Hello, TGIM, and welcome to another Domaining MBA Monday! Today I want to talk about an incredibly important topic – how to reinvest your profits. Selling a domain can be a great feeling, maybe you made 10x your initial investment and you want to go out and celebrate, that’s fine, but before you do, make sure you have a solid plan to reinvest some percentage of your profits.
As a business owner you are in control of your money and it’s important to decide early-on how much money you are going to put in the bank and how much you are going to reinvest.
Here’s the problem. Most new Domainers never think about this, instead they’ll make a big sale and before you know it the money is gone with little to no money going back into their business. The feeling is often “Well if I sold that domain for x, then I can sell any number of my domains for the same price or more, I’m rich!”
As I like to say, you’re not rich until the money is in the bank and thinking that your whole portfolio is worth a fortune based on one sale is flawed thinking. As a business owner you should constantly be paying attention to your profit margin and how you are using the money you make to continue to build your portfolio and make more money. Of course reinvesting your profits doesn’t have to mean putting all of the money you make into other domains, it could also be putting money towards writers, logo designers, programmers, the list goes on.
The good news is, it’s not hard to build a basic model around reinvesting your profits so that with each sale you make, your business grows a little bit stronger along with your bank account. There’s no right way to do it but here’s how I break it down for myself:
- 25% goes in the bank (cash is king right?)
- 25% goes into new domain investments
- 40% goes into paying my team (writers, designers, developers, etc.)
- 10% is used to celebrate
That’s right, along with putting money aside for my business, I also put 10% aside to celebrate. You’re not a bad business owner if you take some of your money and use it for your own enjoyment, just try to keep this below 25% if you can. As you can see, 90% of the profit goes right back into my business with the largest percentage going towards paying my team.
These percentages will be different for everyone. If you’re a self employed Domainer you may not need to spend 40% on your team because, well, you are your team! This means you can take more of your profits and put them in the bank or into new investments. If Domaining is not your primary income source you might not have to put 25% in the bank and can maybe put a bit more money towards new domain investments.
The point is, put together a solid structure for how you are going to reinvest your profits and do it. By do it I mean, do it now! It only takes a few minutes to think about how you’d like to reinvest your profits and you can share it in the comment section below. Think of this as Domaining MBA Monday homework.
Comment and share how you plan to reinvest your profits!