Morning Folks!!
I have often talked about my 20 year plan but have NEVER talked about what happens after 20 years. See it is 20 years to the starting line. I think I have helped to shorten that time. I believe at about 17.5 years things will just POP!
So what happens after 20 years? After 20 years the dealmaking really begins in earnest. I don't want 100% of the pie. I want 25% of 1000 pies. Maybe 2000 pies. I mean businesses. Can you imagine that? I sure as hell can. I have dreamed it for a very long time. But as it gets closer, I can taste it. I already have several of these deals in place. Partners I may or may not have met. They have a talent to do something profitable specifically with one of my domain names.
Like every mountain you have to climb slow at first and then it begins to accelerate. Candy.com started with just 2%. Property 5%. Luv.com 25%. Depending on the attributes and ideas and profit potential, each one will have a different number. But the one that seems to be the path of least resistence where you allow a third party to use one of your domain names to make a go of their idea is worth 25%. They need no money, they need a profitable idea.
So the profitable idea is really like carrying American Express. It goes anywhere. Your GREAT idea is your passport to other places and dimensions and success.
So 100% of 1 business is 100%. Could be gold mine and then some. 25 businesses at 25% each comes to 625%. (Like owning 100% of 6.25 businesses. 100 businesses at 25% ownership comes to 2500%. 1000 businesses at 25% ownership comes out to 25,000%. So you can own 1 business as a whole or you can own 100% of 6250 different business entities.
Follow that??
Have a GREAT Day!
Rick Schwartz
lifeisshort
This is what i follow rick. U mentioned in another post on berkens blog steve jobs,”life is short”. U aint getting younger, none of us is. Your 20 yr plan kicks in in what, five yrs when youre 60+? But u and i know its better to enjoy these material fruits when we’re a little younger. So make a long story short, it doesnt matter its 25% of 1000 or 1% of 1000, either way you likely not to be able to enjoy these fruits by the time they mature. The real solution is you have enoug to live well already, you can already have anything material you want by now, and even if not, if u were to sell all today you would. Life is short.
Rick Schwartz
lifeisshort….I already have everything I want in life. The key now is to sustain it for my lifetime and not to run out or piss it away. So why sell short with an appreciating asset?
Ian
One thing to remember is that investors are not mugs either. Your domain name is just a shareholders investment like any other. If its worth $1m then its worth $1m. The only way you’ll”make” is where you can get a second liner company that wants to get into the big league and cannot afford a prime name so they sacrifice additional value for your equity investment by way of domain name. Personally, I’d never allow a domain holder as investor as it just cranks up the compliance costs and they have no additional usefulness or professional expertise.
Internet addresses are only 1 part of a far larger value chain in business. Logistics, networks, channels, procurement etc etc are also just as important and usually more important.
Given what I’ve seen in the market many start ups go for brandable domain names, these are sub 50k domains. You can likely do equity deals in the top end of the market but I’d doubt that anyone would have 1000 million dollar domain names and the same number of eager compliant business owners. The big PLCs are seriously unlikely to ever have a domain name owner as investor. (Family businesses yes).
Imagine even trying to keep tabs on 1000 small investments.
Me, I’d say do equity deals on the big names if you can and either cash in and upgrade the smaller names and preferably divest some into property given that underlying inflation is aggressively pushing up the replacement costs. We’re going to have a massive property boom in 5-10 years and prices will jump if inflation keeps at 5%.
lifeisshort
Because the appreciation doesnt matter at some point, you cant take any of it to the afterlife, so make the most when its important, like today. I wouldnt have the same view if a 30 something. Age changes the dynamics.
Ian
Nb: Rick – Domains are not an appreciating asset at the moment (From my brief views of sale prices). I am seeing cheaper domains now than 4-5 years ago. At the very top end they have definitely gone up as the slow big players finally”get it”. But the mid range 50k is flat. The bottom end does not seem any better either.
Anyway, each to their own. But appreciating assets require a notion of being undervalued relative to other investment classes and once domains were, but now I really don’t think they are.
One thing though, the internet is killing the high street in Britain with up to 1/3 of properties vacant. Ecommerce must be a big contributor to that. Only problem with the net is that its very price competitive and price comparisons beat the URL any day. CheapAsChips.com beats Buy.com if the goods are cheaper.
Rick Schwartz
Ian,
That is sound advice. Especially the part about upgrading.
However the way I view things, perhaps premature and here is why. None of us know how well or badly the new gtld’s will do. How things will unfold. We already see a trend. The domains go up on release, they crash and then they will either survive or die on their own. The .com will always be in demand for anyone that breaks out in .whatever.
I seldom talk to investors. I talk to folks with ideas and visions and try to be part of it. I have become an asset to Candy.com guys because I have given them profitable ideas that they have actually employed and have found success in doing so.
But my personal goal is sustaining my lifestyle and leaving some type of fingerprint on humanity after I am gone. Nothing more, nothing less.
Rick Schwartz
“Rick – Domains are not an appreciating asset at the moment”
The key part is AT THE MOMENT. Sorry, I don’t work that way. At the moment does not work for me. I don’t sell something because the market is depressed. I wait for things to tun=rn around. We can disucss whether that happens or not, but I believe just like real estate being depressed, it will come back in a few years. So I don’t work in”Moments” , I work in how things will unfold 12 months, 18, month, 36 months, 5 years.
Rick Schwartz
“Only problem with the net is that its very price competitive and price comparisons beat the URL any day. CheapAsChips.com beats Buy.com if the goods are cheaper.”
Which is the reason I own CHEAPEST.COM. So KNOWING how the net is evolving, why on earth would I sell that domain for chump change? The market has to mature because there is only TWO companies on earth that can be the”Cheapest”. The guy who actually is the cheapest and my domain cheapest.com. Marry them together and…….
Selling for less than what I perceive the value to be is not going to happen. My business will still go on long after I am dead. I planned it that way. That is what I want. My wife is younger than me and she will be taken care of through her lifetime as well.
Ian
Where I’m coming from is that domains will now not”supernormally appreciate” although my guess if you are a specialist in domains you can achieve better buys that in any other investment class, but as an”average” I think domains at the mid to lower end are just going to trundle along. The top end has a long way to go. Property.com $15m is perfectly plausible. Anyway, lets see what rolls. Admittedly I’d say the value of property.com is correlated to the property market so you do have a hedge!
Ian
In Britain we have whats called”The pound shop” where everything is £1. Now someone has started the £0.99 shop. So as an analogy you could own cheapest.com and I could buy EvenCheaper.com and at the end of the day if you are competing on price then price beats the URL 90% of the time if its professional.
So, what I am getting at is that there is a premium for good names, but not as much as people think unless there is a definite barrier to entry for some reason.
Selling generics on the net is like SERPs on the net, if you’re close to the mark price wise you can have a vertical wall of demand and if you’re off the first page then you get hardly any traffic. This is why I say there are more than a few similarities between domaining and business. Seriously good domainers can take out physical retailers by destroying them online, And I’m talking the seriously large ones.
Anyway, thats my surmon for today.
Francois
That will be great to find a safe and easy way to split domains with partners and share the profit.
Aron - Tablets.com
I’d be interested in knowing how a parternship is drawn up – legally speaking.
I’d assume there has to be guarantees of revenue (some performance standard to meet) after a year or two?
Perhaps after a set period, if revenue isn’t at a set minimum level you’d just retake possession of the name?
I also would be curious about the practice of selling a name for a set figure PLUS % of traffic.
If performance isn’t as high as expected, it isn’t possible to retake the .com asset.
I suppose one would need to get a certain amount of cash and assume there could be NO revenue going forward.
Anyways, just curious how you did the Candy.com deal.
I know you received cash plus a % of future profits.
What if the profits are REALLY minimal and their plan doesn’t pan out as well as hoped?
Just curious.
I am in talks with something similar on one of our .com’s.
Thanks
Aron
admin@XF.com if you need to send any info.
Chris Brown
I echo what Aron said, would like some details on how you go about forging such a deal to include a % percentage share after the sale.
Thanks
Chris.
Johnny
I think 20-30 year lease-to-buy is a lot more practical solution in most situations. First, equity or lease is only relevant to the very best of the best – names like power.com or prague.com from the recent auction for example.
Let’s take power.com and let’s assume some startup in electric power generation that raised $50M really wants it. They probably will not pay $3M cash, but they may pay $250K/year for 30 years. So that’s $7.5M paid over 30 years to purchase the name.
And the numbers should be higher in consumer ecommerce where domain is much more crutial. Without Candy.com – good luck getting traction selling candy online, without Shoes.com – good luck getting traction selling shoes online. If a company raised the same $50M to sell candy online or to sell shoes online, I can see them paying $1M/year for candy.com or shoes.com for 30 years for $30M total.
Poor Uncle
Rick, you are full of crap and I love you man.
Does your 20 year plan include a will and directive of what to do with your domains if God forbid you decease?
100 businesses at 25% ownership comes to 6250%, huhhh??
All it takes is 1 of those business to wipe out your whole fortune. Just look at what happen to Bank of America when it bought out Countrywide.
Edwin Hayward
Your comment about a”wipe out” makes no sense. 25% ownership doesn’t magically turn into 25% responsibility for paying the bills!
As a shareholder, Rick would be completely insulated from the day-to-day of the business, so if it went under all he’d lose would be his 25% share of that business. It’s impossible AFAIK for a stock to go negative.
Poor Uncle
I was referring to liability in case of a lawsuit.
Bill Roy
Not knowing the details I will have to surmise but I would think that the ‘company’ would be an LLC (Limited Liability Company), that would mean that in law it is treated as an individual in its own right. Any ‘lawsuit’ would thus be against the company and not the individual directors/shareholders unless some criminal act or enforcible act of guarantee was given on a personal level by a director/shareholder.
Rick, as is generally the case, you are spot on. Though as has been commented on above the problem is finding the right partner/s.
But the above having been said there is one absolute truth, the future for any domain investment has to be the correct development, and yet so few ‘get it’.
steve
Well if the product is kitchen chairs then kitchenchairs.com could be the cheapest too.
Brandables will be big winners to.
But they are harder to sell.
Edwin Hayward
It occurred to me that as long as you had a very very very strong legal agreement binding the terms under which the company was allowed to use/own/however-you-describe-it the domain, and as long as it included an unbreakable”non-dilute” clause (i.e. your share of the company will remain intact no matter how many investors come on board later) then it’s probably worth going for a much higher new deal pace.
As long as you’re picking and choosing smart folks to deal with, the chances of you hitting the next”home run” company if you have a piece of 50 or 100 pies must be exponentially higher than if you’ve got just a couple of slices of the action, even if the trade-off to build up those 50 or 100 stakes ends up being that you have to accept less of each company, or spend less time extracting the maximum from individual deals.
Should be interesting to watch!
Rick Schwartz
I’d be interested in knowing how a parternship is drawn up – legally speaking.
Aron, between all the lawyer fees on both sides of the equation, collectively we spent well over $100k hammering out a formula that would never put the domain in jeopardy. It’s an agreement and a pre-nup in one.
I devised the formula because I could never sign a deal without discussing what becomes to the domain if the company goes south. Most folks lose it. Period.
Maybe I can sell the contracts like LegalZoom and get some of my investment back. lol
Don M
Aron-
Sure hope you are talking about tablets.com. I bet you get 5 million for it if you hold for a few more years.
OT-
As far as assets on domains and cash goes, 10,000 in the bank gets you 1% on your money. I am sure anyone could pick up a $10,000 dollar domain name and make more than 10 bucks a month off it.
In that respect domains are more valuable and going up in value. If you make 100 bucks off the 10k domain name that is 10%.
Don M
James
“So 100% of 1 business is 100%. Could be gold mine and then some. 25 businesses at 25% each comes to 625%. (Like owning 100% of 6.25 businesses. 100 businesses at 25% ownership comes to 6250%. 1000 businesses at 25% ownership comes out to 62,500%. So you can own 1 business as a whole or you can own 100% of 15,625 different business entities.
Follow that??”
I follow the gist, but not your figures…100 businesses at 25% is 2500$, not 6250%, 1000 businesses = 25000% etc
Rick Schwartz
ooops, my bad.
AustraliaHouses
Hey Rick,
please keep me in mind if you decide to move forward on your contract selling idea; I’d be very interested.
Thanks.
David Carter
Well, this in an interesting topic, mainly because it’s something I’ve been practising (probably without knowing it) for years.
Only now are my own dreams coming to reality, after a few false starts and much trial and error.
I use some of my domains to promote business services. I take a stake in the business and licence the domain to the company and retain 100% ownership.
I also build the web sites and prepare all content – the web (and therefore the domain name) is a promotion tool – not a business in itself. It’s a separate entity altogether.
If a business fails, I want to be free to continue using the domain name in whatever way I choose.
Even if the name of the business becomes”whatver.com Ltd” I make sure that the domain is protected from that business.
I now have people in my chosen niches approaching me not only for the domains in those niches, but for my expertise in them – which was largely built as a result of me researching content for them in the first place!
This is way more valuable than the domain on it’s own – it ensures that I am seen to be bringing more to the party. These days, that means no investment for me, but plenty of equity opportunities.
The key for me has been focusing on what I am interested in and learning more about those subjects than anyone else – and then narrowing the niches even further to become even more specialised.
It’s not a get rich quick formula (not even get rich at all probably), but it keeps me happy :)
bigshop
Not knowing the details I will have to surmise but I would think that the ‘company’ would be an LLC (Limited Liability Company), that would mean that in law it is treated as an individual in its own right. Any ‘lawsuit’ would thus be against the company and not the individual directors/shareholders unless some criminal act or enforcible act of guarantee was given on a personal level by a director/shareholder. Rick, as is generally the case, you are spot on. Though as has been commented on above the problem is finding the right partner/s. But the above having been said there is one absolute truth, the future for any domain investment has to be the correct development, and yet so few ‘get it’.