Domain Investing in an Economic Downturn
People are suddenly paying a lot more attention to their finances as the world’s economy enters a downturn. It’s important to have a good handle on where you stand financially during uncertain times.
This is especially true for domain name investors. Investors need to understand what’s ahead and consider opportunities that may present themselves.
Extending Your Cash Flow
There are two types of investors in this world: those who don’t have cash and those who do.
If you find yourself in the first category, it’s time to put the pencil to the paper to make a plan. Your goal is to extend your cash as long as possible so you can make it to the other side of the downturn.
- Make a cash forecast
Understanding where you stand is key. Start by looking at your domain name portfolio and when domain names expire. Create a cash forecast for how much you need to spend renewing domains each month. Multiply the number of domains that expire each month by the renewal fee. Forecast your renewal costs for the next 12 months.
This cash forecast represents the bare minimum you’ll need to spend to maintain your portfolio so you don’t have to let good domains expire.
Hopefully, you’ll generate sales to offset the renewal costs but forecasting sales is much trickier than forecasting renewal costs.
Aftermarket domain sales can move in different directions during a recession. People who are laid off from work or have more time on their hands will start an online business, necessitating a domain name. At the same time, other businesses will put off buying a domain until the future is more certain.
Be conservative when forecasting domain sales revenue and comparing it to your renewal costs. Assume sales will decline, not improve. Any sales that come in above your baseline are a bonus but you don’t want to be caught shorthanded when it comes time to renew your domains.
- Optimize for sales
People tend to get lazy when times are good. Now is a great time to make sure your domain name sales funnel is optimized.
Start by making sure all of your domains get maximum exposure. Check the nameservers for all of your domains to verify that they point to domain sales landers. Also, check the major domain marketplaces to make sure all of your domains are listed. Consider adding “buy now” prices to increase exposure and the odds that your domains sell.
Finally, take a look through offers you declined over the past 6-12 months. If you’re strapped for cash, consider reaching back out to the interested buyers to see if you can negotiate a deal.
Look for Buying Opportunities
If you have cash and are looking for opportunities, it’s time to keep a close eye on the market.
People wait to lower asking prices until they have to. Like property markets, domain values might take a while to adjust to a recession. If the recession lasts a long time, some domain owners will eventually lower their expectations as they try to generate cash to pay for renewals and other bills.
Look through domain inquiries you’ve made during the past year in which the domain owner told you they weren’t interested in selling or their asking price was more than you were willing to pay. Contact them again to see if they are more interested in selling now in light of changed circumstances.
Also, keep a close eye on expired domain names. Expired domain auction prices will remain high until domain investors are hurting for cash. All it takes is one or two major buyers to stop bidding in order for auction prices to fall.
The best expired-domain opportunities might be at the margins. If an auction has just two bidders instead of three, the winning bid can be much lower.
Keep Your Head Clear
People make bad decisions when they are under duress. By taking the time now to forecast your future costs, you’ll be able to think clearly when you receive a sales inquiry or negotiate to buy a domain name.
Hopefully, this recession will be short. But there’s a reason they say hope for the best, but prepare for the worst.