When I am in the process of evaluating a domain name to buy, I will “appraise” it in my head. This appraisal is very basic and consists of two numbers – what I think I could get for it should the right buyer come around and what I am sure I could get for it if I wanted to sell it quickly.
I’ll give you a quick example to illustrate how I consider the value of an acquisition. I think I could sell Drafting.com for $75,000 if the right buyer comes around, and I am very confident I could sell it at this moment for $18,000 if I wanted to liquidate it for some reason. You may have a differing opinion, but these numbers are what helps define my personal risk tolerance when buying a domain name, and we all have various levels of tolerance based on our businesses.
One issue most of us face is that sometimes the best and most obvious buyer for a domain name inquires about it, but he (or the company) doesn’t have the ability or interest in spending close to the value you hold for the domain name. For instance, a major CAD software company might want to buy Drafting.com, but the most they will spend is $30,000.
When this happens, I need to consider a few things to determine whether I should sell the domain name to this company for their best offer, or if I should hang on to the domain name and hope that a company with deeper pockets inquires or the company decides to up their offer at a later point.
In a situation like this, there are several things I consider:
- Do I want the cash instead of the domain name?
- What are the tax implications of selling?
- Can I improve my domain portfolio by selling this name and replacing it with another domain name?
- If I
see saw this on DNJournal’s sales report, would I think “wow, that was cheap?”
- How many inquiries have I had on this domain name?
- What are the odds that someone else will want to buy it for more money in the future?
- Could I be wrong about my valuation of the domain name?
- Have I already contacted other prospective buyers without any interest?
Although my business relies on the sale of domain names for the majority of its cash flow, I am probably not going to sell a domain name at a price I will regret in the future. However, there are times that it’s in my company’s best interest to sell a domain name for less than I think it’s worth.
GoDaddy has launched a new domain investing section on its website. If you click on the “Domains” drop down menu on GoDaddy’s website, you can see the “Domain Investing” category on the bottom right section (with the word “New” next to it). Clicking on this link takes you to a section of the website that will provide educational materials about domain name investing.