Explain “Replacement Cost” in a Negotiation

This article by By Elliot Silver⋅ November 23, 2014 is still valid today more than ever. It applies to Australian domain name investments as well as .com domain names from a business point of view.

Getting to the right price in a domain name sale negotiation is often difficult. The buyer doesn’t want to pay more than a certain amount to buy the domain name, and the seller is often asking more than the buyer is willing to spend for it. Convincing someone why a domain name is worth the asking price can be a challenge, but a domain seller might want to explain the replacement cost as rationale for the price.

To me, the replacement cost for a domain name is the amount of money I would need to spend in order to buy an equal or better domain name if I would sell one of my assets. If I sell a domain name for $10k and it costs me $15k to buy an equivalent domain name, I am losing out because I am lowering the value of my portfolio while not generating enough income to improve it. For someone like me, it doesn’t make sense to sell one of my domain names for less than the replacement cost of an equal or better domain name.

I think the majority of domain buyers do market research before making a purchase decision. They have likely come across other domain names that have sky high prices, so they should have an understanding about the prices of similar domain names. Sometimes explaining that it will cost you more than their offer to buy something similar will strike a chord with them. If they understand that, they may realize why your price is what it is.

Every negotiation is different. Many prospects don’t really care about the seller’s rationale for the domain name price. Those prospects may stick to their offer regardless of why the domain name is worth what it is to the owner, and there isn’t really anything you can do to convince the prospect to increase the budget. However, this might give a prospective buyer a bit more insight into how you came to your asking price, and the price might make more sense.

The article can be found here http://www.domaininvesting.com/explain-replacement-cost-negotiation/