Domain Sales

Sometimes deciding to sell a domain name isn’t as easy as receiving a fair market offer for the name. In addition to considering the value of the offer, market conditions, and the buyer’s circumstances, you really need to think about what the loss of the domain name will mean to your domain portfolio and business plan. While being in strong financial position is important, you need to evaluate how the sale of a domain name might be detrimental to your long-term business plan, even if an offer you receive is for the full market value of the domain name.
When I receive a strong offer on a domain name, I do my best to determine the actual value of the name. For instance, I try to figure out whether I could get a higher sales price if I approached certain buyers, end-users or if the name was auctioned and received bidding action. More often than not, I am able to easily determine that the offer is lower than market value, and I negotiate with the person who made an offer in an attempt to reconcile the difference between the offer and what I’ve determined to be the fair market value for the domain name.
On occasion, a legitimate offer that is received is either for fair market value or greater than fair market value. In these rare situations, since you are probably more inclined to sell after receiving the fair (or better than fair offer), it is imperative to think about what the loss of the domain name will mean to your business plan in the long term. I am very fortunate to have received a significant offer for a domain name I own. While most people would think the offer is probably very appropriate, I need to determine how it will impact me if I choose to sell it.
Sure, a domain name could have a fair market value of $200,000, but with my business plan, design template, and execution strategy, the developed website could make this domain name worth a large multiple of this, especially if the developed website is successful. If I sell this domain name, I would be inclined to go out and find a comparable one to fill the hole, and I might not be able to find a comparable domain name to develop in this price range. It might actually cost me more money to find something equally as compelling, which would make the sale very short-sighted.
While it’s usually a good idea to have a strong cash position, with the low interest rates and the weak dollar, holding cash in the bank is almost a losing proposition. Maintaining a cash position is important for the short term, but I don’t personally think it’s smart in the long term, although I did get a D+ in Financial Accounting when I was a sophomore in college (hey, I was pledging my fraternity).
Selling a domain name involves more than evaluating the face value of the name and the market conditions. It’s very important to evaluate how the loss/sale of the name will impact your business strategy and what else you can do with the revenue generated from the sale. It would be ashame to realize what you lost in 5 years by selling a particular domain name.

Much like New York City taxi cab medallions, which are always highly coveted at auction, category killer domain names will always defy current market conditions. While I do think much of the domain industry is in the midst of a slow down, there are always going to be sectors of the industry that perform particularly well, regardless of of the health of the economy. Because category killer generic .com domain names are irreplaceable, when one is put on the market, the price can go through the roof.
On the flip side of things, I think people are spending less money on average domain names, which may be felt by many in the industry, since a vast majority of people own average domain names. I also believe some people think their domain names are worth more than the market will pay, and they are setting the prices far too high to have success. I am not really referring to a specific domain name here, but I am speaking in general terms. If you are going to entrust a domain auction house to sell your domain name, and you are going to allow them to lock the name up for 60 or 90 days after the auction, you might as well make the price reasonable.
Unless you own a genuine category killer domain name, I think you might want to reconsider your asking prices. Instead of trying to get rich on a single domain name, why not reduce your price, sell a name for a handsome profit margin, and reinvest it in other great domain names? There are plenty of times I have sold names for prices I believe are far less than optimal, but I have reinvested in more and better domain names every time, and I haven’t regretted a sale yet.