Budget pt 3 blog

How to budget for your web design project Pt.3

We’ve travelled a long way down the path of creating a budget for your web design project, and in this video we are going to cover the final piece in the budget puzzle which will help you to put a more concrete number on your project.

To be able to figure out what a website costs, you need to decide how much a website is worth to you and your business. When exploring how much something is worth to you, you’ll need to pay attention to the tangible aspects as well as the intangible ones. Your website could bring you tangibles such as the ability to serve your customers with better information or to ship products to people across the country. The intangibles it could bring include brand recognition, thought leadership or social influence. You should have an understanding of the tangibles and the intangibles based on your understanding of why you’re getting a website in the first place, if you don’t read our blog on the three most important questions to answer before you buy a website.

Use the steps below to help you workout your projects worth:

  • Think about what the future looks like, financially, if you do nothing and continue as you are
  • Now work out the top line savings and bottom line gains that you hope to make from your website
  • Workout the difference between these two scenarios to see what the website is worth to you
  • Make an executive call on what you are willing to invest to make it happen

Make sure you have evaluated where your project sits in the risk and complexity quadrants by watching our vlog onย how to budget for your web design project part 2ย  to help you understand what kind of investment you should make.

To hear about the steps for working out your projects worth in more detail, watch the full video below.

Transcript

00:00
WEB DESIGN IS BROKEN Cue the music Today is the culmination of this journey into budget. I hope you have enjoyed it thank you so much for joining me on this journey.

00:17
I’m really excited to actually open up this final piece of the puzzle which is how you can figure out a reasonable budget for your website that is sane, and that doesn’t give you things like buyer’s remorse afterwards and that you can actually go back to in several months time and be like ‘well actually I can see exactly why I spend what I did on that project’.

00:42
Up until this point you would have been aware of your biases as a human including loss aversion, wherever you’re coming from a pain or a gain perspective. You also were mapped out where your project sets on a graph of risk versus complexity; high risk low risk high complexity low complexity. And you’ll have start to have a feel for what size of investment you should make.

01:07
Now this last bit what we’re tackling is actually what is it worth to you in Pounds Sterling: let’s do this.

01:16
Let’s talk about ROI: return on investment. This is gonna be one of the key bases upon which you place your web design budget. You’re not doing this for your health – well at least most people aren’t doing this for their health. If you’re a commercial organization even if you’re a charity there is some metric by which we will judge the success of any project that you undertake. Websites are no different.

01:41
I’m gonna use money because that’s the world that I live in, most of my clients commercial organizations at some point it boils down to how much money we gonna make out of it. Let’s use that. The key things to remember when we’re exploring what something is worth to you what this website project is worth to you is to think about the tangible and the intangibles.

02:01
So the tangibles are all things that this website might be worth to you might be the new capabilities it gives you it might give you the ability to serve your customers better. It might give you the ability to ship products to new markets internationally or something like that. It might give you the ability to reduce your administration.

02:21
These are all very tangible things things that you can look at maybe on a balance sheet go ‘well hey look we’ve got this capability now that’s provided to us by the website and it’s worth exactly X we can measure that’. But there’s also the intangible aspects of it as well brand recognition, thought leadership, social influence things like this though. They also have a value to your business and can affect the way that you do business to a greater or lesser extent so those things have to be considered jointly.

02:57
Let’s jump into a more concrete in example. Let’s take consultancy for example let’s say you’re a brand new consultant. You’ve got to a fantastic place in your corporate career but you want to take that next step you want to reach further shores.

03:11
Let’s say you think that in your first year as a consultant you’ll work your existing networks, you’ll do some extra networking you think you could land say five clients in your first year and let’s say that those clients pay you about ten thousand pounds each year fifty thousand pounds at, I don’t know, twenty percent profit. So you’ve got ten grand profit. Fantastic. Great business. Nice.

03:36
Now you also see the value that other consultants before you have got out of having a good website you’ve seen how it made them look a lot more credible. You’ve seen how they’ve used it as a platform for their thought leadership you’ve seen how they’ve been able to share their content more easily around social networks and you’ve seen how they’ve been able to charge a premium.

04:00
So you think maybe if you had a decent website that made you look good and professional help people understand who you are why you do what you do and why you’re better than the competition and also gave you a platform for sharing your thoughts and ideas about your industry you, think that that could not only help you sell out say a 10% premium but you could probably land one or two extra clients as a result of the increased reach and influence that the website will help you to achieve that year one starts to look a lot different.

04:39
So our first five clients instead of them spending ten thousand each they’re spending eleven thousand. So that’s five thousand extra pounds and that’s just pure profit because you’ve sold out a premium. You’ve not delivered anything different you’ve just sold at higher price plus the extra one to two clients that you think you’ll make on the back of it. That year starts to look like 66 to 77,000 in revenue and 18 to 21,000 in profit. Those are significant numbers.

05:13
What we’ve got to do now is take our do-nothing scenario and compare it against our website scenario in a do-nothing scenario we thought we’d make 10,000 pounds of profit in our website scenario we think will make 18 to 21 thousand pounds of profit. If you take those two numbers away from each other then you’re left with the core of what a website is worth to you. This is the upside that you hope to gain by investing in a website.

05:45
So now we’ve got this figure this extra 8 to 11 thousand pounds what do we do with that now this is where it’s over to you, because the reality is is that unlike regular equities unlike normal investments websites typically don’t hold a huge amount of value to anyone else outside of that business. Yes it is possible to sell an e-commerce and sell that but for the types of businesses that I know I deal with on a daily basis most most of their web sites are only valueable and only really work in the context of that business.

06:23
If you were selling the business then yeah the website would definitely be an asset. But what we’re looking for with websites is generally a good rate of return. You can actually spend more money than you will ever get back out of it you can end up in negative equity. So if we’re taking this eight to eleven thousand pounds there’s no point in spending 12 because you’ll spend 12 you’ll get 11 back in the first year and you’ll have to wait two years to see an actual return.

06:52
So you might want to start by thinking ‘what am I willing what am I prepared to risk money-wise in order to see that kind of return’ go back to the Risk vs. Complexity quadrant that we were talking about in the last video: is this high risk high complexity? Yeah well then you want to be investing 50 percent maybe even more than that. Is this a low risk low complexity thing? Well then invest as little as you can to get a reasonable job done. Only you are gonna know what the answer is.

07:32
I hope you’ve understood that it’s not a cut and dry, one-size-fits-all answer and at the end of the day it’s your business. It’s your responsibility so you’ve ultimately got to make the calls on it. I’m just hoping that what I’ve done in these videos has been enough to help you make that informed decision and help you feel that you’re making the right choice when you’re buying a website.

07:58
My name is Aaron Taylor: I’m helping you have better conversations and make better decisions when you are buying a website. Till next time.

08:07
Want to find out how much investment you’ll need for your new website? Six Two produce ROI focussed web design in Kent to make a real difference to your business. Get in touch with us here and start the conversation.

Share this post