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You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your domain registration business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a domain registration business?
Companies will first need to become accredited, which they can do through ICANN. It’s currently $3,500 just to apply to ICANN. (This application fee is non-refundable, regardless of whether or not you’re approved.) You'll also need to pay a $4,000 annual fee to ICANN to keep the accreditation status.
What are the ongoing expenses for a domain registration business?
Ongoing expenses tend to be low for a domain registration business:
- Computer maintenance/replacement
- Employee salaries
- ICANN annual fees
- Commercial insurance policy
- Rent/mortgage for a physical office
Who is the target market?
Anyone starting a new website will need a domain. With the popularity of services like Wix and Squarespace, this number only grows by the day. Trying to register your own domain name is usually either expensive or full of potential legal pitfalls, so there are few exceptions to this rule.
How does a domain registration business make money?
Domain registrars charge an annual fee to every website owner. If it's not paid on time, the website will be taken down and that name will either go back on the market or be sold to a similar business. Business owners use these annual fees to both pay themselves (and potentially their employees) and to cover any legal or administrative costs they may have. Customers pay based on both the actual name and the suffix for their name. For example, they may pay more for a .com name than a .net name.
How much can you charge customers?
The standard fee is about $10 a year for a domain name, but this number can rise and fall depending on demand or company promotion. For example, a .today suffix on GoDaddy will cost about $25 a year as opposed to a .net, which will cost about $10.
How much profit can a domain registration business make?
For the most part, it doesn’t take a lot of work to simply maintain a customer’s domain name. In other words, much of the yearly fee could be profit. However, net profit will be largely dependent on how the company is structured. GoDaddy took in more than a billion in annual revenue, but still managed to operate at a significant loss.
How can you make your business more profitable?
You may want to consider adding additional web services to create additional profits. Your customer isn’t just going to set up their domain name, they’re also going to need help hosting, certifying, and building their site. Being an all-in-one resources can be an excellent way to round out your profits.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your domain registration business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
Federal Business Licensing Requirements
It is essential to acquire the correct accreditation for your domain registration business in order to avoid legal trouble.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a domain registration business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a domain registration business
Some all-in-one domain registration businesses will promote their services on television, but most companies getting started may want to think a little smaller. Consider running internet ads with companies that offer affordable and simple website production. You can also do coupon codes for cheap domain registry (e.g., $.99 a year) to spark interest and customer loyalty. Build up your reputation with honest and favorable reviews, so more people feel comfortable choosing your registration business over another.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
There is some degree of competition when it comes to a domain registration business, so it will all come down to how well you handle customer concerns. Providing excellent technical and personal service and keeping your name in the public eye will help.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Domain Registration Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
This business is good for someone who enjoys administrative duties as well dealing with customers. They should have a love for technology, and an inherent understanding of how websites are named and who is in the market for them.
What happens during a typical day at a domain registration business?
It’s typically the registry operator who has the bulk of the duties. Their day may include any of the following:
- Maintaining databases
- Setting policies for the company
- Paying registration fees
- Researching new developments in domain law
What are some skills and experiences that will help you build a successful domain registration business?
People who are very organized will do well in this business. There will be plenty of details to decide when it comes to structuring domain names, finding the right market, and following the legal regulations associated with domain registration. They should also have a certain amount of tech skills to spot issues with potentially faulty code or to quickly fix any connectivity problems.
What is the growth potential for a domain registration business?
There is a lot of potential for the right person in this industry. As it becomes easier and easier to set up a website, more people are taking advantage of subscription services to get the word out about their interests. Whether it’s a cause, hobby, or career move, it’s not uncommon for people to have multiple websites to promote the things they care about. As this trend continues, domain names will become ever scarcer and thus more valuable to those who want to find the right name to get the most exposure.
TRUiC's YouTube Channel
For fun informative videos about starting a busines visit the TRUiC YouTube Channel or subscribe below to view later.
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting a domain registration business?
Business owners should concentrate on their policies before getting started. From domain transferring to pricing, you’ll attract more customers if the policies are as clear as possible before anyone signs up. There’s a lot of advice out there about who to sign up with and who to avoid, so make sure you’re giving people plenty of options and being as fair as possible. For example, if a website owner fails to renew their domain name after a year, you may want to keep that domain name off-limits for a month as a courtesy in case the person decides to renew.
Entrepreneurs should also put some extra effort into their customer service response times. Websites by nature are incredibly immediate, and problems can happen at any time. If a person is paying you for their domain name and loses business because there's a flaw with your equipment, then you’ll likely be held responsible for any subsequent loss of revenue to their brand. You may also want to think ahead when it comes to promoting new suffixes. As the .com names continue to diminish, companies may benefit from less popular suffixes with a strong start (e.g., food.xyz, or funinthesun.net.)
How and when to build a team
It’s not impossible for a person to take care of everything on their own in a domain registration business, at least at the beginning. However, the more the business grows, the more complications are likely to arise between the customers and the legal concerns of the company. If you hire, make sure your employees understand how the registration business works, both in terms of changing regulations and customer expectations.