math and spreadsheet formulas and math). What you meant to say was that you want to see a different projection from the specific initial example projection I gave because you thought the example numbers I gave weren't realistic (in your opinion)? lol

Yeah sure .. although your post is a bit confusing give me a first example with all 5 variables, and then tell me how you want me to change / adjust for comparison models ,,,

Acquisitions / Day: #
Avg Acquisition: $
Avg Renewal: $
Sell-Through Rate: %
Average Sale: $

 

[Ostrados]

Oooohhh .. lol .. I thought you said the way things are calculated weren't correct (the actual math and spreadsheet formulas and math). What you meant to say was that you want to see a different projection from the specific initial example projection I gave because you thought the example numbers I gave weren't realistic (in your opinion)? lol

Yeah sure .. although your post is a bit confusing give me a first example with all 5 variables, and then tell me how you want me to change / adjust for comparison models ,,,

Acquisitions / Day: #
Avg Acquisition: $
Avg Renewal: $
Sell-Through Rate: %
Average Sale: $

Yes that what I meant! change STR for each projection, as I suggested in my previous post.

STR need to be changed, and should be derived from "Avg Acquisition" & "Average Sale"
You try to figure out the numbers, because it is your model not mine

 

[Ostrados]

Actually you need first to derive "Average Sale" from "Avg Acquisition", then derive STR from "Average Sale"
..peace of cake

 

[BrandEntrance.com]

@jamesall let me explain with more detail.

Take your current portfolio for the beginning of 2019 and the end of it. Assume that the growth was gradual and take the middle point of those two numbers. Calculate the average acquisition cost for the names that did not sell in the year. You may adjust for appreciation, changes in value per market etc. Multiply the average by the total number of names by mid year point.

Take your total income for the year after the commissions and deduct the renewals you paid during the year. Take the income number you arrived and divide it by your total investment you calculated above. That is the approximation for your annual IRR, internal rate of return. Meaning, the interest you are earning on your capital employed without factoring in the value of the time spent. Of course, if there were any salaries paid, deduct that before IRR calculation.

Now, plug the IRR number into the formula

Future Value of my Investment = Present Value of Investment x (1+IRR)^x

put a year for which you want to know the future value, for example, year 6, and you will arrive at how much you should have, provided that IRR is sustainable and that you are reinvesting every dime back.

example:

FV of my investment in 5 years = PV $100000 x (1+50%)^5 = $759375.

I don't see work factored into this equation.

 

[Recons.Com]

I don't see work factored into this equation.

It is not. But you can factor it in into your costs for the year. Use hours used multiplied by your hourly rate and then deduct it from your revenue as well. You'll have less free cash flow after that and your IRR will be lower. This is also very individual and should be based on the opportunity cost for the time. For example, if the alternative is to work at McD, then $10, if it is high skill consulting, then $xxx/hr etc. To further complicate, with the growth of the names, the number of hours might not go up proportionately, so IRR might be affected more in the first years.

I'd advice not to complicate with that though, if you want to use a simple formula above.

 

[Ategy]

STR need to be changed, and should be derived from "Avg Acquisition" & "Average Sale"
You try to figure out the numbers, because it is your model not mine

No .. again .. you're missing the point .. forget that first projection I posted .. it's just a random example .. everybody's projection is going to be different based on their domains and acquisition skills.

I specifically kept those variables so people could set them based on their own domains.

I cannot arbitrarily set them because I don't know the quality of the domains in your portfolio, nor how good you are at obtaining value acquisitions.

Just give me the numbers you feel are appropriate ...

I'll start you off with one that I think you wanted to see?

Based on 5 .com closeout acquisitions per day. the rest of the numbers you can see ... (you can ask me to change any of the "Variables" you want).

 

[Ostrados]

@Ategy thanks, that gives us a picture that is closer to real life.. I am surprised that $1M is achievable at year 11 to be honest I didn't expect that!

I see that you are leaving the numbers arbitary for us to play with. What I was arguing is to try to derive the numbers from statistics, I know it is not easy task and outside the scope of this thread.

So thanks for sharing this.

 

[Ategy]

Yeah .. more than anything else what surprised me about all this was the various numbers and dates that popped out.

Mind you .. what's very important to note, that it does say 11 years .. but that's buying five 2% STR @ $1000 domains every day.

I see that you are leaving the numbers arbitary for us to play with. What I was arguing is to try to derive the numbers from statistics, I know it is not easy task and outside the scope of this thread.

Not only is it not easy .. it would actually be wrong for me to make any assumptions in the first place. Everyone is different. Sometimes there are no direct assumable correlations. Some people excel at finding fantastic domains even below average wholesale prices .. while others are just flat out bad domainers who think stuff like BlueCreekPartyBus.org is somehow going to have a 2% STR while priced at $3999 and therefore buy it at $50 (when even getting it at handreg would be a huge waste of money)! lol

Although yes .. we could have fun all coming together to figure out the industry averages .. although as you said .. that's really outside the scope of this discussion .. and outside the scope of my available time! lol

 

[wot]

Turned well under $5K in to over $400K in .in/.co.in sales alone in about 5 years from 2005. No clever stuff , just good names and good marketing.

 

[Shailendra Mishra]

Always like your statistical approach to domain investment.

 

[Theanshusingh]

You will start losing instead of seeing it rise...!!!!!

 

[Ategy]

For anybody interested TODAY (Tuesday) at 4pm Eastern Time:

BONUS EDITION of The Domain Social featuring Domainer and Portfolio math.

I will basically be doing a live Zoom with the spreadsheet from this discussion, where you can all ask me to change the variables live to anything you'd like.

I'll be sending the Zoom invitations 2 hours before showtime to everyone currently subscribed to The Domain Social, so subscribe at http://TheDomainSocial.com before 2pm Eastern Time if you want to join.

Here are some previous editions of The Domain Social, although this one will be different from the others and specifically intended for Domainer and Portfolio Math:
https://www.youtube.com/channel/UCbW5sUR0Fnbf03pkgtbJWNw

4pm Eastern = 1pm Pacific = 9pm London = 8pm UTC

 

[twiki]

Thank you

With this projection you hit $1,000,000 in 5 years and 5 days!

Show attachment 143423

Wow, just came across this and want to thank you for it. You gave me great news.

I knew it has to be good (figures speak) but had no idea how good I'm doing. Anyway it's ahead of this estimation. Not necessarily in first year profit amount (lower than 14 k but still proffit) but in growth curve, higher than this.