Domain industry math

[Edwin]

Thought it might be worth summarising what it would take to break even (i.e. cover your renewal fees) though domain sales alone.

ASSUMPTIONS
1. A domain registered via a cheap registrar costs £7.20 (£6+VAT) for 2 years
2. A domain registered directly through Nominet costs £6 (£5+VAT) for 2 years

If you're registering names via a Registrar, then for every 100 domain names you own, you would need to sell:

• 7.2 names a year at an average of £50 each
• 3.6 names a year at an average of £100 each
• 1.45 names a year at an average of £250 each
• 0.72 names a year at an average of £500 each
• 0.36 names a year at an average of £1,000 each

If you're registering names directly through Nominet, then for every 100 domain names you own, you would need to sell:

• 6 names a year at an average of £50 each
• 3 names a year at an average of £100 each
• 1.2 names a year at an average of £250 each
• 0.6 names a year at an average of £500 each
• 0.3 names a year at an average of £1,000 each

If you achieve a better sales ratio that the above (at a given average price) you'll start to be in profit.

Remember that you will need to achieve the above sales figures EVERY year for your domain collection to be self-sustaining. And that gets very hard (and quickly impossible) if you're getting rid of 7-8% of your collection every year!

 

[Edwin]

When considering the best strategy, you can also look at the figures above in terms of "sales difficulty" and ask yourself the question: "Is is really X times more difficult to sell a name for £amountB than it would be to sell it for £amountA?"

For example, "Is it really twice as difficult to sell a name for £100 as it is to sell one for £50?"

or

"Is it really twenty times as difficult to sell a name for £1,000 as it is to sell one for £50?"

 

[Pred]

interesting post, thanks for taking the time

 

[Bailey]

Indeed interesting, thanks . I do think most of us work to a 'needs and opportunities' model though.

[Remember that you will need to achieve the above sales figures EVERY year for your domain collection to be self-sustaining. And that gets very hard (and quickly impossible) if you're getting rid of 7-8% of your collection every year!

The very nature of our game puts an opportunistic element into it. Good Inventory management can equally mean reducing holding if it's not on any ones buy list. By example a couple of years ago I made a couple of healthy transactions in the HD (High definition) market. The few HD domains that I still hold I don't see myself renewing. - that bus has left, so to speak.

My advice is play to your strengths. (forget the typical business model) and if they're not there don't play. Domaining is more akin to the "stock-market" model then any thing else i can think of - certainly not the typical business retail model,(both b2b or b2c) Although some for their own simplistic model reasons may wish and occasionally portray it as such.

And yes - If a new proposition requiring additional domain purchases to captilise on appears. I will be there like a rat-up-a-drainpipe. As always

 

[websaway]

When considering the best strategy, you can also look at the figures above in terms of "sales difficulty" and ask yourself the question: "Is is really X times more difficult to sell a name for £amountB than it would be to sell it for £amountA?"

For example, "Is it really twice as difficult to sell a name for £100 as it is to sell one for £50?"

or

"Is it really twenty times as difficult to sell a name for £1,000 as it is to sell one for £50?"

It's 20 times easier to sell a £1000 name for £50 yes, you could sell them all day long.

 

[DomainManagement]

this is what i love about this game

This is what i love about this game everyone

has there own take on it ,

thanks Edwin for laying your thoughts out in such a nice digestible fashion
you do it so well i am jealous

the end game is as small or as large as you want it to be ,

 

[doodlebug]

ok I currently only have 90 domains but hope to make it 500 by new year 2012 however based on your maths I will make it 600 therefore based on my minimum .co.uk end user price of £1000 I have to sell just 2 per year to make a profit.

If I can sell 1 per month based on my minimum price of £1000 then that is £12,000 per year or £10,200 pre tax profit, if I add that with aff income I can make a decent living from it next year onwards.

I do plan on buying (as often as I can ) a quality .co.uk for eg £3000 and flip it for £3300 so I can add that aswell.

Anyway thanks for the sums they make things quite clear