For as long as I can remember I’ve been probably a little bit OCD when it comes to budgeting and planning. As a kid I used to save my allowance and budget for cool things that I wanted, and as I’ve gotten older I’ve continued to put together plans and forecasts wherever possible.
Domain sales always seemed like a pretty challenging thing to forecast since there really is a fair amount of randomness to when a particular domain name will sell. Additionally, domain investors typically need a relatively long time horizon similar to real estate investors.
When I buy a domain name, I know very well it could take five years to sell. Sure, maybe you can get lucky and buy a name and flip it next month, but the reality is, for most of us, domains are an asset class we invest in, not a business that we run.
Like any investment, there is no crystal ball that will tell you how well (or poorly) your investments will perform, or if there is, please tell me about it! Luckily, there are some pretty basic assumptions you can use to do some back-of-the-napkin math on what kind of investment income you should be seeing from your domain portfolio.
Here are the assumptions I’ve made when it comes to domain investments:
- The average .COM investor sells 1% (or less) of their portfolio a year
- Most of the domains you own will sell for less than $5,000
- You might have some domains that can sell for five figures
- You probably don’t have any domains that will sell for six-figures (or if you do then you know you do)
- If you invest in non .COMs assume you will sell 0% of those domains each year (i.e. if you make a sale, it’s a bonus not an expectation)
Only you know the split between sub-$5k domains and higher-valued names in your portfolio, but let’s assume an 80-20 split. For the five-figure names in your portfolio let’s also assume you’re getting $15k on average for a name. With these assumptions you can put together a forecast for your domain investments.
Here’s a simple sample calculation:
Suppose you have 300 .COM domain names. On average you should expect to sell three domains a year. If we’re assuming that 80% of the domains in your portfolio will sell for under $5,000, let’s say they sell for $2,500 then most years you can expect to make $7,500. Of course, some years you’ll sell one of your five figure names, and in those years you could then make say $20,000.
Of course most domain investors end up having a really nice sale every once and a while, a sales that surprises them and really makes their year. Maybe you quote $35k for a domain you’d sell for $15k and the buyer takes it, boom – you’re having a much better year. While it’s great when this happens, it’s not realistic to forecast this since it really is more of a random event.
By putting together a simple forecast you can be realistic with yourself. Own 100 hand-registered .COM domains? Well you can expect to sell one a year and make $2,500/year. If you’ve convinced yourself that you should be making $50k/year, that’s probably not realistic.
Also, like I said above, non .COM sales are hard to predict and I leave them out of any forecast I do. When you sell a non .COM, great, celebrate all the way to the bank, but I wouldn’t depend on non .COM sales as a regular way to produce ROI from your portfolio.
Being realistic about your investments is important, no matter what you invest in. There isn’t one right way to put together a forecast but I do think putting together your assumptions and running some calculations will help you get a better sense of what to expect from your portfolio.
Now I want to hear from you. Do you agree with the assumptions I put together? I want to hear from you, comment and let your voice be heard!