Acquisition cost vs. replacement cost

Which is more important when setting prices?

Acquisition price vs. replacement cost text on picture of price tag

I was having a conversation with a couple of domain investors the other day about a domain I just sold. They asked me how much I acquired it for, and I informed them that I acquired it in 2019 via NameJet for about $2,000.

The conversation immediately turned to how much that domain would go for in a NameJet auction in 2023. The consensus was it would have gone for $5,000 or perhaps more.

Which got me thinking…

When negotiating domain deals, I often look at what I acquired the domain for. I aim for a multiple of 10x on domains acquired in the $2k range. (I look for a much larger multiple for cheaper domains.)

But is the purchase price multiple as relevant as the replacement cost? If it will cost me $5,000 to acquire another domain to replace this inventory, should I focus on that multiple rather than what I paid for it?

At the end of the day, what matters is what the market will pay for the domain. But I think I’m going to reprice some of the domains that I acquired years ago upward.

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