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
seesaw 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.