Domain Names: Rent, Lease or Buy?

According to the U.S. Small Business Administration, more than half a million small businesses are created each year. More and more of these businesses are turning to the Internet, offering their services online instead of in traditional brick-and-mortar stores.

Whether online or in the physical world, the number one rule when it comes to creating a business is: location, location, location. And location on the Internet is your domain name. Once you have determined the right “location” for your business, you then have to decide whether to rent, lease or buy the domain name.

Renting a Domain Name

When you rent a domain name (sample domain name renting agreement from 16south.com), you avoid the financial risk associated with buying your own domain name. Depending on the rental company, domain names can start at about $20 a month. Compare that to the cost of a “good” domain name, which might cost hundreds or even thousands of dollars. When starting a business, less capital expenditures can be critical.

Also, with a domain name rental, you have the flexibility to cancel the monthly commitment at any time. If your business doesn’t work out, you will not have lost much.

On the other hand, if your business flourishes, that flexibility can become a huge liability. The person who owns your domain name can also cancel the contract at any time. Imagine, for example, that the site you created has started to generate some good traffic. The owner of the domain name might decide to monetize the domain themselves, ending the rental agreement and leaving you out in the cold.

Further, a domain name brands your company. If you build a successful company on a rented domain, you would not have full control over your own brand.

Leasing a Domain Name

An alternative to renting a domain name is leasing. With domain name leasing (sample domain name leasing agreement from ClickLeasing.com), provisions can be included in the agreement that benefit both parties. This gives you more security because, depending on the terms, the owner of the domain is not able to take the site away at any time, as is the case with a rental contract. (Of course this means you are also not able to cancel at any time.) Most leases are for one year and cost about $200 to $300 a year.

Another advantage to leasing over renting is that most leasing agreements come with an option to buy. That way, if your business takes off, you can secure and protect your investment.

Buying Your Domain Name

Most people would say that owning your own domain name is the best option; however, what is best and what is possible are not always the same thing.

The goal for any Internet entrepreneur is to find the ideal domain name, which means finding something that is easy to remember and easy to spell. The easier it is for your customers to find you, the better chance you have of getting more sales.

Unfortunately a domain name that is simple and easy to remember often has a high price tag. Good names can run from a few hundred dollars up to 5 figures. That is a lot of capital to shell out on a start-up business idea.

Although there are some cheap options in the marketplace, they are cheap because they are long, complicated, obscure domain names. Think of it in terms of real estate. If you buy an inexpensive house you will have to put money in to renovate it. The same with a domain name. The cheaper it is, the more work you will have to do to get it recognized. In the long run it could end up costing you more to fix up the name.

Conclusion

Whether you chose to buy, rent or lease a domain name, be sure you have a solid business plan and pick the best “location” you can for your business.

[Photo credits: drewcoffman, stevensnodgrass, kheelcenter]