Things to Consider When Selling a Domain Name

Some of the largest domain portfolio owners rarely if ever sell a domain name. They’ve built strong (and profitable) business plans that are effective by not selling a domain name, or only selling for a very, very compelling offer. While I would like to be able to keep every domain name I acquire, it isn’t feasible for me and my company. When I do decide to sell a domain name because of an unsolicited offer or if I put the domain name up for sale, there are several things I consider prior to the sale, and I thought I would share these things.
Is the domain name generating revenue as is?
Before selling a name (or before pricing a name), it’s important to calculate how much revenue is being generated and at what cost. If the domain name is generic and it’s parked, the name can typically be priced anywhere from 8 – 20 times its annual revenue, all depending on the name. For many category defining or product (non-TM) domain names, people have sold them for hundreds of years multiples. Most people with category defining domain names won’t sell simply based on a revenue multiple so this is a guideline.
If the domain name has a website, the owner should take the monthly hosting costs into account as well as other costs that are incurred, such as commission for advertising sales. Additionally, advertising agreements that are in place should be considered, since the new owner may not wish to keep the site as is, so contracts may have to be broken with advertisers once a domain name is sold. All costs and revenues should be considered when a domain sale is contemplated.
Are there plans to develop the domain name?
If the owner is planning to develop this domain name because of a particular interest in that industry/field, or development would be made easier because the owner has content or access to content, the price to sell the domain name could be higher. Sometimes a particular domain name fits well within the portfolio of a domain owner, so selling might not be in the best interest of the owner. A domain owner should think about what opportunity costs will be faced if this particular domain name is sold.
Can the domain name be easily replaced?
One reason why domain names are so valuable is because they are virtually irreplaceable. There can only be one, and likewise there can only be one of every domain name. If a domain name is sold, it might be impossible to find a similar domain name at the same price level. If you think you will regret selling a particular domain name down the road, you should probably hang on to it. In my opinion, domain names are going to continue to increase in value in the years to come, so don’t make a sale you will regret. However, don’t miss out on other opportunities because you became too attached to a domain name that you value more than the market – unless you have plans for the name.
Can the sale proceeds be used to reinvest in a better domain name?
On occasion, a person will want or need a domain name owned by someone else, and they will offer significantly more than the market value to acquire the domain name. While this might seem like a great deal if it happens, the domain owner needs to weigh whether he will be able to reinvest the money in a similar/better domain name. If the seller can upgrade, it might be worth selling the domain name. If the name isn’t easily replaceable and the owner has plans for it, selling might not be the best bet.
I’ve heard people praise others for passing on a $200,000 offer and selling a name for $300,000 4 months later. This is great only if the person couldn’t do something else with that money during the same period. If the domain owner could reinvest that money in other domain names and sell them for more in a short period of time, it might have been a better deal to sell for $200k, buy other names and sell those for more.
The one caveat is that the seller must be conscious of the tax implications of a sale/purchase. If the seller makes $100k profit on the $200k sale, he needs to be cautious when reinvesting that $200k because he is in the hook for around $35k of the $100k profit. If he buys a $200k domain name, he will still need to pay taxes on the profit.
Can the domain name be sold to someone else for more money?
The seller should analyze the market to see if he could get more money elsewhere. As any real estate broker will tell you, a home owner usually values his home more than the market would actually value it. Likewise, many domain owners believe their domain names are worth more than the market will yield. The domain owner needs to determine whether someone else would pay more than a current offer, and if so, what the effort to make that sale would be. Time is money in this industry.
Like with any negotiations, the dynamic of the negotiation really depends on whether the domain owner is actively selling a domain name or a potential buyer inquired to buy a domain name. In the first case, the seller may be the motivated party in making a deal, and this may somewhat dampen his prospects unless there is more than one interested party. When a domain owner receives an inquiry, the sales price really depends on the owner’s motivation for selling. If he has plans for the domain name or if he doesn’t need the proceeds from a sale but the buyer needs the domain name, the sky could be the limit for the price (just ask Rick Schwartz).
If the domain owner is actively marketing his domain name, he should strongly consider any offers before rejecting or counter offering on one. I’ve experience domain sales where I asked $25k for a domain name, and upon receiving a $20k offer, I’ve tried to counter at $22.5k. Sometimes during this period of negotiations, the potential buyer purchases another domain name, so his offer became voided.
From my experience, if you are the seller and you are the person seeking offers, if you receive a counter offer that is acceptable, you should consider accepting it rather than trying to make a small % more. Even major companies like Yahoo have overestimated the value of their assets, and they lost a sale they would be happy to have now.
As any domain investor knows, there are many other facets to valuing a domain name and negotiating a domain sale. These are just a few things I consider when selling, and I wanted to share them. As always, if you have questions or need help, drop me a line and I will do my best to respond shortly.

Elliot Silver
Elliot Silver
About The Author: Elliot Silver is an Internet entrepreneur and publisher of Elliot is also the founder and President of Top Notch Domains, LLC, a company that has closed eight figures in deals. Please read the Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest. Reach out to Elliot: Twitter | Facebook | LinkedIn
  1. What would you the name is worth? Fort Lee is an enty/exit port of New York and New Jersey and North Jersey is kind of the bedroom community for New York City commuters with a growing night life. Pop 41k. I bought the name with intention of building out the site (I lived in Ridgewood, NJ for about 5 years.) I have some bond with the area, but I am so wrapped with building out I could use the extra cash. I am also selling I was thinking 8k for and 40k for I’d appreciate your thoughts. Thanks

    I know Ft. Lee well since I live in Manhattan. It’s worth what someone will pay :). I am not in the appraisal business, so I am not inclined to name a value. I will say people will type in FtLee and FortLee, so unless you have both names, there will be some traffic leakage. I wouldn’t pay $8k for a small city .net though all things considered.
    BTW, two of my college fraternity brothers were from Ridgewood.

  2. I lived there from 1976 to 1981 Ridgewood is great town. My best friend in high school his father was the mayor, and may still be. Did you go to Fordham U? I knew a few people that went there. Small world and still shrinking. Thanks

    I went to Muhlenberg College (Allentown, PA) class of 02.

  3. This one cracked me up Elliot : “If the owner is planning to develop this domain name because of a particular interest in that industry/field, or development would be made easier because the owner has content or access to content, the price to sell the domain name could be higher.”
    You should also include this one : If the buyer is a hard person to work with, can’t make an offer, has a history of tough dealings not paying on time, etc the price goes up.

  4. Hi Elliot,
    I have a domain name: . could you please help to valuate it from your point of view?
    I would like to sell near future.


Please enter your comment!
Please enter your name here

Recent Posts

Using AI For Background Image

I acquired a domain name last week, and once it transferred to GoDaddy, I set up a custom landing page using Carrd. Instead of...

It’s All About the Time You Put into It

A few years ago, my wife jokingly described my daily work lifestyle as leisurely. In some ways, I thought of that as a badge...

D3 to Host Invite-Only Dominion Conference

D3 is a relatively new entrant to the domain space, but it has a team with considerable domain industry expertise. In announcing its $5...

WWYD: One Word .CO or Two Word .com?

Trenton Hughes posted a domain name question that drew more than 50 replies in the last two days. Trenton is launching a business called...

Karen Bernstein Appointed as UDRP Panelist

Karen Bernstein is an Intellectual Property lawyer who has considerable domain industry expertise. Karen has been involved in the domain space for quite some...