Getting the best price for your asset if your in division 3

A comment from Rich Schwartz on his sale of property.com made me realise how far domain name sales have to come and how far they still have to mature.

Specifically contracts and the negotiations of a sale of your assets.

We need to look out at other industries and learn from the way deals are done, I have already talked about leasing which I believe has a big future, perhaps dictated by added value such as rankings, a shop would have added value through it’s location and passing trade, a domain with a small site that ranked would mirror that location and passing trade adding real value and making it an asset that would be attractive to businesses.

In the UK some of the larger deals we see reported in the press are for sportsmen, specifically footballers who can earn huge transfer fees and wages through their contracts with clubs. It is from this model that I see future potential.

Large football clubs don’t need to sell their best players, therefore if Real Madrid want to buy a player from Manchester United we are talking tens of millions, a motivated buyer and an unmotivated seller make for some really large numbers. Larger clubs can also give the experience needed to improve players and offer international matches which adds value.

If Manchester United wanted to buy a player from Luton Town (a few divisions down) Luton will never get the best price for their best player, they need to turn over player more and are much more motivated to sell, lower value amounts of money also make a much bigger difference to their business. Furthermore with their lack of experience their players will never have champions league games under their belts to add value HOWEVER they have found a way around this problem that we can learn from.

Let’s take this adage straight across to websites and domains.

When Rick sold ireport for $750,000 most of us agreed we would have sold it for a lot less, how many of us wouldn’t have taken $50,000 for it? So in this instance him being an unmotivated seller meant he got the best price, we would have taken a lot less but there must be a way to combat this.

If someone approaches you for your best asset we usually go one of two ways

1/ We over compensate in the hope of riches and ridiculously value our asset which kills the deal dead
2/ We get more realistic, come up with a figure that would be half decent value and make a difference to our lives but fear we may live in regret for evermore, like footballers domains are unique and really difficult to value and once it’s gone difficult to replace.

There is a 3rd method and one the smaller league football teams use frequently

3/ Sell for a half decent amount of money than can make a real difference BUT write into the contract a share from a future sale, there have been countless stories of small clubs having huge windfalls when a player moves on , does well and gets sold on again but for a much larger price. If your asset was sold and then improved, given the experience on a national stage that you can’t give it and then sold I am sure you can see the value in being more realistic with your asking price in return for say 5% of any future sale. In some circumstances that can amount to more than your initial sale amount.

Naturally with any new method comes hurdles like contracts, this would be a much easier arrangement to achieve if your in the same country as the buyer and much more enforceable, so if someone will not pay your price in method 1 above, consider method 3.

About Scott Jones

Scott hails from the north east of Scotland and started earning online at the end of 2000 building websites for local businesses during which time he won an award from Lord Alan Sugar for Excellence in Enterprise. After having quite a bit of success with domaining Scott mainly runs educational evergreen websites which generate over 3 million visitors per month but is always on the lookout for a fresh thinking out of the box way to turn a buck. Follow on Twitter.

Comments

  1. The problem with getting the best price for a domain lies with how you value it. I.e. how do you value a domain? If you are selling a website at least you can come to figure based on traffic and earnings, but the value of a domain is purely based on what the seller is prepared to pay and what the seller is prepared to accept. As you say in the article this can vary massively!

    A bit like sellings houses, what someone pays for it is what it’s worth!

  2. I love the idea of writing in a % cut on a future sale of a domain. Anyone spending thousands on a premium domain is serious about what they are doing so it would be a safe bet you would get a long-term lump cash return as well. If I was the buyer I also wouldn’t mind having that in a contract if it meant I got a premium domain I was desparate for and could use wisely!

  3. I agree with John. These days its very difficult to figure out the value of a domain.

  4. One thing to note is higher value sales often are with end users, thus names are unlikely to be resold.

    Another plus for end users to snap up decent names, if they dont someone else will…. 🙂

  5. Good point about end users, this helps limit the supply. In fact you could argue the supply is VERY limited, in that for example there is only one domain for http://www.microsoft.com – I imagine Bill would be prepared to pay a fair price for that domain if someone else owned it 🙂

  6. Another excellent thought provoking article, as always thank you!

  7. I am very bery surprised ireport fetced $750,000. On the face of it, it does not seem all that valuable because I have seen far far better domains go for far far less.

    In many ways, in future I think a domain will only have great value if it has traffic because they are launching so many different extensions that people are no longer willing to pay a premium for a .com domain unless its highly mmarketable because a .com is no longer the be all and end all of domain names.

    These thousands of extensions that are being launched will only dilute the value of domains.

    So, in some ways we come to what matters on internet – traffic.

  8. I think the valuation is also influenced by how much the niche related to the domain is valued. I also agree with Nesa about all the domain extensions that are popping up, which is kinda diluting the dotcom domain value.

  9. I tend to think the more extensions the more confusion and that re-inforces the value of the original .com and in the UK .co.uk as they have long since been branded and are memorable unlike .web or any other attempt to open up extensions.

  10. All i can say is that contracts should be made in good faith.

  11. I think the www has reached saturation wrt the domain names, there is not much scope left, too much of competition. so the better way out is to add a city domain instead of current domain strategy for .com or .org …..etc this will give more room for everybody to compete at a more minute levels.

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