No matter what buying strategy you decide to follow, the first step to getting into domaining is acquiring enough capital to play in the market. Put simply, the more capital you have, the easier it is to build your domaining portfolio. So in this section we cover some simple strategies for coming up with the right types of capital you need to get your domaining off the ground.
- Spend only cheap capital.
What’s the point of making a profit domaining only to pay it right back out again with high credit card interest rates? It is difficult to consistently make a return of more than 20-50% on your domain flipping, but you will need that return just to break even if you are funding your operations on credit card debt. So to minimize the risk of paying out all or most of your gains in credit card fees, make sure that early on you are only purchasing domains with only the money you have, and not what your credit limit says you are worth. If you do buy domains on credit, make sure that you are paying off the cards before they start accumulating interest and fees; otherwise you’ll start to see your domaining profits shrink as your break even point becomes that 20-50% interest rate.
Nobody likes to share their profits. But teaming up with a few partners who bring capital to the partnership will allow you to diversify your holdings and overall lower your risks and increase your net earnings. Just remember, however, that if thepartnershipdissolves, you may be forced to pony up cash to buy out your partners, or sell domains for less than you were hoping for. So if you and your partners have different ideas about how to profit from domaining, it may be a good idea to instead opt for a joint venture in which everyone’s obligations are spelled out ahead of time.
- Credit card balance transfer arbitrage.
If you’ve opened up your mail lately, you’ve probably noticed that 0% APR credit card offers have now replaced AOL Free Trial CDs as the most abundant piece of mail in the world. Well, some card issuers have taken the free credit offer one step further by offering you something called a transfer check, which is simply a 3-18 month interest free loan. They make the offer to entice you to use their credit card, but if want to live dangerously, this can also be an easy way to come up with some quick cash. This advanced financing method, known as balancetransferarbitrage, will allow you to use that “free” money before the offer period expires, then pay it back. This is a very risky technique, however, because if you run into emergencies or other financial problems and cannot pay back the free loan before the regular high interest kicks in, then you are sunk. But in a situation where you come across the once in a lifetime deal, engaging in ‘balance transfer arbitrage’ may be worth the risk.
- Bootstrap and reinvest.
Bootstrapping isn’t so much a single fundraising technique, as it is a ‘do it yourself’ mindset of leveraging what you earn back into growing your business. Entrepreneurs engaged in bootstrapping take very little of the company profits out of their business early on, and instead use those funds in lieu of a formal bank loan or venture capital. If you are anxious to quickly expand your domaining portfolio and can afford to live without the immediate profits, consider leaving all or most of your profits in the business to leverage new purchases. Bootstrappingis the poor entrepreneur’s way to compete against larger competitors, because by reinvesting their gross profits back into the business, bootstrappers gain a return which is functionally equivalent to compound interest.