Valuations: Get It Right You’ll Be A Multimillionaire, Get It Wrong You’ll Go Broke
Mike wrote the following post in October of 2009, while it deals with other asset classes as well, here was the part on domain names.
Domains like any other asset are going through a constant revaluation process.
For domainers, your ability to correctly value a domain is going to be a huge factor in determining your ultimate financial success in this business.
As a buyer if you overvalue a domain name, you’re going to overpay for it and put yourself in a bad situation.
Your going to be faced with the choice of either recognizing the mistake, selling the domain at a loss, or holding on to the domain, tying up capital you could have used for another investments, hoping the market revalues the domain higher in coming years, to fully recoup your investment, or at least cut your loss.
Do this frequently, and your going to face substantial financial problems and maybe financial ruin.
As a Seller if you overvalue your asset, your simply not going to sell it; undervalue it and you’ll have the pleasure of watching sell it for more, maybe substantially more, down the road.
No, its not easy.
You’re not always going to be right.
You are going to spend more on a domain than you should have.
You are going to sell a domain for less than you could have gotten for it (well everyone but Rick).
Bottom line, when it comes to valuation, you going to have to be right a lot more than your wrong to be successful in your financial life.
In reading a lot of discussions on forums it seems some would be smart to try to have more of a detailed plan when it comes to valuing their names. Some are asking millions for new gtlds, possibly as a publicity stunt, but either way having realistic valuations is what will keep you in the game.