Advice

While it is generally a good business practice to keep an adequate amount of cash on hand to cover expenses for at least a few months, there are plenty of reasons why it is necessary to do so if you are in the domain industry. Aside from the lost opportunity of not being able to purchase a domain name that can help your business, you never know when unexpected liabilities will pop-up, and money will be needed.
A perfect example is the LH.com legal situation. While we can all assume FMA has adequate cash to pay for the defense of LH.com, smaller domain investors might not have had the cash. I would peg the re-seller/need to liquidate quickly value of LH.com in the ballpark of $300,000 (not taking the offers received or anything else other than the 2 good letters into consideration). Had a domain investor saved up and purchased LH.com as his prize investment, there is a good chance he would have been drained of his cash reserves. While he holds a high value domain name, you can’t really pay the bills with this paper worth.
Now say a UDRP is filed against the domain name. The ballpark cost for a UDRP defense is anywhere from $5,000 – $15,000 (very high) if you hire a competent domain attorney. With that said, if the UDRP defense was unsuccessful, the domain owner would be on the hook for the defense fees, and he would have lost this $300,000 hypothetical paper value. If a federal lawsuit would follow this action, as it could be the only way to recover the domain name, the cost of this could be in then tens to hundreds of thousands of dollars. While it is possible to sue for attorney’s fees, I don’t know the success rate of that.
The point of this is that we often jump on great domain deals when they come up, but as business people, we need to be mindful of the cash we have in reserve. Even though the interest rates in American banks are very low and we all assume that most of our premium domain names are fairly liquid, we need to realize that our domain names could be frozen and contested by overreaching corporate entities, and we need to be prepared to defend them.

It seems obvious, but it’s never a good idea to use the same passwords for different email accounts, domain registrar accounts, bank accounts…etc. Whenever you need to log on to an account online, it’s best to have different complicated login passwords. If you use the same password and that is stolen by a thief, they will have access to all of your private information and can easily log into your account and take control of everything:
From the Boston Globe,

“Using the same password for multiple Web pages is the Internet-era equivalent of having the same key for your home, car and bank safe-deposit box.”

Whenever it is offered, I strongly advise that you get a security fob to add an extra layer of protection to your accounts. I have a Paypal security key (which costs just $5.00), and I have recommended that at least one domain registrar implement this level of security to protect our digital assets.

I want to clear up a couple of misconceptions that I’ve seen pointed to me and my blog recently. The purpose of my blog is to give an inside view of what I am doing with my domain names and how I am generating revenue or trying to generate revenue. Some of what I am doing will make me money while some of what I am doing will end with me spinning my wheels. This is my first experience with starting a business, and it has been an evolving process. I enjoy chatting about the domain industry, and I am happy to share an inside view of my business model and plans.
I have been buying and selling domain names for a few years, and I’ve been fortunate enough to have the opportunity to work on my business full time. As my life and business progresses, I have to make certain business decisions to put me in a strong financial position for years to come. I see buying and selling domain names as a great opportunity (and one I have been successful at for a little while), but I also see it becoming more difficult. As a result, I have started to develop a few of my better domain names using various strategies I have been happy to share (mini-sites, affiliate websites, full businesses…etc).
While I don’t think development is for everyone nor is it for every domain name, I do see it as a way to grow constant revenue streams. While domain parking can be a source of passive income if your domain names get type-in traffic, I haven’t been fortunate enough to own many great domain names that generate a ton of PPC revenue – enough that I wouldn’t sell. Since I have dedicated 100% of my energy to growing my business, I am focusing more on development. I have the time, I have the resources and I have the energy to create businesses around logical domain names – starting with Lowell.com.
As I said, I do not think development is for everyone nor is it for every domain name. It takes an extraordinary amount of time to develop a domain name, it’s expensive, and it may be unproven. While I have slowly begun to reap the rewards of development – 12 hotel reservations on Salinas.com last month and some revenue from the job board, I have a long way to go to be profitable. Fortunately, I am able to leverage some of my domain name assets to buy other names for development down the road, including Burbank.com.
I read somewhere that I am selling all my domain assets to focus on development. This is entirely inaccurate. I have always bought and sold domain names, but with the expense of Burbank.com (I bought it from a person who had a functioning newspaper and didn’t have it for sale), I had been selling more rapidly lately – although that is slowing down. I have also been buying domain names even as I am selling. Some of the names are for development (Oenophiles.com) and some are for sale (Metabolizers.com and UnemploymentLine.com).
I still believe the domain market is soft due to worldwide economic conditions, but I am bullish on the domain industry for the long term. In order to sustain my business, I have decided to build businesses around some of my domain names, which I highlighted in my post about the perfect portfolio for me. As the industry evolves, I am evolving as well, and I am happy to share my plans as they evolve.