Business is business. It doesn’t matter if you’re selling petunias or domains. A person that learns how to run all aspects of business can usually translate it to any product. In each of my businesses I am looking to establish these three profit centers.
Cash Flow: I need regular money to pay the bills. Money that continues to flow. When you start a business this should be the first goal. Profit dollars is certainly the end goal but it’s much easier to manage constant things. In domains it can be parking, small build outs, even regular advertising. The goal is to have a constant reliable form of income that doesn’t fluctuate too much. A constant that allows you to pair it with constant expenses and lets you sleep at night. In most businesses it tends to be lower margin income which you exchange for reliability. In domains my cash flow is advertising, resale of domains at the auction houses, and parking. Those three are good for a certain amount of income every single month. Another good source of cash flow for domain investors? A day job
Higher Margin Products: Now that you have the regulars providing cash flow, the next goal is to find a line of products that make you more profits. For me, it’s retail mulch and annuals in my nursery, and in domains it is the end user or private sales. It’s not quite as reliable, has it’s ups and downs, but on an annualized basis there is some constant. In all my businesses I am constantly looking for items to sell that give a good return for my investment but are fairly reliable income producers. Some people look at this part of the business as the profits that let you expand. The cash flow keeps you in business and the higher margin products keep you moving forward.
The Gamble: While not straight up gambling there is a segment of the business that is a little higher risk, higher return. Often it’s expansion into a new segment, a brand new product, or putting a lot of money into something that doesn’t have known results. Every year we like to put a few thousand dollars into a product line that we believe will sell but our decisions is purely based on our past experiences, another company’s results, or just a guess. Half the time it leads to a new product line that will generate income for years and other times I end up having to dump the product at cost or less. In domaining it’s buying the $10 or $20 name and hoping to sell it for four figures.
And the key to all of this? Having a plan. Not a dream, a plan. Knowing what part of your line, your business, is going to represent each category. What you are doing, where you are going, and goals for the future.