8 Ways to Fail at Domain Investing (Domaining)

doron vermaat

Profitable domainers fail 97% of the time on the way to selling 3% of their inventory each year.  Domaining is a highly speculative endeavor.  To be profitable means walking a virtual tightrope of income, expenses, and probabilities.  On top of that, we have to compete with thousands of other domainers from around the globe.

So if we want to exceed – we have to excel.  On the other hand, if we want to fail, there’s at least eight ways to do it:

1. Spend first, learn later

Would you invest in a stock just because you liked the name? Without doing any research on stock trading strategies? Technical chart analysis? Company fundamentals or current market trends? Of course not. So why then do we invest in domains without a thorough understanding of the market and a well-developed evaluation skill?  

According to CB Insights, 42% of startups find out, too late, that there was no market demand for their product. My recommendation? Get an education in domain valuations before you invest your hard-earned money and dig a financial hole you may never emerge from.

2. Avoid planning

Every successful business person begins with a written plan, based on research, facts, and figures.   How many domains do you need to buy, and sell, and at what prices, to turn a profit? Is that formula realistic?  Have you ratified it with an experienced, already profitable, domainer? 

Base your business plan on facts and hard data, not naïve hopes and dreams. Define your goals and regularly assess your progress to make the necessary revisions and adjustments that lead to success.

3. Stay in your head

What you don’t know will hurt you. Written records of what you own, what you paid, what you’ve listed, at what price, what you’ve sold, renewal costs, commissions paid etc. are an absolute must. 

You should have a current document that you can look at anytime and within in minutes know your total year to date income, commissions paid, acquisition costs, renewal fees and profits. If you don’t – then you are a prime candidate for self-delusion with regards to your real-life profitability.  

If record-keeping is not your thing, then pay someone to do it for you. Just get it done.

4. Take candy from strangers

As you proceed with your business plan you will encounter problems, obstacles, and failures.  You will need additional information and guidance in order to modify your business plan and succeed. 

Random input from anonymous strangers will not place you on the path to success. Seek out qualified information and advice from reputable sources like Domain Sherpa, DN Academy, and the writings of veteran domainers who are recognized in the industry.

Avoid taking segmented pieces of information from random people on the web and inadvertently slowing or sabotaging your business growth.  

5. Treat it as a hobby

The reason casinos make hundreds of millions each year is because patrons view their gambling as “entertainment.”  They have not learned the game, studied it or practiced it. Most of all they don’t approach their gaming with the expectation of winning. They say “it’s just for fun.”

When they do win, a hand or a play, instead of taking money off the table and going home they continue to gamble until they are broke, thereby concluding their self-fulfilling prophecy as a loser. 

In this same way, I hear domainers rationalizing their lack of success by saying “oh it’s just a hobby.”  If you want a hobby buy a bowling ball or a tennis racket. 

Domaining is a business even when it’s part-time.  It should never, ever, be treated as a hobby and if you find yourself speaking of it in such terms it might be time to cash out and spend your money somewhere else.

6. Expect quick results

If you’re looking for quick and easy profits you’re in the wrong business. I only had a handful of end user sales in my first year.  Now I have a handful every month.  But my average hold time is 390 days!

A 2% sell-through rate on 100 domains could mean 4 sales in the last quarter of the second year!  So be patient.

NOTE: I am not recommending sitting on, and renewing, low-quality domains with low marketability.  Every domain purchase is a gamble.  Most of the time we lose. So make the odds of winning as high as possible by owning the best quality brandable domains you can afford to own in medium quantity.

7. Hang out with newbies

Domaining is a solitary endeavor.  Still it’s important to make friends, network and learn from our successes and failures.  Just do it with other domainers who are at least as successful as you are. 

Mentoring a newbie is a noble activity but make sure you’re spending a significant amount of time with domainers who are making more money than you are.  They will lead you higher.

8. Take it easy, don’t work too hard

Imagine a clothing store that sells the same shirts and pants year after year.  Their sales would fall off a cliff in no time.

Same thing with mid-level, end user, brandable domains.  Like everything in our fast moving culture there are fads and favs, hits and misses in brandables.  Some last longer than others and you need to catch the new trends early and shed old inventory that’s no longer in style. 

Always be looking to upgrade the quality of your portfolio, improve your sell through rate and reduce expenses. 

Stay hungry and don’t get complacent. Commit to spending a minimum number of hours every week refining and improving your skills and domain business model.

There’s a significant difference between patience and complacency.

doron vermaat

Analyzed by Doron Vermaat

Doron Vermaat is the co-founder of domain name investor platform, Efty. He is a prolific domain investor who owns a porfolio of domains and also blogs about it. Prior to Efty, he served 10+ years in senior sales and business development roles. Check out all Doron's articles, LinkedIn, or Twitter.

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