What Does it Cost to Run an Online Business?
About a million dollars a year. Frightening, isn’t it?
Time to raid the piggy bank.
The question of cost is one that always comes up with professional online service providers: “What’s the cost of a website?”
It’s always a tricky one to answer. It’s like the proverbial “How long is a piece of string?”
The answer depends on what you are hoping to achieve, what resources you have and what you are prepared to spend.
And so the delicate dance between service provider and client begins. It’s not that we are being evasive or trying to get as big a budget out of you as we can, it just really does depend.
And often we are trying to spare you the effect of “sticker shock” if we told you what it’s really going to cost.
What You Really Need
Thankfully, US Inbound Marketing firm, Kuno Creative has put together a really useful eBook that, among other things, addresses marketing website costs.
According to Kuno, if you put together a basic team to handle all the essential parts of your online business, the salary costs would be around $500,000 a year.
If you then add fixed costs, and my rule of thumb is to double it to get the amount you need to break even, then we end up with the $1 million figure.
Remember that’s just to cover your costs. If you want to make it worth your while and actually make a profit you should probably add another $500,000.
That gives a total of $1.5 million, which is what you need to budget for to do all the basic stuff and make your online business profitable.
And really, at that level of investment a return of $10 million would be the more likely expectation.
Clearly this is already way out of the league of most small business owners contemplating setting up an online business, and probably stretching it for many medium sized ones as well.
Are There Cheaper Alternatives?
One obvious way is to outsource the project to a professional services agency. Kuno suggests the likely cost would be around $7,000 per month, which I think is still a bit low, and $10,000 a month would be a more realistic base figure.
So even at that rate, the annual cost will still be over $100,000. Again, a business would need to be generating at least $1 million a year to justify that level of expense.
With many businesses in Australia only just considering putting their collective toes in the online sea, those sorts of numbers can be intimidating.
And as I said, this is just base level costs. To do your online business justice you should probably be spending twice as much.
There Must Be a Another Way
There is, sort of. A lot of it you could do yourself, if you have the time, the inclination, the knowledge and the skill.
Unfortunately online business is complex and varied, so it’s unlikely most business owners will have all the necessary time and talent to successfully implement the DIY option in a hurry. You will have to learn as you go, be prepared to make mistakes and realise it’s going to take a few years before you pull it all together.
Even if you do it this way, you will still spend thousands of dollars of your own time each month doing it, so what have you really saved?
Another option is to start small. Just focus on one area of online business first, such as email, social media or search engine optimisation, blogging. Pick one and work it until you feel comfortable with it and it is generating a return. Then add another one and so on.
Eventually you will build up a powerful marketing process.
In addition to the above, you could hire a coach, an experienced online business person or marketer who can tell what to do and when to do it, and also what not to do.
There is No Free Lunch
One of the pervasive myths of the internet is that everything should be free or cheap. The reality is that you get what you pay for, and you have to work for what you get.
Many of my clients have been at this for over 10years and have spent hundreds of thousands and even millions of dollars on developing their West Australian online businesses, and they are reaping the rewards of this effort.
If you seriously want to get the same level of reward then it should be obvious that you need to make the same level of commitment.
A Blueprint for Online Marketing Success
As mentioned above, KunoCreative have produced a fantastic eBook that maps out many of the things you need to consider and implement in order to achieve online success. You can download it here...
Posted in: Ecommerce,Strategy