Categorized | Domaining Tips

How Much Are You Paying Yourself?

Posted on 26 November 2013 by Andrei

A lot of domainers are extremely satisfied with their ROI when buying a domain for a low price or even hand registering it, then contacting a bunch of potential end users and ultimately selling for mid-high 3 figs to low 4 figs.

In most cases, they shouldn’t be all that satisfied because after crunching the numbers and factoring in the amount of time they spent finding the domain(s), contacting end users and closing the deal(s), they’d come to the conclusion that the amount they’re paying themselves per hour isn’t all that high.

Let’s assume that over a period of one year, you bought 150 domains and paid a grand total of $5,000 for them.

Let’s assume it took you 30 minutes to obtain each domain (research, the actual registration process and all that), so you invested a grand total of 4500 minutes. In other words 75 hours.

Great, now let’s assume that over that one year period, you contacted end users each day and ultimately sold 15 domains at an average price of $675 a pop. In other words, you generated $10,125.

A lot of people would say you did pretty good.

But is that true?

Well… no. Not quite.

You invested $5,000 and obtained $10,125. In other words, a profit of $5,125.

If you wouldn’t have had to invest time in order to obtain those $5,125 and would have simply obtained them as a relatively passive investor then sure, you did well.

But you have to ask yourself, how much time did you invest?

Well, first of all, you invested 75 hours to obtain the domains, as mentioned initially.

Then you invested time to contact end users for each and every domain. You didn’t manage to sell all of them but still, you sold 10%. Let’s assume you invested one hour per domain to find and contact end users. In other words, 150 hours.

All in all, you invested a grand total of 225 hours for that $5,125 profit.

This essentially means you made about $22.7 per hour.

I don’t know about you guys but I don’t consider $22.7 per hour all that impressive, I’m sorry but it just isn’t.

Now of course, this is just an example and an overly simplistic one at that.

The message I’m trying to get across is that you have to be honest with yourself in order to determine whether or not your business model makes financial sense.

Don’t assume you’re doing great just because you generated profits, always ask yourself how much time (not just money) you had to invest and after drawing the line, decide what to do next.

5 Comments For This Post

  1. Brad Mugford Says:

    “I don’t know about you guys but I don’t consider $22.7 per hour all that impressive, I’m sorry but it just isn’t.”

    You realize that the average wage in many countries is a couple dollars an hour or less? Even in the US $22 is about the average hourly salary. I don’t think it is all that bad really.

    Brad

  2. Andrei Says:

    @Brad: don’t get me wrong, it’s not bad but the point I’m trying to get across is that it’s not all that impressive either.

    Far too many people approach domaining with a “get rich quick” mindset and that’s a mistake in my opinion. Domaining isn’t easy, especially at the beginning when you’re not well funded enough to be able to afford a passive approach.

  3. Brad Mugford Says:

    It is all relative.

    The example you provided is clearly part time. I don’t think $5K+ for 225 hours of work is all that bad for the average person.

    How many part time jobs can you make $22+ an hour doing on your own schedule without having a boss?

    With that said, this is still not the norm. Most people investing in domains end up spending time and losing money, so their return is actually negative.

    Brad

  4. Andrei Says:

    @Brad: I agree that my example is rather optimistic, especially when it comes to beginners who usually make considerably less (a lot of them actually lose money, as you correctly pointed out).

    The most important thing people have to understand in my opinion is that domaining is not a “get rich quick” industry.

  5. Leonard Britt Says:

    Yes, the value of one’s time certainly has to be considered. I believe that acquisition, research and marketing time is greater than the assumptions you have made above but the point overall is valid. Domainers who spend their time marketing domains which no one will ever buy are actually making less than minimum wage – certainly not what they thought they were getting themselves into with domaining.

 
 
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