The confusion of value for the majority of entrepreneurs

[snowbank]

A lot of entrepreneurs are confusing value with how much work or money they put into something.

The amount of work or money you put into something is irrelevant to the value of it. It doesn't determine the price AT ALL. This befuddles most people.

"Well, I've already got $10k into my site, so that's the least I could sell it for"

Just because you spent too much money on your site doesn't mean it's worth anymore than the $200 it's actually worth.

Here's an email I got yesterday for a domain I was trying to purchase:

[FONT=Helvetica, Arial, sans-serif]That's our special sale price Bill. Considering how much just the registration fees alone have been paid for over 15 years, our one-time cost is a bargain.

Also, XXX.com(x'ed out) is a developed site.

P.S. XXX.com(x'ed out) just SOLD 5 weeks ago for $3,800!


They start off with a weak sales pitch about the current price being a 'special sale price'. They follow it up talking about all the money they've spent on the domain. They finish with another weak sales pitch comparing to random domains that supposedly sold for higher trying to justify their high price.

Recap:

Step 1: Weak sales pitch
Step 2: Talking about the money they've spent on it
Step 3: Weak sales pitch close

I followed up on the email saying I could spend X on the site. This was their response:






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So you want to domain for LESS than it costs. What a fool. Guess XXXs(x'ed out) previous answer was not clear...

Let's try it again. NO! Our one-time cost is NOT going any less!

Did you bother to go to XXX.com(x'ed out) ?

Wow, XXX.com(x'ed out) is available to purchase at another dealer for only $2,388. Offer them your stupid idiotic amount!

[FONT=Helvetica, Arial, sans-serif]They followed up with anger because it was 'less than cost', followed by the same strategy of trying to compare sites that are asking even higher priced amounts as if that will justify their overpriced amount.

I looked around and there's similar responses from this seller to others. He's a very stressed out guy.

He'd save a lot of stress if he realized the money he has into it does not determine the value. The actual value determines the value.

Many wantrepreneurs run into the same issues: determining value by effort/cost, rather than what something is actually worth. Followed by the need to attempt to justify the worth by giving unsold comps as "proof" that it's worth a certain price.

Don't get caught in this trap.

As you can tell, if you don't figure this out early, you may spend 15 years using the same strategy. Don't end up stressed out like this guy.



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[Astute]

I think he probably does realise that the market dictates the value, but he won't admit it and sell it for a loss because he is hoping someone else will offer him a price that compares to what he spent on it (well, what he claims he spent on it). Anyway he would be a terrible negotiator if he dropped his trousers just because you made him an offer.

The real moral of the story is not to pump money into something **** in the first place. Can't polish a turd, as they say.

 

[CommonCents]

reply to them with this.

So Frank, if I had some XYZ stock I was selling you and the current market is at $30 bucks today, what would you say to me If I offered you to buy it from me at the price I paid if I paid $40 bucks?

 

[InMotion]

He'd save a lot of stress if he realized the money he has into it does not determine the value. The actual value determines the value.

I think a great offline example is a custom home. You can pour money into a remodel or a newly constructed home but it doesn't mean it will be worth the money you put into it. Lots of examples like this. Good post Billy.

 

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[MJ DeMarco]

Basically, they seller wants you to pay for their poor choices and evaluative skills.

If one pays $100,000 for a new Honda Civic, is it worth $100,000? Or were you just stupid and overpaid by $75K?

 

[KeonTheGreat]

i clicked on that out of curiosity and it took me straight to porn lol

but on a serious note, its only worth what the market will pay for. When i search for cars I always get "KBB values my car at $$$$$ and im selling it for 500 less so its a deall" Well is KBB giving you any cash for it? NO!

 

[biophase]

Just like that idiot lady on shark tank last night who said her company had $600k in debt because of salaries that she was owed during the last 4 years of her working at her business.

 

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[LightHouse]

I figured this would happen with that guy. All of places like that are the same, they are fine sitting on them long term. I'm surprised squatting for profit is still allowed. Imagine what the web would be if you didn't use a domain in a year it had to be released.

 

[Vigilante]

Just like that idiot lady on shark tank last night who said her company had $600k in debt because of salaries that she was owed during the last 4 years of her working at her business.

Using her math, my company owes me about $4,605,741.25 (give or take)

 

[Bigguns50]

Good "choices and evaluative skills" are essential ! A lot of people are just to lazy to educate themselves and do their homework.

I bought my home 4 yrs ago via foreclosure directly from an investor. He was about to loose it to the City because of unpaid back property taxes. He would not pay the taxes and was willing to let it go. ( after this story he may not sound smart but he's a multi millionaire who lives on Marco Island and in Georgia) I did my research of the housing market in this area. I educated myself on things I didn't know about housing. I had 3 contractors give me quotes to bring this house up to par with the neighborhood (of course I did most of the work myself. It was a negotiating tool) I did a worse case scenario....say the housing market dropped 50%....what price can I pay, invest in renovations, and still break even ? He initially asked for $120,000. I took my time and paid $10,000 (he financed me at 8%), I paid off the property taxes, and now with the house looking beautiful, if the market drops 50%....I'm still good...no loss.(not figuring in property taxes.)

 

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[splok]

Imagine what the web would be if you didn't use a domain in a year it had to be released.

The problem is defining acceptable "use" of a domain that would accomplish what you want. It would be fairly trivial to automate minimal development. Using something like wordpress/tumblr, you wouldn't even need to pay for hosting.

 

[snowbank]

Just like that idiot lady on shark tank last night who said her company had $600k in debt because of salaries that she was owed during the last 4 years of her working at her business.

that was crazy. she seemed angry that the sharks didn't agree with her