Some Thoughts On Selling Domains At A Fixed Price vs. Make Offer

It’s an age old question in the Domaining world and one that spurs a lot of debate. Should you price your domains or list them for sale and wait for someone else to make an offer. First I’ll cover both sides of the debate and then tell you my current thinking.

Why List Domains At A Fixed Price
Proponents of fixed price domain listings favor this option due to increased liquidity. There is a general thought that if your pricing is right (i.e. not astronomically high) then a fixed-price listing has greater liquidity.

Why List Domains As Make Offer
Proponents of unpriced domain listings favor this option due to higher selling price. The idea here is that once you know someone has interest, you can work-out the price and wait for them to show their hand before you show yours. If you have a domain that you’d sell for $2,500 but get an offer of $4,500, you could counter at $6,000 and have a deal since you know what the potential buyers opening bid is.

My Thoughts
Like most businesses I am always paying close attention to data, I love data, and it never lies, but it can be different for everyone. I used to be a fixed price guy, then after I sold a domain that I had a $10,000 offer on for $2,500 via a fixed price listing I moved to unpriced listings and now I think I’ve found a middle ground.

I think it’s a huge mistake to list all of your domains with fixed prices. Sure, it might increase liquidity, but you’re going to miss-out on bigger deals that you might not know were at your fingertips. That being said I also think it’s a huge mistake to list all of your domains as make offer because you really have to have a very large portfolio with domains that gets tons of offers to make this profitable.

So my strategy now is to list about 75% of my domains with fixed pricing and leave 25% unpriced waiting for offers. The 25% are my best domains, the names that I know have specific end-user interest and are in markets where buyers have solid budgets. The other 75% I price, but I don’t just randomly price them, I focus on the profit margin I want to maintain and use that as my guide. This typically means that I price my names at 3x – 10x what I paid for them and I rarely dip below 3x.

Sure, I could have a name that I bought for $1,000 sell for $3,000 when another buyer would have paid $5,000 but I might not have ever made the $5,000 sale and I can make the $3,000 sale quicker and bank a 3x profit which is never a bad thing.

Like most things in life it’s all about balance and the domains that I keep unpriced I have a much longer time horizon on and I’m willing to wait for the right buyer that really appreciate the value. That being said, cash is king and cashflow is critical and this is why fixed priced listings are still very important to me.

Now it’s your turn. Are you a fixed price guy (or gal) or do you prefer unpriced listings, or do you take a blended approach like me? Comment and let your voice be heard!

{ 16 comments… add one }

  • Nick July 31, 2013, 7:59 am

    I do a mix, like you do. My best domains, the ones which I think have a corporate buyer, are listed at ‘make offer’. The others are at a fixed price with the buyer paying 100% escrow fees. Thats the cost of buying fixed with me. I figure if they want the lower, buy-it-now, deal then the least they can do is pony up for the fees. ๐Ÿ™‚

    I dont know what the ratio is for me though. I’ll have to check, but I think that ratio is gonna be different for everyone.

    Reply
  • Logan Flatt July 31, 2013, 8:10 am

    I take a mixed approach as well, depending on marketability of the name. However, I allocate a larger share of names to “make offer” than to “buy it now” so that I and/or a broker can negotiate freely with each prospective buyer to determine the best price with that buyer.

    Reply
  • todd July 31, 2013, 8:11 am

    “This typically means that I price my names at 3x โ€“ 10x what I paid for them and I rarely dip below 3x.”

    One thing I think should be added to this is that as the price of the domain increases the multiple decreases. For instance if you paid $1000 for a name it would probably be pretty hard to get 10x or $10,000 for it but if you paid 100 bucks for a name your multiple would be pretty easy at 10x. Yes any price is possible if your willing to sit on the name for years but this is not always the case so I think its a good generalized rule.

    Reply
  • Logan Flatt July 31, 2013, 8:26 am

    Following up on the post and Todd’s comment:

    Since this flipping domain names game is a speculative business and not investing in the proper sense (in my worldview, you hold investments to pocket the free cash flows they generate), I not only look at ROI from each deal but also my holding period.

    I keep track of the number of days from when I became the new registrant and when I become the old registrant. I then divide my ROI% on the deal by the number of days in the holding period. This helps to remind me that I need to move my inventory to be successful in this business. I need to be willing to do deals at good prices that generate cash flows. Watching my holding periods helps.

    Over the past two years, my average ROI% is 400% (A 5x multiple of my purchase price) and my average ROI%/Day is 1.3% because my average holding period is ~300 days. I can improve that number by either getting higher ROI% โ€“ obtain higher sales prices and/or pay lower purchase prices and/or lower transaction costs and/or lower holding costs โ€“ or by shortening my average holding period. Those are the tradeoffs.

    Fortunately, my goal is ROI%/Day of 1.0%, so I am ahead of goal.

    Reply
  • Alvin July 31, 2013, 8:55 am

    Great insight, Logan. I like your holding period concept and will look to implement it myself. ๐Ÿ™‚

    Reply
  • Nick July 31, 2013, 10:26 am

    @Logan, May I ask how you are figuring your ROI? Do you include renewal costs in that calculation? So if you purchased your domain for $10 (year 1) and renewed it for 3 more years at $10 each renewal ($30), the total outlay is $40. If you sold it for $400 then the ROI is ? This is where I get confused. I would like to figure what mine are.. Thanks!

    Reply
  • Howie Crosby July 31, 2013, 10:47 am

    My portfolio is mixed to the majority of BIN, some of my favourite domains are in that said category too. The ‘Best Offers’ are open to the subjective market areas and maybe a little more niche?

    Also I have a couple in a pool that will be used for a Start-Up in the next 2-3 years, and it will take a big offer to release them, I’ve kept them on the market, but there just sitting tight.

    I did just accept an offer on a domain via Sedo, which did not complete, however this has totally opened my eyes on the subject and it is now a BIN, higher than the accepted price.
    I think this offer was a wake up call ๐Ÿ™‚

    Reply
  • Logan Flatt July 31, 2013, 10:53 am

    Yes, renewal costs are simply a holding cost.

    Here’s the ROI% formula to use:

    ROI% = 100 x [(Sales Price โ€“ Transaction Costs โ€“ Holding Costs โ€“ Purchase Costs) รท Purchase Costs]

    OR, simplified:

    ROI% = 100 x [(Sales Price โ€“ Transaction Costs โ€“ Holding Costs) รท Purchase Costs] โ€“ 1

    Transaction Costs are broker’s fees, listing fees, and other marketing expenses to generate awareness that the domain name is for sale, etc. Additionally, Morgan would likely advocate putting in a cost for your own time here to account for opportunity costs. So, if you could make $50 per hour doing something else besides marketing this domain name and you spent two hours marketing this domain name, create another cost of $100 and throw it in Transaction Costs.

    Holding Costs are domain name renewal fees mostly. Like the opportunity cost notion above, you could include opportunity costs for buying and managing your portfolio over time and then dividing by the number of domain names in your portfolio to get to the average opportunity cost of holding onto this particular domain name. Create another cost here and throw it into Holding Costs.

    Lastly, if you so choose, you could create another cost for Federal (and State) income taxes and throw those into Transaction Costs.

    Reply
  • Morgan July 31, 2013, 11:29 am

    Great comments so far everyone! @Logan, I like the way you think ๐Ÿ™‚

    Reply
  • Diana Goodwin July 31, 2013, 2:06 pm

    The vast majority of mine are fixed-price. I am fully aware that I do not own the next “Sex.com.” I, too, have a few that I intend to develop out (“someday”), and so have priced those higher or listed them as “make-offer,” but as Morgan stated, cash is king and cash flow is critical.

    Reply
  • Michael July 31, 2013, 2:45 pm

    I like BIN! when I write someone and they tell me some super high price, I tell them I will have to come up with some super idea! Then I wait like three months and write them back with a lower price lol

    Reply
  • Alan Dodd July 31, 2013, 3:35 pm

    I think you price up a good brandeable at your peril. There the ones which could be the lottery tickets.

    You never know who is on the other end of the phone. If you’ve got em all priced I believe you are lessening your odds of success.

    I have a few priced up at brand bucket but that’s it.

    Reply
  • Nick July 31, 2013, 6:00 pm

    @Logan: Thank you very much for such a detailed explanation! I am sure it helps more than just myself! Kudos!!

    Reply
  • Kassey August 1, 2013, 3:33 am

    @Logan, excellent investment approach. Thanks.

    Reply
  • Joe August 1, 2013, 9:22 am

    I’m a bit if not quite misplaced because all your domain names must have traffic and therefore make offers to sell or aquien interests you.

    Your Morgan in other post write that receive many offers with prices of domain names that make ofeta down and then up the price a bit, until you see that may be interested or not.

    When writing 3x – 10x refires you, is an amount or a percentage?

    If I have more than four domain names in English that keyword in Google tool does not have global and local users in USA but notice Adwords appear with a yellow bar as a keyword admitted, do you mean this?

    I before and even last year registering domain names a bad habit is to go directly to the Google search engine and look if the result is high I think well, in two of these four be some 6,000 million the result and other two of 2,000 million the result, then I register and buy the domain name generic singular and plural, first do no offer, then make offer for each $ 500 that it is less, I must climb a little higher that percentage over so that he who receives the offer might be interested.

    My problem is that I find even a parking lot domain that does not happen to have partners like Sedo, Afternic, Aftermarket, all registrars have partners in order to have traffic and make money find SmartName DomainApps and also the D-Park Pro which charge 100% entirely as intermediaries failing, I see and do you have to pay $ 200 and $ 25 a month is not that opinion be able to advise you if me with your answers thanks for your help.

    Reply
  • Nick August 1, 2013, 10:20 am

    This may be slightly off the subject here but with respect to ROI and profit…… “sales” in general, how do you folks handle that data with respect to your taxes? Specifically in the USA..

    My accountant wants to treat the inventory of my names as intangible assets. I provide him a monthly accounting of inventory changes in these categories: domains (assets) carried over from the prior month, new inventory acquired, inventory sold, and inventory lost (dropped domains). Is this how others do it?

    If not on topic then I would love to see an new article regarding this topic, if you have the time and interest! I am sure others would too. Many of us dont really know how to represent what we have as far as taxes and accounting goes.

    Reply

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