How much to invest in a website blog Six Two Tech

How much should you invest in a website

‘How much does a website cost?’ has got to be one of the most common questions people have when they’re thinking about buying a new website. And with good reason: buying a website isn’t like buying anything else for your business—it isn’t like anything else you might have bought before, so many of your previous experiences might not translate.

Couple this with prices that range from less-than £100 to over £100,000 and you’re set up for endless hours of fun and frustration trying to figure out how much is right for you.

The long and short of it is that how much you invest in a website is ultimately determined by what you seek to gain from it and your appetite for risk. You’re putting money into a website because you’re trying to achieve some future outcome. And because this isn’t science, no one can tell you for sure whether it’s going to work or not.

So how much should you spend on a website? That’s what we’re going to tackle in this post. Whilst there is no one definitive pounds-and-pence, one-size-fits-all answer (sorry to disappoint), we’ll give you the tools you need and a pretty bullet-proof method to work it out for yourself.

I think the question ‘how much does x cost’ is often misunderstood. And as a result you’ll often get glib responses such as ‘well how long is a piece of string?’. I personally think this is a lazy response, especially if the person answering the question is the service provider. But it’s lazy because when someone asks how much something costs, they aren’t asking for a quote, they are in fact asking for help.

When someone asks how much something costs, what they’re really asking is ‘I have no idea how things work in your industry, but I see the value in what you do. Please help me understand what it could mean for me, and what I might need to invest’. Now that’s a much bigger, much tougher question.

And it’s a question that a lot of service providers don’t want to answer, because it means—potentially—spending a lot of time getting to know someone and figuring out where they’re coming from, what their goals are, who they’re for and what they’re about only to find out that they haven’t got the budget, or they buy from a competitor and sometimes people are just timewasters with nothing better to do. So these people clam up, give off-the-cuff answers and act in a standoffish way. Remember: sales costs money and they want to be sure that you are worth their time.

The web design industry is particularly bad for this. I know this because we’ve won an alarming amount of new business on the back of being the first people to a) answer the phone and b) have a genuine conversation with the prospect.

The sad thing is it doesn’t take a particularly long time to help someone figure out a budget for your web design project, and working it out for yourself is pretty straightforward if you follow these simple steps.

Step 1: Articulate the problem you’re trying to solve

Articulate problem Six Two Tech blog

This sounds obvious, but I can’t tell you how many times I’ve seen people look at me, blank-faced when I ask them why are you doing this anyway? Often people are looking to a website as the solution for a problem they don’t understand—or worse a problem they don’t even have.

And if you’re not crystal clear about what you’re trying to get out of this website, how am I or anyone else possibly going to help you? If you’re still unclear on what you want your website to do (or even if you actually need one in the first place) then I’d recommend taking a step back and answering The Three Fundamental Questions You Need To Answer Before Buying a Website.

Websites are great at solving certain types of problem, but they suck at other things. And remember, a website is just a piece of the puzzle; seldom is it the whole solution or the magic bullet.

Here are some examples of well-articulated business problems:

Example 1: A challenger utilities company

We’ve been growing our customer base and our customer support centre is overwhelmed. Most of the calls that we’re getting are for the same types of issue and we’re convinced that our customers would be able to solve a lot of these common issues for themselves if they had nice, clear set of instructions. We’re getting bad reviews for our customer service, and if we could free up some resource we’d be able to better deal with the uncommon enquiries. If we can reduce the strain on our call centre, we can better utilise the team there and move some people into value-adding areas.

Example 2: A business consultancy

After a successful career working for FTSE 100 companies it’s time for me to strike out on my own and take my skills to a wider audience. I’ve made a lot of contacts over the years and these people will be a great starting point, but if I’m going to make new clients then I need somewhere to show the world who I am, what I’m about and what I can do for them. I sell great face-to-face and I want somewhere that people can go in their own time and learn more about my results, my thinking and my philosophies. I want a place where people I don’t know can learn to trust me.

One thing to note when you’re articulating your problem is to focus on the problem, not the solution. It’s easy to say something like ‘I need a website to help me build trust online’, but as soon as you’ve decided that a website is the thing to have, you close yourself off to other possibilities that could work even better. That’s not too much of a problem if you’re already toying with the idea of doing it yourself, but it might colour the conversation if you go the agency route down the line.

Any supplier worth their salt will be able to tell you if what they do is the best way to solve the challenge you face.

Step 2 – Decide whether it’s a cost-saving or a revenue-making problem

Whether you stand to gain something or whether you risk losing out massively colours how you view that situation. In general, people would rather not lose something they have than gain something of equivalent worth. It’s called loss aversion and it makes us do some weird, illogical things. Try it out for yourself. Tell me if you agree with this statement: it is better to not lose £10 than to find £10. Like me and most people you’ve probably agreed. Of course it’s better to not lose something than it is to gain the same thing. But think about it for a moment—that doesn’t make sense? Surely you should feel as good about finding £10 as you would feel bad for losing it. It’s £10 after all.

But it turns out that people might be hardwired to avoid loss rather than seek gains and this can have huge implications when you’re trying to figure out what to invest in a website, but not in the way you might expect. You might be prepared to spend £20 to avoid losing £10, but won’t want to spend more than £2 to gain £10.

Also, depending on whether you’re viewing your problem as some kind of pain to be moved away from or a capability to be gained, you’ll assign different values to the solution, and you’ll experience things differently and form vastly different long-term opinions as well.

In our first example, our utilities company is trying to save on the cost of their customer service operations. They’re also trying to move away from the pain of bad reviews and stressed out staff. Things are painful, and they’ll be keen to get things sorted as quickly as possible and may well end up paying over the odds for a solution.

In our second example, our consultant is riding high. She knows who her first few clients are going to be and is looking to create some upside, look more professional and position herself as an expert. She’s under no real pressure to rush into anything and so she’s going to wait for the right solution at the right price. She may well end up investing too little in her website and there’s also the opportunity cost to think about too.

Be aware of the situation that you’re in and how it affects your decision making to avoid getting ripped-off or missing out.

Step 3: Estimate the savings/gains over time (bottom or top-line? This is your ROI horizon)

The last thing to factor in is the payback time. The eagle-eyed readers might have noticed that I’ve been using the word ‘investment’ quite a bit. That’s because regardless of whatever kind of website you end up with (assuming that a website is the right thing for you), you should certainly be looking for it to pay you back and then some—otherwise, what’s the point?

So let’s talk money. What you need to do is figure out how much profit you’re going to make or how much you’re going to save costs over time if this website can help you solve your challenges. I like to use the 1 year horizon, as the first three months of your website’s life will be bedding in, dealing with snags and learning from your users.

The important thing to remember when you’re looking at your payback horizon is that you’re thinking about the profit that you’ll make back. Even with an all-singing, all-dancing website that’s pulling in leads left, right and centre, there’s still a cost to you before you turn that interest into sales.

Let’s jump back to our examples:

Example 1: Utilities company

Let’s say our company has an outsourced, offshore team of five people in customer support, and around 40 percent of phone calls are for the same sorts of things that the customer could fix themselves. If their website could half the number of calls by even half, they could reduce the amount they’re spending on that service, reduce call-waiting time and refocus on the problems that are causing them to get negative reviews.

They’re also a rapidly growing company, which means that their customer-base is growing. If they do nothing, then they can expect that their costs for customer service will increase in line with the number and frequency of calls they receive. Now, however, they can expect that they’ll save not only on the current cost of customer service, but also on not having to spend so much so quickly in the future.

Example 2: Consultant

Our consultant is used to working with companies who have revenue streams in the billions and her approach can help them make millions more with the teams they already have, and she knows that they’ll be willing to pay for that.

A good client might be worth tens of thousands to her a year, but they run to budgets, might take a long time to decide on things and have multiple people involved in the decision-making process. For her that might mean multiple meetings and many conversations where she won’t be in the room for it. Her website needs to be able to have these conversations on her behalf, in a way that helps build trust.

She’s worked with consultants like herself over the years, and she’s seen that consultants who have more proof points and more published content were able to command up to 50% more in their fees than ones trading on word of mouth. So for her, the gain would be the difference between what she might make anyway plus the extra that she’d be able to charge those people plus the extra revenue she’d make from extra clients she’d land as a result of her having a fuller, more convincing and engaging profile and sales process.

Now you’ve got your numbers and your payback horizon, the last thing to do is figure it out what a sensible amount to invest to get things off the ground.

Step 4: Determine your risk profile and invest accordingly

Investment picture Six Two Tech blog

Now comes the hard bit. How much should you invest? As I said, there’s no one-size-fits-all answer to this; how much you actually invest is really a function of these things:

  • How risky this website project is. What effect will it have on your business if it fails? Mission-critical websites carry more risk than sites that are little more than tick-box exercises.
  • Your ‘buying style’. Are you a bargain hunter or do you pay top rates for premium products?
  • How much cash you have available at the time

There are a few rules of thumb which you can use to work out your initial investment:

Use a 1 year horizon

It’s much easier forecasting returns over a year rather than two or more. One year seems to be a convenient time frame that people can work to: it’s not so far in the future that it’s all dream-like and hazy, but it’s not so close that there isn’t much you can do to change things.

Try not to invest more than 50 percent of your estimated savings or gains

This is about return on investment. As soon as you invest more than 50% it means you have to generate extra additional revenue to pay back the initial invested amount. But payback in project investments is never linear: you don’t get more back simply by putting more in. As you start to invest more and more, you’re simply tying up more cash for proportionally less return.

Try not to invest less than 20 percent of your estimated savings or gains

There is a lower limit to what you should spend on your website project, and that’s roughly about 20 percent. With a 20 percent investment and a 1 year horizon, you’re basically asking your website to return half of your investment amount every month. Quite ambitious, but not in the outside of the realms of possibility.

Likewise if you’re only looking to make a much smaller investment, you’re simply asking for some highly unlikely rates of return.

A final word on risk and complexity

All website projects fall along two basic axes:

  1. How important it is to your business (risk)
  2. How technically difficult it is to deliver (complexity)

We can plot these on a graph like so:

Your web design project will fall into one of these quadrants. So here’s some guidance for each type of project:

High risk / high complexity a.k.a. The Moonshot

This is typically the type of project that would-be startup founders dream up in the middle of the night, convinced that it’s the way to make their millions. It’s also the hardest type of project to deliver with the lowest chance of success. If your web design project falls into this area, then you need to think about minimum viable product (MVP), user testing, and investing heavily in your technical infrastructure and team. Don’t cut corners on this type of project as it can easily eat up all of your money and still be asking you for more.

High risk / low complexity a.k.a. The Punt

This kind of project tends to come about when a business is thinking of launching a new product but wants to test the market first off. It’s risky in that if it works, it can mean significant upside. The thing to do here is to limit the investment and test fastidiously. Low complexity projects mean a greater opportunity to produce multiple variations of the core idea, tuned to different audiences. Make multiple small investments and iterate your way to success.

Low risk / high complexity a.k.a. The Moderniser

If the project is complex, but presents a low risk to the overall business and strategy, then the chances are that the purpose is to modernise some of the business’ capabilities. So think about bringing around online payments or integrating with an existing CRM. These are complex problems that have been solved quite thoroughly by companies like PayPal. This type of project should look for off-the-shelf functionality rather than building something bespoke. Invest low-to-moderate amounts and look for trusted, name-brand suppliers of the complex functionality.

Low risk / low complexity a.k.a. The Tickbox

A project that is simple and presents very little risk or impact to the business is probably driven by compliance rather than strategy. There isn’t much to say on this type of project other than investing the least amount possible to get a decent job done.

Want to find out how much you should be investing in your site? Get in contact with our Kent web design team today on 01233 333824.

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