Article · 18 May 2021
Here's what you should spend on a new website
You're looking to develop a new website. What should you expect to pay, how should you evaluate whether it's a good investment, and how do you convince your management?
Image credit: Entle x Midjourney
Redeveloping your organisation's website can be a daunting prospect, especially if you are doing it for the first time. What should you expect to pay, how should you evaluate whether this is a good investment for your organisation, and how do you convince your management?
1. First, dig deep to find your "why"
To evaluate the cost of a website you need to know your rationale for building it, but deciding on your real need is harder than it sounds. You know you need a new website and you might have an idea of your preferred design, how you'd like to structure the website, and what kind of content you want to include. But to create a website that will also end up being a great investment for your organisation, you need to dig deeper.
The key question to start with is: why do you really need a new website and why now? This will lead you to your most urgent, underlying business need or organisational goal. That might be something like:
- We want to grow our customer base by 10% over the next 12 months. From past experience we know our current website can't help us do that, so we need a new website now.
- Our current website and landing page workflow is slowing us down. Our marketing team needs to be able to iterate and learn from our online campaigns more quickly and they can't do that with our current system.
- We're targeting a new audience and our current website's messaging is not speaking to them, so we need to launch a new website now to avoid missing out on them.
- Our brand is changing and our current website isn't reflecting that; we need a new website now to properly communicate our brand.
Zooming in on your "why" is powerful. Once you understand the underlying reason your organisation needs a new website, it becomes much easier to decide how much that problem is worth to you, and consequently how much it makes sense to spend on it. It also gives you far more freedom on the "how": a good web partner can help you unearth and explore easier, better, or faster ways to achieve your goal, which might not be apparent yet.
2. Calculate the value of your "why"
2.1 What's the benefit of solving your problem?
If the "why" for which you're trying to solve has an upside that you can quantify, calculate that expected benefit. For example:
- If you're trying to get new customers, quantify the expected value of their long-term relationship with you. A useful metric to do this is Customer Lifetime Value (CLV), explained below. Furthermore, if you know your rough conversion rates (i.e. how many of your leads turn into customers), you can work backwards from that in the sales funnel to calculate the value of a single lead. For example: if one out of every 10 leads turns into a customer, one lead is worth 1/10 of a customer.
- Quantify the time you free up for your employees, which they can spend on other tasks or projects, by making it easier to publish content on your website or to launch new landing pages. If the efficiency of a new system means you don't have to hire additional employees, calculate the value of those savings.
To cater for different scenarios, you can formulate low, medium, and high ballparks for the expected value, e.g. CLV and employee costs saved. To do this, you can ask: (i) what could this number be in a worst-case scenario, (ii) what could this number be under normal circumstances, and (iii) what could this number be in a best-case scenario.
Quick explainer: How to calculate the long-term value of new customers (CLV)
It's easy to calculate the value of a single sale, but to really understand how valuable a single new customer is to you, you need to consider the value of their future relationship with you. How many purchases does a customer make in the course of their full relationship with your business? And how long is that relationship with you, on average?
Considering these questions will give you the Customer Lifetime Value (CLV). Perhaps you sell a monthly subscription, where customers pay you R1,000 or £100 per month, and customers stay with you for 2 years on average. You spend R100 or £10 per month to service the customer, which includes your initial cost to get the customer. The total revenue you will get from a customer in a year would be R1,000 or £100 * 12 months = R12,000 or £1,200. And the cost would be R100 or £10 * 12 months = R1,200 or £120. A simple formula for CLV, from Qualtrics, is the following:
Customer revenue per year * Duration of the relationship in years - Total costs of acquiring and serving the customer = CLV
In the example above, the CLV would be: (R12,000 or £1,200) * 2 years - (R1,200 or £120) * 2 years = R21,600 or £2160
Note: this is the simple way of doing it; you can make this calculation a lot more nuanced by calculating different CLVs for different segments, adding some sort of discounting for inflation, and so on. Here is a great guide to CLV from Qualtrics.
Knowing your CLV gives you a better tool to benchmark your spending on a website. If you're expecting to get R4,000,000 or £200,000 in new customer relationships, it makes sense to spend R200,000 or £10,000 on the website that will help you achieve that. But if you're only expecting to get R500,000 or £25,000 in new customer relationships, that same calculation might not make as much sense.
2.2 Or: What's the downside of continuing to deal with this problem?
If the problem you're looking to solve is hard to quantify, it may be easier to look at the downside than the benefits. For example:
- If your goal is to help your marketing team roll out and learn from campaigns more quickly, what are the dangers if your marketing team can't keep up with your competition? What will that mean for your organisation's competitive position in the market?
- If your goal is to reach out to a new audience, what's the downside to your organisation if you're not able to reach out to that audience because your website's messaging isn't properly targeted at them? What is the cost of receiving unqualified leads that aren't the right fit for your organisation?
- If your goal is to realign your website with your new brand, what are the dangers — and how problematic are they — if your website doesn't reflect your brand?
3. Get ballparks for strategy, development, and ongoing services
Now that you know your "why" and have a rough idea of what it's worth to you, it's time to approach web agencies for a ballpark costing. Website costs will typically be divided into the three distinct phases of a website project:
- Web strategy: Before diving into the development, you should commission a web agency to translate the "why" for your website into website requirements that give you the best shot at success. This will also help you decide on the best metrics to measure the results of your new website. The web strategy phase is vital to get everyone on the same page and reduce unknowns and risks later on in the project.
- Development: This phase is the actual creation of your website. The key services are (i) website design — translating your brand and requirements into a high-quality, high-conversion visual language — and (ii) web development — building out your website and initial landing pages, as well as integrating everything with your internal systems. Other services offered in this phase can include copywriting (transforming your information into high-quality content) and further user testing.
- Maintenance, iteration, and content marketing: Once your website is live, a good web partner will help you maintain it, provide reports on its performance, and iteratively improve it. If your budget allows, content marketing (producing and publishing regular, high quality content to draw people to you) can be a great way to build a passive, 'always-on' lead flow.
While these three phases form the basis of any website project, the exact offering in each phase can be tailored to your budget and unique circumstances.
A good web partner won't lock you into development before completing web strategy. Since the strategy phase informs so much of what follows, and since the final requirements are only clear after this, a good web partner won't require you to commit to development upfront. Instead, they will provide an accurate, obligation-free quotation for the development and ongoing services after having completed strategy. For example, at Entle we offer web strategy as a standalone service. This gives our clients a low-risk way of starting their relationship with us and assessing the best way to go about their project. The deliverable of our strategy process is a project brief with our recommendations. This becomes a valuable blueprint for the client's website, no matter with which vendor they choose to go for the development and ongoing services.
Looking for a quote from Entle? Entle websites normally start around R70K ex VAT / £3,500. To get a quote for strategy and a more detailed ballpark for development and ongoing services, book a free call with Entle.
4. Compare vendors on the value they create
Once you have ballparks or quotes from your preferred vendors, you should do a detailed comparison to check which vendors are the right fit. But more than just looking at something that meets your concrete website requirements and that meets your budget, you should consider broader questions about the vendor, their process, and how they can reduce your risk. Considering these factors will help you understand which vendor can create the most value for your organisation.
Need help you do this? Grab our free tool: A decision matrix to compare website vendors.
5. Don't forget to measure the results!
You've built a convincing argument for a new website and your organisation's management has agreed to allocate the budget for it! Exciting times! While a lot of work will go into the process to develop the website, a good web partner will make it fun and exciting and help you keep your eye on the prize.
Once your website is live, don't forget to measure its impact on your key metrics, as you defined them during the strategy phase. Being able to demonstrate the success of the project and the return on your organisation's investment builds credibility and helps you establish a track record with your management. This will make it a lot easier to convince your stakeholders the next time round.
Best of luck with your project!