“Domaining is a hard industry, very few make money but many like to pretend that they do.” – Morgan Linton, Co-founder of Fashion Metric
I like to play poker. No-Limit Hold’em to be precise. But I’m an average player and I don’t play very often. However, despite my shortcomings, over the past 10 years, I’ve won more money than I’ve lost. How can I say that? Because I have an Excel spreadsheet to prove it.
What’s the secret to my success? Well that’s easy. Smart money management. Huh? Let me explain.
Even on a bad night most players will have at least one big winning hand or a series of 2-3 winning hands in the space of a 15 to 20 minute period. It happens so often they’ve given it a name. It’s called a “rush.” At the end of the rush a player is often profitable for the entire poker session. Sometimes by a wide margin. But players tend to get excited, over confident and greedy at this point in the game. As a result they keep playing and over the next few hours they lose all of the money they “won.” Many lose all of their chips, buy more and then lose them again. Often ending their session deep in the hole.
In contrast, I’m profitable. Why? Because I do the one thing they don’t.
It’s simple. After my rush, I cash out and go home. Even if I’ve only been playing for 30 minutes.
Why am I telling you this? Because poor money management is, in my opinion, the number one reason why domainers are losing money. Domaining is a very competitive micro-industry and often professional domainers only sell 2% to 3% of their portfolio in a given year. This means the line between profit and loss is a tightrope walk and poor portfolio management can easily eat up potential profits.
The domainer’s tale
This is how it usually goes…….
We’re hand reggers our first year. This is a good thing since we don’t really know what we’re doing in the beginning. If we were smart we’d have studied the industry first and only started buying after several months of accumulating market knowledge and naming skills.
But let’s get real. Nobody does that. From Drew Rosener on down we’ve all just jumped in and starting registering domains right off the bat. It’s an unnecessary, but pretty ubiquitous, right of passage in our industry. Even though hand regging often leads to a portfolio dominated by low quality names it can also have the effect of getting our feet wet and accelerating our learning curve in real time as long as it’s done in moderation.
So the first year is usually characterized by accumulation and little or no sales. Many impatient domainers, expecting to get rich quick, implode at this point and either sell their domains for pennies on the dollar or just let them expire and walk away.
The second year is a crucial test for a domainer. By the end of the second year we either have a profit, a loss, or we just don’t know. If we’re not keeping careful records and don’t know our total income and expenses for the year, then it’s a darn sure thing that we’re operating at a loss and we’re just avoiding the issue.
The second year is also crucial for other reasons. For one it’s the year we grow up as a domainer. Because by then we have somewhat of a working knowledge of how to judge and evaluate a domain. But. We also have renewal fees that can annihilate any chance of a second year profit if we don’t purge our portfolio and get control of our expenses.
Objectively evaluating our holdings and cutting out the dead wood is absolutely necessary for maintaining a healthy portfolio and preserving profits. This is something that every successful domainer needs to learn and do on a monthly and annual basis.
More to come
Next week, In part two of this topic, I’m going to itemize and discuss the various criteria and methods used by veteran domainers to trim and maximize the sale-ability of their portfolios. This practice is an important part of profitability and good money management and is an absolutely crucial skill for a successful domainer.
Meanwhile here’s a curated list of domains for sale this week at NameJet: