Evaluating an Offer for a Domain Name

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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.

1 COMMENT

  1. Perhaps this is a good situation in which to retain a small ownership position in the domain that you’re selling? The buyer walks away with a great domain without any additional up-front cash out-of-pocket, and you reap the benefit of someone building a (well-financed) business on that domain.

    ***UPDATED BY ELLIOT***
    I don’t think this would be a good idea for this situation. I am the one who has the business idea for the domain name, which I wouldn’t be able to implement if I sold it (or a portion of it).

  2. Great post
    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.

  3. i think it depends on the type of name – is it a generic or is it industry-specific (and may be out of favor 5 yrs out) – with that said, given the facts as stated i say hold and develop – the payoff appears to be considerable

  4. Great name only help, sure. But in this case i think revenue is based for calculating price. 5 – 10x revenue is fair for market, but if the name generic may be pay more, IMO.

  5. Even after Leland Hardy made the points at traffic, the industry seems oblivious to the untapped potential of domains in call-to-action-direct-response-tv. NOT dotTV but…
    “Make an offer on TV, close it online.” The right domain supports or impedes whether or not the motivated traffic can remember where to go. The perfect example of this is freetriplescore.com (see the whole campaign here:
    http://fragerfactor.blogspot.com/2008/05/free-triple-score-com.html
    Domains have the potential to significantly increase response rates and ROI from offline media advertising. Domainers had argues that domains are advertising and therefore get traffic without needing to spend money to advertise. With that stubborn argument, Madison has turned its backs on domainers and domainers shoot themselves in the foot by valuing on two options- PPC or expensive, time-consuming development. Think outside the box before you abandom domains and ship.
    More people are just coming online– older consumers seeking healthcare information– while children who have grown up online are seeking their own future. Both need names. Neither will be represented on Estibot or a canned appraisal.

  6. Hi, could anyone tell me how to determine how many people have run a whois on my domains to check availability/ownership? I read and it makes sense that this should be factored into any thinking as to value. Thanks!

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