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When I said that I was mostly referring to the kind of posts I see on FB or Twitter, like "bought a domain for $50, sold for $220, now that's a nice ROI" - sure if that's the only domain you ever bought or owned. If you own more domains, then the total portfolio costs need to taken into account with figuring out an ROI, and to me personally, buying a domain for $50 and selling for $220 is a quick way to go bankrupt.
For example, if you bought 100 domains at $50 each, and sold them for an average of $220, then you'd need an annual sell-through rate of 23% just to break even. Anyone know a domainer that sells 23% of his domains on an annual basis? Then the next year you add $15 a pop in renewal fees to the unsold domains....
Some people have no idea how much they spend on domains a year, or how that cost relates to their sales revenue, and tend to just pour more of their "work paycheck" into domains without having even a slight plan. At that point it's a hobby like collecting hockey cards or coins, not a business.
If at some point you want to make money, then you have to keep track of sales & purchases, as well as expenditures/expenses and revenue/income, because this data not only determines if you're turning a profit, but also what type of sell-through you have, and the average price per domain you need to attain. That in turn will determine the type and potential resale price of domains you should go after.
For example, I have been trying to upgrade my portfolio in a number of areas, which means a higher price paid per domain, which also translates into a higher per-domain selling price based on my current sell-through rate. This means I only buy domains that I realistically see selling for at least that same amount.
There are lots of different ways to skin a cat, but at the end of the day you need to know a) how much you've spent on domains, b) how much you've made in sales, and c) what your domain sell-through percentage is. It might seem scary to look at the numbers, but at least you can determine whether it's a hobby or a business.
For example, if you bought 100 domains at $50 each, and sold them for an average of $220, then you'd need an annual sell-through rate of 23% just to break even. Anyone know a domainer that sells 23% of his domains on an annual basis? Then the next year you add $15 a pop in renewal fees to the unsold domains....
Some people have no idea how much they spend on domains a year, or how that cost relates to their sales revenue, and tend to just pour more of their "work paycheck" into domains without having even a slight plan. At that point it's a hobby like collecting hockey cards or coins, not a business.
If at some point you want to make money, then you have to keep track of sales & purchases, as well as expenditures/expenses and revenue/income, because this data not only determines if you're turning a profit, but also what type of sell-through you have, and the average price per domain you need to attain. That in turn will determine the type and potential resale price of domains you should go after.
For example, I have been trying to upgrade my portfolio in a number of areas, which means a higher price paid per domain, which also translates into a higher per-domain selling price based on my current sell-through rate. This means I only buy domains that I realistically see selling for at least that same amount.
There are lots of different ways to skin a cat, but at the end of the day you need to know a) how much you've spent on domains, b) how much you've made in sales, and c) what your domain sell-through percentage is. It might seem scary to look at the numbers, but at least you can determine whether it's a hobby or a business.
