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What is the ideal price point to start offering payment plans?

Labeled as discuss in Domain Buying and Selling Discussion started by CDM, Feb 7, 2020.

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327

  1. CDM

    CDM Established Member ★★★★★★★★★★

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    I've sold 6 domains on a payment plan in the past year or so through DAN.

    For me personally, I highly prefer the immediacy of cash flow from a domain sold at full price up front, than to sell domains on a payment plan, but I understand some of these sales might not have happened without the option for a buyer to buy on installments.

    However, it's very likely in some cases a buyer could have paid full price up front, but rather opted for the payment plan instead so they don't have all that cash flowing out at once. (basically our desires are inversely related).

    In your opinion, what is the price point or range below which allowing payment plans becomes counterproductive as a seller? Meaning you don't get any advantage because an overwhelming majority of buyers could afford to pay the full price and would have bought it anyway if a payment plan had not been offered.

    $500
    $1,000
    $1,500
    $2,000
    $2,500
    or more?
     
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  2. Ryan217

    Ryan217 NameBlitz Gold Account

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    I offer payment plans on all my names names regardless of price. One option to consider when offering payment plans is you could require a larger amount down initially or structure it so it is cheaper to buy it outright than to buy it under a payment plan if you want to encourage users to pay upfront if they can. I am thinking I am going to start saying that I will pay the escrow fees if it is paid in full but the buyer must pay if done though a payment plan.
     
  3. DanSanchez

    DanSanchez Brokerage & Acquisitions Epik.com Staff VIP

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    Honestly, I sold one domain last month for $1000 on a 3 month payment plan. The buyers are so unique you can't start generalizing based your perceived need for cashflow. If you start somewhere, raise your prices a bit and offer 33% down with 12 monthly payments, for example.

    A $3000 domains might be $3995 with $995 down and the rest in 12 monthly payments.

    What I have recently realized is that payments (thus delaying the gratification of a single large sale) has immense benefits for folks like you who depend on constant sales to maintain a stable ground of income. So instead of counting on one or two sales every month, you can focus on getting to a certain monthly goal in net payments via leases or financed deals.

    So you might sell less one month or the other, but it wont wipe you out if you have a solid foundation of financed/leased deals to keep you afloat. Say 5 deals might bring you $1500 a month in reoccurring income to cover your basics. What would that do for you long term? Selling low might suddenly become a risk of losing monthly income, instead of a welcomed influx of a little bit of capital.
     
  4. CDM

    CDM Established Member ★★★★★★★★★★

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    Okay, I may need to back the truck up. I guess my question is strictly pertaining to DAN where the option is automated and at the buyers discretion, not in the case where you negotiate the deal yourself and can do things like you both suggested of raising the price over the long term.

    I understand DAN now offers this option to an extent with the new model for leases that are longer than 12 months, that incrementally increase in cost on a sliding scale as you add more years, but the time horizon relative to the amount of gain doesn't seem right for me. On higher end domains it may be worthwhile, or if you have a large enough portfolio. Let's take the example of a $3k sale, over 3 years, that's marked up to $3600 and a $3,030 take home (after DAN's cut) / 36 months = $84.16/month in payments. If that's the strategy you'll need a lot of those to add up. Perhaps it would be advantageous for a sizeable enough portfolio operating at scale. Otherwise I don't see the advantage.

    Here you're kind of illustrating my point in a way, by the number you threw out. So in this scenario your 5 deals are averaging $300/month each, as opposed to the above $85/month scenario I presented above, where the same 5 sales would be netting only $425/month. So perhaps a minimum $300 installment is a good cutoff point for you. Maybe the question needs to be reframed a bit, instead of what sales price point, what installment price point is a good cutoff. Or maybe it's just too highly variable for there to be a simple answer to the question.

    I think you're overstating things here. For one thing, if someone's at the level of sell through of 1-2 sales per month, even converting 100% of all sales into payment plans means what? At that low volume you don't have enough runway to ever get liftoff, unless you're talking about a) large enough deals, as I alluded to above, or b) funneling money out of other investments or a primary income to continue buying until you have enough of these recurring payments built up. At a lower scale/lower portfolio size, lease-to-owns should be looked at as supplemental where you can generate additional sales from it, or to get deals done, not as foundational. But the optimal strategy for anyone will need to evolve as the portfolio and business evolves. Whatever the case, cash flow is king.
     

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