Domain Shane’s Daily List of Domains at Auction for Thursday May 21st, 2020

One Reply to “Domain Shane’s Daily List of Domains at Auction for Thursday May 21st, 2020”

1. Heya .. it actually isn’t quite so straight forward. That multiple of “acquisition cost” on what it takes to be profitable is good only if looking at the first year .. but the overall long-term isn’t entirely correct depending acquisition costs.

   It gets to be a bit of a sliding scale over time as average annual holding costs go down.

   With a 0.25% annual sell-through rate the number he’d need is 400x over averaged “annualised holding cost” to break even (as opposed to purely “acquisition cost”). Meaning that if you look at it over 5 years for a portfolio full of domains he bought at $100, he wouldn’t need to sell them at $40,000, but actually at $12,000 as the annual average cost of the domain at that point is $30.

   $100 + (5 x $10 renewals) = $150 cost over 5 years = $30 cost per year

   So with a 5 year plan he’d only need to sell domains acquired at $100 at 120x over actual cost in order to break even (still 400x over averaged annual holding cost which would always be constant as long as the average sell-through-rate is constant at 0.25%).

   The higher the acquisition costs vs renewal price, the sharper the drop in required mark-up over time. So if your portfolio is only handregs, then there is zero drop over time.

   —————————————————————————–

   But what I wrote is actually the simplified and not entirely accurate version. If you want to get even further detailed (probably not .. lol), a few months ago I actually made a stupidly complex “Portfolio Projection” spreadsheet that accounted for depreciating averaged holding costs to show expected break-even timeline depending on your specific (constant) acquisition habits. Took a good chunk of a weekend on Excel .. lol, but really opened my eyes to the math behind domaining.

   If ever you want me to do one for you, the main variables to input are:
   – Acquisitions per day
   – Average acquisition price
   – Average renewal cost
   – Sell-through rate
   – Average $ sale amount
   From those it calculates the date and amount of your peak out of pocket investment, as well as the dates you will break-even, and the dates you will hit $100k, $500k and $1M in profits. Obviously it’s all theoretical and based on steady sales, but still interesting.

   I don’t really follow Mike Mann (sorry Mike .. it’s not you, it’s Twitter .. lol). But from what I see others post here’s a sample based on the following data:
   Acquisitions / Day: 5.00
   Avg Acquisition Cost: $100.00
   Avg Renewal Cost: $8.50
   Sell-Through Rate: 0.25%
   Average Sale: $12,000

   Based on those numbers this is the expected timelines:
   -$404,490 = 4y06m16d (peak investment)
   Break Even = 8y11m26d
   $100k Profit = 9y06m14d
   $500k Profit = 11y03m14d
   $1M Profit = 12y11m27d
   $2M Profit = 15y07m21d

   That’s based on a continuous and ongoing acquisition of 5 domains per day at an average cost of $100 with $8.50 renewals. With the 0.25% sell-through he’d only make 2 sales in the first year. After 10 years he’d have 18024 domains and a total of 226 domains sold (43 sales in that year). Getting back to multiples, after 10 years his multiple would be 680x (and climbing every year due to decreasing averaged annual costs). More interestingly is that he’s be losing money for 5 years before seeing $40k in profit in the 6th year; and overall it would take about 9 years to break even. But after that profits really start to roll because of the size of the portfolio and decreasing holding costs.

   That being said .. if I adjust his average sale down to $7,000, he would bleed money for 11 years and take 21 years to break even (but he’d still hit $1M in profit after 26.5 years).

   All that is based on if he was starting today with 0 domains. However, for any portfolio with $8.50 renewals and a 0.25% sell-through rate you’d need an average sale of about $3400 to break even (if you ignore acquisition previous costs and invest in the portfolio today with no further acquisitions going forward). With his 350,000 domains if his average sale was just a little more at $4000, it would profit $500k per year. A little less at $3000 and it would lose $350k per year. At $5000 average the profit would be $1.4M per year.

   Again though .. this is all theory based on statistical averages .. real world will end up very different! 😉

   #NumbersAreFun 🙂