Most investors across their entire portfolio, would say their average is 2% – 3%. They’ll sell 2% to 3% of their domain names per year.
– Michael Cyger
This past week Andrew Allemann at Domain Name Wire did a great interview with veteran domainer, Mark Levine, about his 2018 brandable domain sales. In the interview Mark lays out his domain acquisition strategy and sales philosophy as well as sample sale details, his portfolio size, acquisition costs and other items you don’t often hear in this type of discussion. So I highly recommend it.
At the same time, despite his best efforts, Andrew may have left many readers with a skewed picture of Mark’s actual bottom line profit on the 48 domains that he sold this year through Afternic, BrandBucket and Efty landing pages. Some might think that Mark’s $114,000 in sales minus the $3,400 he paid for those domains would mean a 97% profit. Right?
Nope. Not even close.
I would estimate his bottom line profit at 50%.
Your new reality
Let’s imagine a scenario loosely based on Mark’s laudible 2018 sales performance. Let’s say that you have a portfolio of 1500 domains with a 2.6% annual sell thru rate. Let’s assume you sold 40 domains in 2018 at an average sale price of $2,500. This means your sales total for 2018 was $100,000. Nice!
But how much of that $100k goes into your pocket?
$100,000 = Total sales for 2018
$9,750 in Brand Bucket Commissions (13 domains X $2500 = $32,500 X 30%)
$6,500 in Afternic Commissions (13 domains X $2500 = $32,500 X 20%)
$83,750 After commissions
$3,500 in acquisition costs for the 40 domains that sold (40 X $87.50)
$1,148 for private sale escrow fees (14 domain sales @$2,500 = 14 X $82)
$15,000 in renewals (1500 domains X $10)
$64,102 After commissions & expenses
Minus income tax
$14,102 Income tax (22% X $64,102)
That’s a very nice profit and a 50% profit margin is almost unheard of for a side gig or even many full-time ventures. For example, the average profit margin for restaurants is 3% to 5%. Yikes!
You could be anywhere
Now domaining is fun but time you spent domaining could have been spent on other money making endeavors instead. In addition, you likely had a long and expensive learning curve. But now, after a few years of long hours, hard work, financial investment and modest profit, you’ve just had a $100k sales year. Hooray!
So to continue this imaginary scenario let’s assume that you’ve done the hard work in years past and this years sales were the result of a lean, mean, well curated and executed portfolio.
Even so, you still spent 15 hours a week (or more):
- Researching new acquisitions
- Updating existing sales listings
- Creating new Efty landing pages
- Liquidating stale domains
- Negotiating private sales
- Executing payments and domain transfers
- Doing your bookkeeping, tax filings and office maintenance
So let’s say you worked 15 hours a week times 52 weeks. That means 780 hours you worked on domaining this past year.
Oil and hairy backs
We then divide your $50,000 profit by 780 and we get $64 per hour. Less than what a licensed massage therapist makes per hour before expenses.
Now, I think domaining is 10 times more fun than rubbing oil on someone’s hairy back but I bring it up to keep things in perspective.
The point I’m trying to make is that domaining can be very lucrative but…. even after a six figure sales year I would not call it easy money or a get rich quick scheme. If you are one of the precious few who gets to the six figure sales level you’ll have created an awesome and lucrative side gig. Congratulations!
But nothing fell in your lap.
At every level of your business development you got what you deserved. That is, lucrative monetary rewards for working hard, and smart, with a patient, multi-year business plan.
So forget the myth of overnight wealth through domaining.
There’s no free lunch……. except on Thanksgiving!
- This analysis is USA-centric. My apologies to our readers who live outside the USA. You’ll have to adapt the above numbers for your specific country, currency exchange rate and financial situation.
- The figures in my analysis are estimates and there are many potential variables in acquisition costs, commissions, tax rates, capital gains computation methods and on and on. Those variations could raise or lower your bottom-line, profit.