There are two implications of this rule, one obvious and one not so
obvious.
First the obvious. Your maximum budget for a domain name should
depend largely on your expected online sales. If you are trying to run a
$100,000/year online business, $1,000 is about the maximum you
should spend on a domain name. If you are trying to run a
$1,000,000/year online business, $10,000 is about the maximum you
should spend on a domain name. Of course this should be adjusted by
how important branding and image is to your business.
The second, but less obvious, point is that this 1% rules gives you an
idea of the maximum others are willing to pay for a domain name. If
other firms are about the same size as yours, the maximum they are
willing to spend is about the same as yours.
There are far more part-time $10,000/year businesses than
$100,000/year businesses. Likewise, there are far more people
scratching out a living with $100,000/year businesses than
$1,000,000/year businesses. Likewise, there are far fewer businesses
with online sales of $10,000,000 a year – and these already have legacy
names and trademarks.
This means that others trying to purchase similar domain names most
likely have sales of $10,000 to $100,000 to maybe $500,000 maximum
and are probably only willing to pay $100 to $5,000 maximum. Very
few businesses are willing to pay $10,000+.
Of course there are a few large corporations trying to buy domain
names to launch new product lines. This is the hope of many domain
name speculators. “I hope General Motors will want GreatCars.com and
pay me $100,000.” This is usually a false hope, but you may encounter
it.
If you would like to make a comment, please fill out the form below.
