December 16, 2016

How much should a website cost – the truth and numbers explained

A question we hear quite a bit is "How much should I pay for my website?"  It's not an easy question to answer, but we'll try to get to the bottom of it using objective metrics.

The numbers below are for a hypothetical situation and while applicable to most businesses don't reflect every business's exact cost.

Is the website for your business?

Before going any further, let's set the foundation for this article.  If you're creating a website for a business, you should be using a professional solution.  Why?  Because this your modern day storefront.  It still baffles me how many people are willing to spend thousands a month on a physical store, but not the first place (and potentially last) your customers see.  It's a business- treat it like one.

The next question is have you been in business long enough to know that it will profit?  If so, this makes valuating your decision much easier.  If not, it may be wise to test the waters and not go for the highest-end solution.

Costing model

We previously wrote an article discussing fixed versus hourly web development costing methods.  Spoiler alert – hourly pricing is the better method.  

About a decade ago, we still struggled with pricing and were having a hard time giving proper quotes and estimates to clients.  Browsing the interwebs, there are so many delightfully absurd and opinionated ways to determine a website cost.  One of the most popular was to work backwards based on your individual needs and budget (housing cost, food, entertainment, etc.) and divide by the number of hours you worked to find the cost.  What?!?  So someone decides a yacht is part of their budget, only wants to work 3 hours a day, and despite being inexperienced is charging you $200 an hour?  I've been doing it wrong this whole time.

While this doesn't give an exact number, this is an abstract method for defining how much a developer or designer should be paid:

Hourly rate = ( Work Produced * Quality Factor * Skill Factor ) / Time

What this means is that as someone produces more work, higher quality work, possesses more in-demand skills, or does this in less time, their rate goes up.  We can multiply time on each side of this equation to get:

Project cost = ( Work Produced * Quality Factor * Skill Factor )

Simple, fair, and makes sense- right?  The larger the amount of work done for a project, level of quality, or skills needed to finish the project increase the total cost.

Web developer cost vs DIY

Many people build their own websites and there are a lot of great tools out there to help you do this.  Is it worth it though?  You need 3 things to be able to create a good website.

  • Time – the actual time you need to spend to build it yourself
  • Design skills – this includes both aesthetic design and usability
  • Development skills – knowledge of at least basic skills (HTML, CSS, Javscript, PHP, Ruby, or whatever else may be needed)

You cannot create a good website without the above 3 items.  Sometimes it's possible to create a bad website by cutting corners.  If you lack the design skills necessary, can find a pre-built application to help with the development side,  or spend less time on the project.  But for this analysis we'll assume you are able to create a comparable website to that of a professional.

According to Business News Daily, the average salary for a small business owner is $68,000 per year, which would be the equivalent hourly rate of roughly $32 per hour (rounded down).

In our example project, our web designer has quoted us 40 hours to finish the site at $80 per hour.  In comparison, let's say our DIY guy can complete the same task in 3 times the amount of time as the developer.  This is a big assumption, but if we're being realistic, it's extraordinarily conservative.  I'm 99% certain that it would take me 5 minutes or less what it would take a non-programmer to do in an hour (that's 12 times the amount of time for these keeping track).

Web developer cost

$80 (hourly rate) * 40 (estimate project hours) = $3200

Our DIY cost so far

$32 (hourly rate) * 3 (time multiplier compared to professional) * 40 (estimated project hours) = $3840

So, wait… it costs you more to do your own website?  Yes!  You're actually sitting at (a very conservative) loss of $640.  But wait, there's more…

This formula just accounts for your time and hourly input.  There are a number of other factors and reasons you may not want to build your own website.  Mostly due to economies of scale (in a very microeconomic sense), you should focus on your business and outsource work which you are less efficient at.  By handling your own site, not only do you have the cost of your lost time, but also any opportunity costs incurred.  That time is better spent focusing on customer orders, leads, and business growth to further increase your earnings.

The real cost of a bad website

So you decided to cut some corners and made a website on your own.  You know it's not a bad website, but at least it works right?  Probably, but here's how it could hurt you.

Poor coding and slow load times

The first thing that pops into my mind is website speed.  You test from your browser and the page loads in a few seconds, not too shabby right?  Wrong.  You need to be testing from a throttled mobile connection in a remote location.  Not all of your customers are loading from the same place, connection speed, or have cached versions of your site readily available.  

Econsultancy wrote a really great article on site speed relative to drop rate and conversion.  They estimate that after the 4 second mark, you lose almost 60% of your visitors.  Not only that, but by the 4 second mark your conversion rate has also halved from 3.8% down to 1.9%.

( Chart credit goes to Tagman )

So let's do some math again.  Continuing our example, let's say your site gets a steady 3000 visitors monthly and each of those visitors represent a potential $100 purchase on your site.  With optimal settings our gross profit is:

3000 (visitors) * 0.038 (conversion rate)  * 100 (sale) = $11,400

But 60% drop off, we're now at 1200 visitors and a 1.8% conversation rate:

1200 (visitors) * 0.019 (conversation rate) * 100 (sale) = $2,280

Still think the cost of a better website is unjustified?  Over the course of a year, this $9,120 difference turns into a whopping $109,440.  Even if your business is only pulling a fraction of the visitors, this is not a small chunk of change.

Website design usability and conversion

Site usability and conversion generally go hand-in-hand.  Now, a good website design does not necessarily mean great conversion.  You could easily have the best website design in the world and it would not mean perfect conversion or any way to even monetize on that site.  But a good designer is going to help you avoid some of the common pitfalls that a poorly converting site may have (e.g., accent color on everything, no clear call to action, bad navigation, etc).  

The real science comes in with split testing.  And if you're bringing in enough traffic, you should always be testing variances.  For example, this study found that actually removing their navigation took their conversion from 3% to 6%.  Might not sound like much, but that is double the number of sales.  Imagine taking that initial salary we talked about earlier and literally doubling it.

What's the real cost here?  There's too many different variances to give an objective number.  But in this one example, it could cost you the difference in 100% of your sales meaning $68,000 if you're a sole proprietor in our business model example.  

Now I'll be the first to agree that this is not hyper-realistic of most real world scenarios, but even a 10% increase in conversion alone is going to cover the cost of a website for most businesses.  Is 10% realistic?  Most definitely.  Consider for a moment that if you have poor responsive (mobile) design that you could literally be cutting your sales in half.

Marketing and SEO

Now if all our other bases are covered (good design, good programming, and fast site), what happens if the on-page SEO isn't taken care of?  No one ever sees the site.  All the work and without the traffic sources, it means absolutely nothing.  

How do we put this into numbers?  The answer depends on how where you currently stand with your SEO.  Some of our customers come to us with phenominal SEO already and we continue to help them tweak it to improve and get more quality traffic.  This might yield a 10-20% increase in traffic and an additional 1 to 2% of user conversions overall.  

Taking our example from earlier with modest increases we can see:

3000 (visitors) * 0.038 (conversion rate)  * 100 (sale) = $11,400

Still gets us a net increase for a business that's already doing well:

3300 (visitors) * 0.048 (conversion rate)  * 100 (sale) = $15,840

But sometimes people come to us with websites missing meta descriptions, stuffed meta keyword tags, or even sites using images where text should be used and receiving little to no traffic because of it.  Doubling traffic is not difficult when you're moving from 2 to 4 visitors per day and 100x the amount of traffic becomes a reasonable goal.

My nephew can do it cheaper

Great!  But my guess is that unless they do this professionally, it's going to show.  My niece paints great pictures in arts and crafts class, but it doesn't mean I'm going to let her repaint my house, much less my business.

I'm not trying to discredit or discourage people who genuinely wish to enter the field of design and/or development.  People that want do this professionally should, but it is not feasible to run both your "main" business and become a true professional web designer.  It requires commitment and more focus than most people realize.  And by all means, if it is your passion, go for it!

There are also times when I think it's great to give someone an opportunity to build their portfolio.  But these projects need to be selected carefully.  It's not wise to play Russian roulette with your business or primary source of income.

Bottom line- how much should I pay?

If you came here looking for a real answer, here it is- there is no exact amount you should be paying.  There are too many variables to give a one size fits all price to the cost of a site.  

However, like most investments, you should continue investing until the marginal benefits or return flattens out.  Also add just a dose of common sense.  If you're running a blog that brings in $20k a year, don't drop $10k on it.  And conversely, if you have an online storefront nearing 6 figures, invest more back into your business website and maximize those profits.

With all that said, here's a general guide to how much you should be paying:

Small Business – $2,000-10,000

This is a site that may be informational or just have a small shop.  No huge fancy software or bells and whistles here.  On the lower end, plan on a basic site with a nice design but not a load of pages, while the higher end is going to take care of optimizing a slightly larger site and improving conversion rates and shopping experience.

Custom Application – $10,000-25,000

When your company has expanded enough and you're looking to integrate some tools to increase productivity or customer acquisition, this is the range you'll be in.  This is going to give you a more secure and organized way to handle your data and ease growing pains in your business.

Large Company – $ 25,000+

These are companies that have a primarily online presence and usually sites with tens of thousands of pages.  There may be a lot of custom built functionality, but for these companies, continuing to improve sales and tweak behavior nets far more profit than the cost of the website.