I’ve heard a lot of people calculate the profit for their domain businesses like this. I bought this domain for X and sold it for Y so my profit was Y-X. Sorry, but this is only the right way to calculate profit if you value your time at $0/hour. This is how I calculated my profit when I first started my business and it got me into trouble.
Time is the most valuable asset you have, period. Sure, you may have a great domain that’s worth $500,000 but all of your time is worth a lot more than that. This means that throughout the course of your life, and your business, you’ll want to keep track of it.
In my book the way to make the best use of your time is to spend it with your family and friends. That should never change. Next in line is business, but not just business, but the things you do that generate a profit. If you find yourself spending hours looking through lists of expired domains, you’ll need to make sure this is really worth your time, or what you value your time at. We all have a different number, some people value their time at $15/hour, some at $150/hour, and other people see their time worth $1,500/hour.
Whatever your number is, know it. I know mine, and even though I’ve never had a job that pays an hourly wage, I’ve always calculated out what an hour of my time is worth. I use this when I determine if I should be doing something myself or hiring someone to do it, and I also use this to determine if I really turned a profit in a deal. Your time is not just the time it takes you to negotiate a deal, it also is the time you spent acquiring an asset or buying other assets that you didn’t sell to iterate to the one that you did.
Taxes also need to be included. We all pay them and most of us to the tune of ~40%. This means that you should give each and every sale a nice haircut, then factor in your time, and the money that is leftover, that’s your real profit. If you spend hours each day scouring lists of domains to find a few names that you flip for a few hundred dollars, are you really making the best use of your time? Wouldn’t you rather spend your time with your family or friends?
Now I’m not writing this to be harsh, I’m writing it to be a wake-up call. My goal in life is to maximize the amount of time I spend with my family and friends. I work incredibly hard, but I also am constantly evaluating how I spend my time and looking for ways to outsource what I’m doing to people who value their time differently.
Michael Gilmour made this point loud and clear at TRAFFIC and I agree with it 100%. Outsource the things you do that are not worth your time, value your time, it is incredibly valuable, and always be on the look-out for ways to maximize how you spend your time. Now go back and look at the deals you’ve done this year, factor your time in, pull out taxes, there are your real profits.