When you are considering a domain to buy, you may think your immediate budget is all you can spend. When you bring alternative payment arrangements into the mix however, your budget can increase dramatically.
Non-standard payment arrangements have helped some big domain deals get made. Companies who may not have had the capital on hand were able to pay over time or barter in some way. One recent sale that showed this at work was Marijuana.com which had sold for over $4 million total, but in payments over time with only $125,000 upfront.
What were the arrangements of that sale exactly? According to the SEC filings, 69 monthly payments of just over $60,000 as well as 10% of the gross revenue and some ad space on the new site.
It may sound like a lot for the buyer to have to pay overall, but the company buying the domain was already active and grossing over $400,000 per month. With a name like Marijuana.com, the benefits likely increased their bottom line by more than the monthly payments they’re making. So when all is said and done, the buyer ended up with a huge asset and a much larger online presence for a very reasonable upfront cost.
Not every domain seller is open to payment arrangements. In fact, one case I know involved a seller turning down $250,000 (their sought upfront price) paid over 12 months. The buyer owned a different extension of the domain and was highly motivated but didn’t have the cash upfront. This was over 3 years ago and the seller still has the domain since the buyer moved on to other domains.
As this illustrates, payment arrangements can allow a very motivated buyer without the cash on hand to buy the domain. Over time, the seller can get much more than they could ever hope for upfront. The Marijuana.com deal appears very lucrative for the seller and the buyer couldn’t have afforded the name otherwise.
Note that these deals are generally “lease-to-own” such that you are leasing the domain until the last payment is made, when you then get ownership of it. You can make use of it in the meantime, which is part of why these can be great deals for the buyer. You can get a site up and running which will help make the payments. Given it’d be a premium domain you’re buying, it would help your site be much more visible, get more traffic and make higher revenues.
What are some ways you can make arrangements to buy a domain?
Monthly or quarterly fixed payments
Most deals hinge on monthly or quarterly payments over a specified period of time. Usually there’s a higher upfront payment since you’re buying immediate use of the domain. The term might be as short as a few months or as long as several years.
The actual payments could be different amounts month to month but they are set in stone under this arrangement. In many cases, there would be terms such that if payments are no longer made, the contract is void and the seller keeps the name with the buyer no longer leasing it.
Percentage of earnings (monthly or quarterly variable payments)
As was in the Marijuana.com deal, percentage of earnings can be common as well for payment arrangements. In the case of higher quality domains, the domain itself may get type-in traffic that can earn significant revenue on a developed site. Based on that alone, the seller might get more than they were earning on their own even with low percentage revenue payments.
These arrangements could be made to hit a target amount, or for a certain fixed term. In many cases however, payments continue for the life of the business/site operating on the domain. There can be clauses requiring a minimum amount per payment that must be paid or a minimum term by which payments must be made. So if the site were to stop running, the deal can be voided.
Financing through a third party
Domains aren’t quite like real estate just yet such that banks would typically give you a “mortgage” loan for the domain. That said, Domain Capital is a company that finances domain purchases. Typically you need a significant percentage down (around 20-30%) and they won’t loan out in every case.
In any financing deal, the finance company would take control of the domain and you would be able to use it. Once the last payment is made, you would gain control of the domain. Note that a finance deal means the company pays the seller for the domain – you would be paying interest on the purchase. Given that, if the seller is open to payment arrangements, that would be more ideal and would often save you money over using a third party.
Trade or other non-monetary considerations
The Marijuana.com deal also illustrates an example of other considerations that can be made. The seller is getting advertising space on the new site, which in a way would work out similar to the percentage of earnings. The better the site performs, the more the seller will get from that ad space.
You can barter services such as consulting or website development or possibly assets such as stock in your company or even domains.
Bottom line, if you have to have a domain and you don’t have the cash on hand, get creative. Come up with a win-win scenario that should please the seller. Make sure you set up a deal that you can absolutely commit to – the last thing you want to do is give up a lot and end up with nothing. That said, you have to make sure it’s worth the seller’s time and potential lost opportunity of upfront sale.
At Branded Names, we can help you explore options to purchase your ideal domain. We’ve been on both sides of non-standard transactions and understand what can make such a deal happen or fall apart. Contact us if you’re looking to buy a domain and need assistance.
