If there’s one thing that has constantly changed for me over the last fourteen years it has been how I balance cashflow and pricing. The reality is, pricing and cashflow can have an inverse relationship, i.e. the higher you price domains in your portfolio, the lower your cashflow will be unless you get really lucky with a big sale or two.
The counter-balance to this is the cost of replacing inventory. Elliot has written about this topic a few times on DomainInvesting.com, I tried to look for the post I liked the most but couldn’t find it but here’s a good one that still touches on the topic of evaluating replacement costs.
At the end of the day it’s all about balance, like most things in life, and that balance will change over time. Domain Investors usually fall into two categories – those who rely on domain sales as their primary income source and those who don’t. If you don’t depend on domain sales for your livelihood you might be less concerned with cashflow and more focused on maximizing the value of your domains.
On the other side, if you depend on domain names to live, cashflow is critical so getting pricing right and deciding which inventory to price and and which to price low can be complex.
When I started in the domain investing world, I wasn’t making very much money and I used the money that I made from Domaining to supplement my income so I could live a little more exciting life. I got a new car, moved to a nicer area, it felt good – at the same time, it felt stressful, I had to sell domains to support my life.
Everyone deals with stress differently but for me it was too stressful to rely on income from domains because as we all know, domains aren’t completely liquid assets. Yes, if you need to, you can sell a domain, often to another investor, but you’ll be selling for a fraction of what an end user would pay. That being said, I do wish marketplaces like DNWE were around a decade ago because they’re doing a good job of providing more liquidity to investors
Long story short, I suck at handling stress, didn’t like relying on domain income given how erratic it can be, and around that time I got a promotion, made more money at my job, and decided to only live off of the money I made from my job. When I did this something interesting happened, I started re-investing the money I made from domain sales back into domains, that compounded, and that’s how I still operate today.
Now it’s pretty rare for me to use the money I make from a domain sale on anything that isn’t an investment. For years my investment money went only back into domain names, then I diversified into crypto, then into startups and now into NFTs…but not matter what, I invest with house money.
Which brings me back to the question I posed to kick off this article that probably has gone on for way too long. How to balance pricing and cashflow. Lately I’ve been pretty excited about both crypto and NFTs so I’ve been interested in increasing cashflow which means lowering prices, but I try to lower prices only on domains that I think are easily replaceable.
The concept of easily replaceable is incredibly nuanced and somewhat different for everyone but for me I look back at a window of time when you could buy domains on sites like Go Daddy auctions and Park.io with a lot less competition than there is today. Anything I feel like I got a stellar deal on that would go for a lot more today is, well, harder to replace.
So, to summarize since I know we’re clocking a heavy word count here. For me personally, I was cashflow focused initially because I used the money to live. Then for a long time I wasn’t very focused on cashflow and priced everything higher. Today, I’m moving back into more of a cashflow mode because I think crypto and NFTs can grow my money faster, I could be wrong, but that’s my bet now, ask me next year it could be different.
That’s me, what about you. I want to hear from you – comment and let your voice be heard!