Morgan Linton: Domaining done right.

By , July 2, 2010

I think domainers like Morgan Linton are a credit to their profession. He’s basically sharing his knowledge as he gains it, and he’s doing it in a way that isn’t derogatory to people “who don’t get it”, and also isn’t self-aggrandizing.

What strikes me about his accounts of developing is his overall approach and mindset to building this asset out.

Morgan observes,

One of my biggest lessons was – treat the domain/site like a brand, a real business. That’s what I’m doing with and the results are already exceeding my expectations.

Which is an important lesson going back to the likes of Ben Graham, who wrote that “that investment is most intelligent when it is most businesslike, a statement which Warren Buffett regarded as the most important words about investment ever written” (via Wikipedia).

Note that Morgan is concerning himself with is building out the business. Not with the future price action of the domain name itself. Perhaps this occurred out of necessity, after a couple of unsuccessful attempts to sell the name off a couple years ago, he’s accepted that the domaining game has changed, and is taking a more sustainable approach to his portfolio.

If he does this successfully, and early indications are that he will, then this endeavor becomes a full-on asset. It will have cashflow, and thus have value based directly on those cashflows.

My guess is if his strategy comes together now that he’s decided to develop, he’ll be glad he failed to find any takers. As I always say, the objective for any business or asset is to get it to the “why sell?” point.

(The “why sell?” point is the point where you are earning a decent return with minimal effort, i.e passive income, from your business, website or other assets – and that cashflow looks to be sustainable over a decent time horizon. Once you’re at that point, why would you sell? Unless you’re being squeezed elsewhere or otherwise under pessure, there’s no reason to. You just keep piling up the free cash flows generated from your performing asset and use it to buy or build another asset. Rinse, lather, repeat).

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