From the recent whizzbangsblog.com survey I was approached to write a series on starting a domaining business and revealing some of the opportunities and pitfalls for the unwary.

Whenever I view any business the first thing that I look at is the underlying business model. If there is no business model then there’s no business, just a gamble. In many instances you’d get better odds playing in any one of the casinos at Vegas.

When you look at the domain industry there are three models that are distinctly different from one another although they are not mutually exclusive. One of the great things about domains is that a single domain may exhibit qualities that reflect all three business models.
1. Monetize domain – get revenue now, sell for revenue multiple later.
2. Capital growth – treat domain as a stock item and sell domain to natural owner in the future.
3. Development – design business for domain, monetize and sell in future.

When viewing a domain it’s a good idea to think about what type of business model does this domain supports.

For example, if I have a domain with considerable traffic that I can monetize now then this will reduce the payback time on my investment. If on the other hand I purchased “asdcffddsc.com” then I would have to be prepared to continuously reinvest the cost of re-registration until the domain sold to a natural owner or speculator.

Always, always, always think in terms of the underlying business model. I’ve seen so many newcomers to the domain industry spend a lot of money on what they thought were terrific domains only to get a near zero return on their investment.

For example, "SeattleMedicalBenefitsSchemeForOlderPeople.com" is likely to take a long time to sell to a “natural” owner of the domain and is unlikely to have any traffic. Developing such a domain into a website is going to become a branding nightmare.
I know that you may think it’s a great domain but remember that ultimately you need to subject your personal opinion to that of the business model. Just to reinforce what I’m saying picture yourself sitting before a table loaded with $10 bills. Now picture yourself tearing them up, one at a time, hundreds and then thousands of dollars being sent to the trash can. That’s what domaining is like without focusing on the business fundamentals.

If you insist on tearing up the money then send some of it my way and sponsor whizzbangsblog.com 
In the next installment I’m going to unpack what are the basic building blocks you need to start domaining and who are some likely partners that you may want to approach for underpinning your business.

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