30,000 Foot Overview of My Business

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I was discussing my business development and growth strategy with a friend in this business, and I thought I would share a bit of my business strategy from 30,000 feet. This is just a general overview (hence the 30,000 feet saying), but maybe it can help you set some goals for your business.

My primary revenue/income source is flipping domain names. I buy anywhere from 3-15 names on the aftermarket each month, and most of the time the goal is to re-sell them fairly quickly. The margins vary depending on the name/price, but it’s still a lucrative business, especially considering everything that’s going on with the economy (my business was up about 10% in the first half of 2011 vs. first half 2010).

Inevitably, I also have some domain names that are bought to flip but end up sitting in my portfolio for some period of time. Because I treat my domain investments as inventory (for tax purposes), the government treats them as if they were cash. For instance, if I sell a domain name for $10,000 profit and buy another name for $8,000, I am still on the hook for roughly $4,000 in taxes on the $10,000 profit, despite having spent all but $2,000 of it. This is one reason why I sometimes opt to churn and burn names even at very low margins. I am bullish on domain names, but I prefer to keep a strong cash position.

On the other side of my business is development. The purpose of developing some of my domain names  is to increase my income from sources other than domain flipping. I’ve tried many things, and a few have stuck and are making decent money. My geodomain investments are just starting to pay off. Revenue is increasing every month and the costs are stable or decreasing. My pet directories are doing well, with DogWalker.com leading the pack (pun intended).

Ideally, revenue from developed sites (including this blog) will eventually become 50% or more of my income.

I want to briefly explain why my goal is to convert my business from nearly 100% reliant on domain sales to a goal of 50% or below. From my point of view, revenue from developed websites (including all forms of advertising/monetization) is far more consistent than domain flipping. There’s also considerable pressure on me when buying high dollar domain names for flips. With a large and steady advertising revenue stream, I can afford to hold out for better deals on domain names and can take more development risks.

There you have it. I have been slowly transitioning my business into an online publishing company instead of being solely a domain investment company. Investing in domain names is still lucrative for me, but it’s less consistent and the goal is to keep my company operating even when I am not working.

32 COMMENTS

  1. @ John

    Just about all of the higher value names. I try to re-sell them within 2-3 weeks generally, although I prefer even shorter flips. I would say that I buy 3-5 higher value names a month.

  2. Elliot–it is damn about time you are assertive.

    You can be short like Napoleon- but you need to be tough with all those whinnies that give you s+hit

  3. Agree Elliot and makes sense. Being a flipper is tough. 95 percent of everything I do is related domain flipping and end user sales

    Past few weeks been decent and this year been ok with sales. Been trying lower that 95 percent down around 70 percent this year with income generating names or future websites

    A lot of money is made from flipping. Flipping Elliot has made you a lot of money and that’s how you can think diversification imo. Now your to the point where monthly cash flow is key.

    Your in a good position. Congratulations Elliot.

  4. In order to quickly flip the names, who are you selling them too? Are you contacting previous buyers and letting them know you have a some new names for sale or do you always go straight to end-users?

  5. Domain sales are tricky, unless you have an amazing portfolio and millions in the bank. Development is where it is now, especially if you want to pay your bills.

    Of course I have bought some domains for future projects.

  6. “Development is where it is now, especially if you want to pay your bills.”

    @ Priv

    There are no guarantees with development, it’s expensive and time consuming to develop, developing domain names decreases the likelihood of receiving an offer for the domain name, and the more development projects a person has, the less focused they are on the individual projects.

    I am all for developing a business on a website – or even a small site, but based on my experience, throwing money at a development project may not always be wise.

  7. @ John

    I would say that a majority of my sales are to other domain investors… well, that may have been more likely the case a couple years ago. Haven’t really done much analysis lately. Have 3 end user names selling this week and last few have been to end users, too.

  8. Do you try updating list of sales (by month/year) even if it is not a complete list and a 6 month or more lag? Do you think your Blog presence helps in selling the names? I imagine to other domainers or brokers at domain brokerages it does. Thanks

  9. @ John

    I update it once in a while, generally when I publicly post a name for sale and then sell it. Generally speaking, when I sell a name in private that I acquired in private and sold in private, I won’t post it.

    I am sure my blog gives me added credibility when selling names, and I have sold several names I had only listed for sale on my blog.

  10. What means do you use to sell a domain? Example: parked, developed, letters to end-users, auctions ??

    tnx for your continuous support 🙂

  11. Hi Elliot,

    I have enjoyed the blog off and on off for several months now and what to thank you for the service. Recently, I have added the addiction of purchasing domains with really no end goal in mind. My ‘portfolio’ is closing in on 200 dotcoms yet I have two burning questions:

    First, is there a service (I hope for free) that would value this portfolio? I want to make sure I am on the right track.

    Secondly, if I want to develop out a few of the generic names would you be able to point me in a direction that matters? Meaning a link or two or simply go buy dreamweaver or hire a programmer… Just something that says go- know what I mean?

    Thank you community before hand for any advice.

    G.

    • “First, is there a service (I hope for free) that would value this portfolio? I want to make sure I am on the right track”

      Not sure of a service that does portfolio valuations, especially at no cost. You might want to run them through Valuate.com to at least get some idea. Keep in mind, I think Valuate.com is generally high when it comes to values, so even if it says a name is worth $5,000, it’s very likely nobody will pay you close to that valuation.

      “Secondly, if I want to develop out a few of the generic names would you be able to point me in a direction that matters? Meaning a link or two or simply go buy dreamweaver or hire a programmer… Just something that says go- know what I mean?”

      I would recommend using Elance. However keep one thing in mind. First, if the name isn’t good, I don’t think you should waste your money building it. I see too many people spending time and money developing a domain name where the keyword string isn’t searched, so even a #1 Google ranking likely won’t bring traffic. If you aren’t passionate about a topic and the name isn’t very good, you are likely just wasting money by developing it.

      “I have enjoyed the blog off and on off for several months now and what to thank you for the service.”

      Thank you for taking the time to read my blog.

  12. @ Josh – I might be able to help you out with the development part. I own a few sites, work on domain development myself and have a few developers helping me out.

    Let me know if you are interested?

  13. I enjoy your blog.

    I have spent money on domain names for about 7 years. Mainly .com ‘s

    No luck parking them. But lately I have taken a little more time and effort to get better stats by parking with smartname.com and will use the stas I get to either develop or sell many of the names and move on from there.

    * What is the future of domaining with the new gTLD stuff going on ?

    What effect will it have on the tld’s like .com and the newer .co ?

    Thanks for any wisdom you can pass along.

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