Planning and Budgeting for a Start up New Internet Business or New Web Site

How to plan, estimate costs and make good choices for a new web business or new web site.

Web Success comes from good planning, budgeting and management of web site design, development and maintenance and good web site promotion.

Our Web-Success how-to articles, tips, guides, comparisons and rankings give most of the guidance to you need to get started. This article focuses on selecting, planning and budgeting for both new web businesses and new websites. See related articles "Before you Begin" and "starting a new web business" and "new website checklist"

As we mention in another article, most business managers fail to properly research and plan either their web business or their web site. This is especially true for the new business website owner and the novices who have never managed a real business nor managed a serious computer project. Web business entails both hazards.

If the business is new, or a new division or new web thrust of a business, the company usually underestimates the complexity, costs, risks and need for standards and promotion. Some things about web sites are simpler than the old days, but many are becoming more complex and expensive, such as code compatibility, hackers, security, promotion and advertising.

As we say in How to Start a New Web Business, the key is research, study, strategy, planning and budgeting, and selection of top professionals to help guide design, development and promotion, whether or not you do most of the work in house.

If you need much functionality, such as data inputs and reports and user interaction, expect the costs to go way up. There is far more to a functional site than selecting a script or a service. There are many issues of installation, server and browser compatibility and transportability, as well as whether you can actually modify or own the code and control the files. Such projects require technical installation, on-going support, web master services and issues of security and performance. Don't expect any customization to be possible unless your web designer says it is possible, unless you want to spend many thousands of dollars and time to do so. Some scripts and templates are very difficult to modify. Others are partly inaccessible.

The key factors to success are doing your strategy and positioning research, planning and testing. There is no substitute for having some kind of virtual monopoly, such as unique skills or products, or little competition in a niche or geographical area. Like we say in starting a web business, you need to have products that people really demand and say "wow" about.

Competition can spoil the best businesses and products, especially the new world-wide competition in cheap products. If you are just going to be another reseller of some foreign products available to any reseller without an exclusive sales territory or type of customers by a license, then you probably do not have a real business. If you are going to be selling mostly opportunities to join opportunities and help market to each other and others with no restrictions on new entrants, you don't have a business.

The main thrust of this article is budgeting. The budget for the internet depends mostly on:

  • the degree of customization and functionality,
  • the type of promotion you expect to do,
  • the number and complexity of products,
  • whether you intend to take orders online,
  • how many pictures, videos and graphics you intend,
  • Whether you have in-house experienced staff with internet, programming, marketing, advertising and webmaster skills also matters.

Most companies fail to allow for proper marketing promotion. Small business often allow almost enough to build a web site and then expect business to come to it without advertising. There is so much clutter and competition now on the internet that you can not expect that anymore. Promotion costs at least as much as the website, whether you go paid placement promotion or free organic placement.

Typical advertising for an internet business is not much different than for a regular business. Expect to spend at least 2 to 5% of sales on average per year. The start up period can be much higher, such as 20% to 40% of the first year's sales; some even more. This reduces some as business comes in and gets steadier and the site propagates. A purely information selling or programming or similar services business can expect to pay an even higher percentage of sales, some up to around 30% AFTER the first year which is higher. Programming services for corporate enterprise applications spend up to $20 per click. One reason is that most of those sellers attempt to market nationally heads-on against other major companies.

But just spending on advertising and PPC services may not achieve top-center position for certain keywords you may want. The issue of QUALITY of how well keywords match can prevent the showing of some keywords. Then, even if you get high Paid Ranking-Position, prospects may not buy if the "landing page" does not match the ad or the prospect. The appeals and content really matter to convert to sales. We discuss this more in our Promotion articles. Sites normally need to be revised (tweaked) at least twice as appeals and content are tested. Testing appeals, refinements of the site and refining PPC or other Ad campaigns takes money that we must budget.

As we explain elsewhere on this site, the big strategy choice in internet marketing is whether to mostly rely on organic ranking or paid advertising, such as banners and pay-per-click search engines. Organic (or unpaid) placement is not as reliable as it was, and much harder to achieve. Organic ranking has a catch-22 problem nowadays: Organic rankings come from traffic and inbound links, authoritative content and quality and focus of key words, and whether there is much competition. Only a few years back, such as in 2003, it would have been about 10 times easier and less effort (read that as cost) to create and reach a top position without paying much to start propagation. Because most categories' top positions are now entrenched and have high traffic and other measures to rank high, they are very difficult to dislodge.

The only reliable way to first page placement is pay per click advertising. Another good approach to marketing can be banners on related topic sites, but that can be expensive. Google, Yahoo and Microsoft's Bing can actually put your text ad on related sites by their "content" placement. Our opinion is that requires very careful oversight and laborious selection of content by the advertiser rather than relying on automatic content network placement. We can help on this subject. Consult our Web-Success Services page.

So ultimately the facts of life for a new business web site are, if the business hopes to sell between $60,000 and $1 million per year in the second year, and if the business is fairly typical and uses half the web effort and funds on paid promotion by search engines and niche directories mostly, it should allow about $300 to $2000 per month solely for those costs in such second year. Typically double or triple that in the first 6 months to one year. This does not include any labor or fees for expert assistance and guidance, nor the actual labor (in house or out) to design, coordinate and implement proper SEO keyword development, ad copy writing, campaign management, testing tabulating and bid management. For a very small business under $500,000 annual sales, the least for that effort is around $500 per month in the early stages, not including some of the time of management and staff to coordinate and plan the web strategy and site design and changes each 3 to 6 months. For help and pricing on this, consult our Web-Success Services Page.

Three main factors in web site marketing costs are number of competitors in the category, how directly they compete as to special identifiable niche or features, and geographic market reach. Ideally then you have few existing competitors in your main search and directory categories, even fewer in your features and unique offering niche (such as Dayton Ohio, material handling, carts, railroad dock type, hard urethane wheels). In such a category as that example, the issue is whether competition is global or national.

Good management will identify features and offerings to further differentiate the advertising to reduce costs. A problem that results is that most people don't type in such searches, so traffic for obscure search terms added shrinks to tiny. BUT, the good news is that those are truly prime qualified buyers who click, usually. Bottom line, you still have to spend to build many sub-category search terms and keyword phrases. The great thing about PPC is that usually only serious seekers will click, unlike many unproductive advertising methods with non-measurable results. We can help you find better search terms and how to present your offerings on the web.

At this point you should consider your business and marketing strategies as to positioning, differentiation and pricing. These crucial business decisions should only be made after exhaustive research of competition in each area chosen, to minimize competition and maximize differentiation. The goal is never to attack head-on unless you are very strong financially, resources and with superior products, like Toyota has dominated U.S. car sales by taking market share to drive GM and Chrysler down. Very competitive pricing and promotions took market share when GM could not afford that. That is a special strategy which seldom applies with regular business.

Other Costs

Ultimately, a successful site roll-out onto the internet depends mostly on getting as much right from the beginning, to avoid re-doing your business and your site, or having a mis-directed site steer the business into a lurking iceburg like the Titanic.

Most other costs relating to the website are relatively minor compared to proper planning, testing, designing, refinement and promotion/advertising. Those programming, graphics design, creative, photography, content and ad writing and PPC management or organic promotion eat up most of the internet site budget.

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