I’ve chosen the directory model for a few of my developed websites, and since one has several hundred paying customers, I think I can give some feedback about building and managing directory websites based on my experience.

Building a directory site can be a bit difficult if you start from scratch or customize a theme you like, but once you’ve got a design and platform that works, replicating it can generally cost just a few hundred dollars and should take several hours to complete. This doesn’t include the time and maybe money spent researching, marketing, and advertising the site, but rather just the cost of getting it started. All in all, it’s not too  onerous, which makes this a very good model for me.

If you haven’t managed a directory website before where people pay for listings, I can tell you from experience that they can be a pain in the ass, especially when you are working with small businesses.

People can be demanding when you ask them to spend their hard earned money on a listing. Some might not understand why an Internet directory listing is worth the price, despite the fact that they continually spend thousands of dollars on phone book advertising and newspaper ads. Many want to talk on the phone or in person before committing. It’s not the end of the world, but I would prefer to not have an hour-long conversation (or more) with just the chance of earning $49 for the listing.

Many small business owners will want or expect special  accommodations to be made for them (the standard listing page won’t be decorative or colorful enough). Others will ask you to make changes to their listing frequently. You’ll have people who want a listing but can’t complete it themselves and will require you to create it for them and then make changes. Some of your clients will expect instantaneous results, and they will complain to you when they haven’t received a single lead after 24 hours.

You will have a considerable amount of people who will create a listing but won’t be able to pay. Some just won’t be able to pay using the payment methods you offer. People will forget about their listing and file complaints with Paypal when their listing automatically renews…. the list goes on and on, and it can be difficult to manage an active directory.

Directories are great because they are fairly easy to set up, and customer-created listings help drive increased traffic to the website. They offer a strong recurring revenue stream, especially when your site gets significant amounts of traffic. However, there are plenty of frustrating aspects to managing a directory, so you should know what you’re getting into before you get started.

Despite the economy that seems to be on a roller coaster ride, good domain names are still fetching very good prices. This is important for me because selling domain names is how I make a majority of my income. However, development has become an integral part of my business, and I’ll tell you why.

Domain names aren’t selling as quickly as they once did. A few years ago, it was very common for me to buy a name and sell it within just a few days. Other domain investors had a great appetite for descriptive domain names, and it was far less common for me to hold a name for more than a couple of months than it was to flip it quickly.

From my perspective, the “hold” time on my personal domain investments seems to be longer. I am more focused on selling to end user buyers than relying on the once very quick flips. While the quick flips are still there (and still have the same excitement), they occur less frequently than previous years.

With my developed websites (dog sites, city .com sites, my blog, and a few miscellaneous sites) generating significant revenue, I have a greater ability to hold high value domain names without the pressure to sell them. I can be much more selective when it comes to selling my names, and I am in a far better negotiating position. For instance, if I receive a $10,000 offer on a name I think is worth $25,000, I can turn down the offer, even if I paid $5,000 for it and a sale would yield a profit.

From my perspective, I believe you should develop your best domain name into a revenue generating website rather than spreading yourself too thin and building many sites. Once that site is generating significant revenue, then you can branch out and build the next one. Don’t take on too much at once, but do build one revenue generating website.

Having another revenue stream that brings in consistent income will reduce the pressure on your domain sales/flipping business.