They’re questions that I am trying to ask more often but often miss a few. It’s so easy to get caught up in the buy, the auctions, the deal. We often forget that it’s real money involved. Money that has an opportunity cost and could be used for all different kinds of investment. Here are 10 questions I think should be asked as you buy a domain.
1. Are there better names than this in the same price range for the category you are targeting?
Many of us have niches or categories that we feel more comfortable in. It’s easy to get caught up in an auction or negotiation and go above the price level of comparable or better names.
2. By registering or buying a domain are you acting in bad faith? Bad faith as defined by ICANN “By using the domain name, you have intentionally attempted to attract, for commercial gain, Internet users to your web site or other on-line location, by creating a likelihood of confusion with the complainant’s mark as to the source, sponsorship, affiliation, or endorsement of your web site or location or of a product or service on your web site or location”
My opinion has always been to try and make money through my own hard work. Registering obvious trademarked names is a lazy person’s way of making money. GetFacebookFriends.com (made up name) sounds like it could be a great name but it is only great because it has one of the most popular website names in the world in the title. Using their popularity to make money for yourself. It’s your decision but make sure it’s a conscious decision when you make it.
3. What’s is your exit strategy from for each domain?
Yeah, “I’m going to sell it, that’s how I’m going to get out” I’ve never put money into a name that I didn’t have some liquidation expectation. I know I can get out of every domain I have. And yes my exit strategy on a few is drop them if I have to financially. I find so many people buy and buy with the one will pay for the rest strategy. Some times it works, some times it doesn’t.
4. Do you have a mentor or a fellow domain investor you can trust to ask questions and bounce things off of? It will serve you well if you do.
5. Are you buying the name only because you feel like buying something? Most domainers are addicted to buying. They scan the auctions looking for names every night and get a rush from the hunt. Be careful. Its easy to get over your head or buy less than quality domains because they seem like a “deal”
6. Is this a domain for resale or for a build out? If you answered build out then what are the REAL chances that you are going to build it out? If it’s not in a niche you are already familiar with the real chance takes a dive. 98% of your domains are resale domains merely from the standpoint that you can only build out so many unless you have staff.
7. Do you have the money or business knowledge to build out the domain you have plans for? I’m going to guess for many the answer is no. Nine times out of ten the answer is no for myself as well. I just wish that would have stopped me from buying a few of the names.
8. What percentage return do you expect from your domain investments? As a whole, not individually? For every domain you sell there are hundreds you haven’t. That sale has to pay for the rest of the group. Is it acceptable? Could you get a better return investing in something else? You should know your returns from your tax filings alone. Wait, you don’t file taxes? Please step over here.
9. What were your investment in domains this year plus or minus dollars? The key to trading and gambling is bankroll management. Do you have a plan of how much you plan to spend on domains this year? Many people I talk to don’t have any idea how much they spent on new domains in the past 12 months. Can you think of many other things that you do with your money that you really don’t know the total of what you spent. My guess would be food and fun and that’s it.
10. Are you addicted to domain investing or are you truly building a portfolio? I fine that most new or unsuccessful domain investor’s portfolio gets bigger but doesn’t get better.
Great post Shane, I think #4 has definitely made the biggest impact for me. Still learning every day but have some incredible mentors that have really made a huge difference in my life!
#6 is spot on and #9 is what I think really is the most important question a domainer needs to ask themselves. If you spend more money than you make each year, you’re not running a business and you’re probably not making investments.
Don’t be afraid to pivot, change your strategy, and focus on what other people have done to be successful in the space. It all ties back to #4, a good mentor can often mean the difference between years of success, and years of failure.
Good post!
#6 is not accurate totally because some domains are not ever for sale or ever for development
#8 is dependent on how you buy your domains. If you buy domains that will make money in parking/monetization, that one out of 100 that does sell every year won’t need to pay for the rest.
I’m a stickler about this. At one point my entire portfolio of over 3,000 domains had a CTR of 72%. Things have changed since then but I am still near 40% the last time I checked.
So many domainers worry so much about sales that they forget the daily income. If the economy tanks again, and it will, sales dry up a lot, and people surf less, but you will still have that daily hedge of income coming in IF you buy right. It’s diversification, and thus eventual strength down the line when you are making great domain sales and great PPC parking income. It can’t be beat.
Mike,
Completely valid points
Who are your mentors Morgan ?
Hey Shane, great questions!
Over the years, my strategy and portfolio have definitely changed….and so have the questions I ask myself, haha!
I think if one is purely going to rely on sales they had better be good at sales and have a good rolodex of buyers. The auctions don’t seem to provide liquidity for names similar to other electronic marketplaces in other industries. Buying names purely on CPC is going to be far more competitive than niche buying and the 80/20 rule is going to exist. Having said that I think ideally having good names for sale as well as having the skill set of being able to develop names into real businesses or as income producing sites is where the real success lies. All you guys who do the blogging and own domains offer a lot to us on that front & I personally thank you all (Rick, Ron, Michael, Morgan {where developing seems to come fairly easy for you}) Shane, Elliot, Andrew, Jaime and the many others) for taking the time to do it. Collectively overtime if one puts in the time to read all the blogs daily it starts to make a difference.
I love the points you have made Shane. Like you say, it can be addictive to hunt and buy domains but, you have to check yourself and really apply the points you made above to maximize your investment potential as a business. If it is just a hobby to you, then there are probably other more productive and interesting things you could be doing rather than dabbling in domains. Love the list!
Awesome post Shane! Every newbie needs to read this.
#7 was a big one for me. I’d register domains and dream up big development plans for them, only to later realize that I have neither the tools, the knowledge, nor the means to even begin laying the bricks for my development day dreams.
I’d suggest every newbie to get familiar with the basics of development before he dives in head first into this field.
Great post I am failing at pretty much all points you made but I am turning things around now.
So true. Thanks for the great info and reminder Shane! I’ve learned that if I can’t see the business behind the domain or figure a way to monetize it myself (or with freelance help) then the domain isn’t desirable for my portfolio. This way even if it never sells at auction I can build it out, give it a shot and see if it can turn a profit. At that point I can sell the website usually with no problem at auction. I’m channeling the world to provide me a talented web designer to bring on my team at the moment. Maybe one will come my way soon.