Web design business - does it worth it?

metavisia · #1 (**permalink**) 11-22-2005, 05:29 PM

Hi all,

I will ask a question which I think is important but was unable to find anywhere discussed (please, send me information if you've already found a similar article or a topic).
DOES IT WORTH IT to do web site design business? I know it's perfect for a side income or for freelancing. We've passed through that. I'm asking does it make sense to try building a big company (like 30 employees and 5 million yearly income), doing custom web design? Is it possible to make good and stable business doing custom web site design, or you better turn to selling software products or developing own web sites?

Let me give you some background. I started my web design business back in 2001. I was alone with my partner. It was hard, no clients, etc., you know how it is. Then, step by step, I started gaining customers, growing a team, becoming a real business. Now we're seven and we've got pretty good business for a small-sized company. Basically, as a CEO and co-founder I make an income compared to what good doctors and lawyers do. Developers' salaries are among the highest in town, and in short everything is fine, I say again - for a SMALL-SIZED company.

However, I've got concerns. First, we're fighting for each new customer. Yes, there are referrals and returning ones, but to keep up our level we're forced to get new customers every month. If there are no new customers for like 4-5 months, we'll be close to bankrupt and we have to dismiss qualified employees and downsize everything. In short, this business is UNSTABLE. Yes, I know we must make more recurring income (such as monthly fees) but nothing can help you if you don't get new customers.

Another issue is we're fighting with amateurs or start-ups who offer ridicilously low pricing trying to build a portfolio (I've done that earlier too :) ). It's pretty good business for people like them - they don't care if they get $1000 or $5000 because it's an ADDITION to their income but if you base your business on that, you can't just be cheap.

And of course, other issues come such as:
- unability to take more projects than your current capacity is (for example, a store can sell both 10 six-packs for one day and 1000 the next, while we can't do 1 project this week and 10 next)

- necessity to allocate some of the customer relations to other employees; when such an employee leaves there's a risk of taking his customers with him

- the low qualification of clients which forces you to develop sites you don't like

So I'm seriously considering does it worth it? Can you grow from small-sized to mid-sized and even corporate business doing custom web site design

I'll appreciate your opinions.

Regards,

Georgi

timmathews.com · #2 (**permalink**) 11-23-2005, 10:18 AM

Georgi,
I honestly think the answer is "NO".
Sorry m8.

metavisia · #3 (**permalink**) 11-23-2005, 01:18 PM

Thanks Tim,

Short and direct :) But I'm rather thinking like you. The fact I'm discussing this shows my uncertainity. In one of the other forums discussing this someone called the web design business a "rat race". So true!

timmathews.com · #4 (**permalink**) 11-25-2005, 02:56 AM

Meta,
It really is a rat race man...
I own a computer store, called "Computer Medics" in braidwood, illinois. The store does quite well with computer repair, upgrades, retail sales and new builds. Web design and SEO is really a nice treat when it comes in. I started in computer repair... then went into design and seo. But... Like you said.. so many wankers out there want to make a name for themselves making the $300.00-$800.00 websites.. it really flushes us down the drain.

Expand and cutback while you can and still have capitol.....

Good luck bro.
Tim

KeithO · #5 (**permalink**) 11-29-2005, 09:12 AM

the company i work for has existed for 10 years and currently we have 12 employees. We offer design, development, seo, and hosting services and target small to mid-range businesses. from what i've heard, things haven't been easy sustaining this long.

Chris · #6 (**permalink**) 11-29-2005, 02:51 PM

i'm going to move this (good) discussion to the internet industry forum.

timmathews.com · #7 (**permalink**) 11-29-2005, 04:30 PM

TBO, I offer web design, hosting & seo as well.
BUT I own a computer store. This is by meal ticket, and the web design and seo stuff, I could never live on it.
Good luck with everything georgi.

Tim

Webnauts · #8 (**permalink**) 11-29-2005, 04:33 PM

What do you mean with webdesign?
Anyway my opinion, I think doing web architecture would do better: Web Sites Accessibility, SEO and Usability.:)

Creating from ground up web sites which can be accessed, found and used. ;)

nashville · #9 (**permalink**) 11-29-2005, 04:37 PM

The problem I see is that with outsourcing and with the teenages doing it there is not any money in it anymore.

And customers can be hard to work with. I would guess that only projects greater than 10K are worth doing.

I have seveal sites and most of them are done outside the US (sad to say) because the price is so much lower.

compusolver · #10 (**permalink**) 11-29-2005, 04:38 PM

Great question!

Let me ask this - is anyone already doing that? (30 employees, etc.)

It is so hard to find good developers, but when you find one, they are likely to be quite independent. Managing thirty might be like herding cats!

Web design/development requires such client/developer interaction - a relationship really. It would be very difficult to do this profitably unless you had a "cookie-cutter" approach - client chooses the template and the code (to run eCommerce) is already modularized.

I started an app like that once - got about 50% when I realized the client, who'd only paid 10%, was broke.

I do think the cookie-cutter idea would work on a large scale. But you deal with two or three developers and all other employees are customer-service/sales.

corporateface · #11 (**permalink**) 11-29-2005, 04:48 PM

Define Your Goals. I am not a large company, but that isn't my goal. If I did any form of advertising locally I wouldn't be able to keep up.

I have been doing it full time for over a year. And I am so busy that I don't follow up on leads half the time. My business is 100% referral.

Teenagers are doing it, (and a lot of their stuff stinks because they don't know first hand what makes a good corporate site).

If you do it "on the side" ... well, lets just say that I pick up a lot of business from people who were someone who was doing web design on the side. Businesses can't wait for you "fit it in".

It is worth it.

Keith

G[dot]com · #12 (**permalink**) 11-29-2005, 04:53 PM

Georgi,

Unfortunately, I do agree with you. My answer to your question, as others mentioned here too, would be "no".

Your identification of where the problems are is perfect.

This business is unstable and I believe in my own experience, that sooner or later you get tired of being kind of a quixote, fighting against the windmills.

Unfortunately there is a stupid and counterproductive idea regarding computer activities, that leads people with no expertise to think "I can do it". Here you have to deal with that all the time. People believe that "this web design thing is pretty simple"... "I´d do it if I had some extra time"... So they are not comfortable with the idea of paying for the work.

And afterwards, they are not even capable of preparing the contents of the site and do the other minimum things they have to do to when having a functioning website.

There is where my main disappointment with this occupation resides. The relationship with the client. One of the main aspects of any business, right? =(

Thanks for posting this. And good luck to you (and all here). Thanks also Chris for ahving included this discussion in the newsletter. =)

theoart · #13 (**permalink**) 11-29-2005, 05:05 PM

The industry for web developers has changed. Myself, I do it as some additional income anymore and focus my energies on a web based (e-commerce) business I created in order to pay the bils.

As was indicated above, many small operations are are offering really low rates that does not allow for a U.S. based company to compete. Many companies even offer simple do-it-yourself web sites at little to no cost (I must disclose that I am one of them).

My point is that I found the market to be too difficult to compete anymore. Standard web design and development services by itself is also loosing its ability to be a high revenue industry as it once was. This industry is now a little over a decade old so like many things over time, prices and rates do come down and potential clients are more aware of this. A case in point is Register.com's marketing campaign that everyone has probably heard. It tells people they can have a professional looking web site for a few dollars a month. This makes poptential clients do a double take when a web design firm quotes thousands of dollars for a web site.

Obviously there are still those clients that require more interactive and complex web sites so if anything, I think if you are going to do web design for a living you should focus on those type of clients.

ChiefTutor · #14 (**permalink**) 11-29-2005, 05:21 PM

I own a small web design firm and we have been going at it for a year now. I still am focused on finding the business model that will sustain us.

I am 100% internet based and except for the core 3, outsource all actual design development and content. Yes, there are people doing it cheaper, but that is not what people are buying. They buy your knowledge and experience.

Our business model is based on web design, monthly hosting, consulting, and building our own products to generate recurring revenue.

If you focus on being the best...at any price point, you will succeed because that is what people want and are willing to pay for.

"When excellence is possible....good is not enough"

doubleplus · #15 (**permalink**) 11-29-2005, 05:28 PM

I do web design and each project is profitable if I manage expectations well enough and scope creep doesn't kill me. But my bread and butter is consulting in a specific market - Miva Merchant. Helping already profitable sites optimize, add functionality, and fix broken functions, is not something teenagers and amateurs really can do, so the competition is limited. And there's lots of repeat work when a site is growing and they want more and more functionality.

But, overall, business is slowing down as new applications make e-commerce site design and maintenance easier. So, I'm considering actually creating my own e-commerce sites, using my expertise to do my own work, instead of just helping others. But I'll probably always do some level of site design, because that's the fun stuff. I still get that thrill from seeing one of my designs go live, and that first sale made...

bigaussie · #16 (**permalink**) 11-29-2005, 05:28 PM

I think some of the posts that say it is worth it to get larger haven't been in the business long enough to have had a few months in a row where business is nearly non-existent. Congratulations on keeping your head, and those working with you, above water for so long.

To take the next BIG step to a corporate style and size development shop requires relationships and partners that are able to feed you with a steady stream of pre-qualified clients. As you alluded to - it will also mean finding more residual income.

You need to partner with a substantial Law Firm or some other group of professionals who will already have a base of solid clients from which you can feed. The partners in the business will obviously require some form of compensation in return - but that is for you to negotiate.

Once you have a steadier flow of clients, the residual income may then come from hosting charges each month. Not the rubbish fees that so many are beating themselves to the bottom with (US$3.95 per month etc.) but substantial fees you can get by installing CMS, Bulk email interfaces and the like.

It is all about perceptions. With a CMS and bulk email system allowing your clients to update their own site content, stay in touch with "their" visitor base - they can see that you have provided much value to their site - and they know that software needs to be kept up-to-date, so will have little hesitation in paying a surcharge for the privledge of having you "looking after" their site at US$50 per month (example only). You only need 100 customers all paying $50 and you have an extra $5000 per month coming in - for very little more work. e-commerce sites can comfortably be charged $80 --> $100/mth.

It is really all about working smarter than harder. In the past we were forever cutting code for websites until we looked around at what was already built and for sale. Many web apps (PHP, PERL,ASP) are available for under $50 and can be onsold for over $100 - that is an "easy" 100% margin. Little gimic things like interactive calendars, surveys, java games. They all attract a premium without too much extra work from your team - but bringing in plenty more dollars.

Maybe you don't need to grow any larger (unless an ego massage is required) - just utilize the team you have more efficiently. Try asking your team for input. There may be some great ideas hiding away in your staff.

proficient · #17 (**permalink**) 11-29-2005, 05:57 PM

I must say that after being in the computer field for over 25 years, working for the AMA, Hewlett Packard and other significant computer companies in many different technical areas including web design the answer is............ NO!
Today Register.com can get your "pro" website done for about $5 a month and you can do it yourself while a tech guy is ready to answer questions by the phone for free support! A few years ago old techie guys lost their jobs as out sourcing was king. Our competition used off shore development to cut costs and lower prices. You can get a "Pro" website for $495! Our customers and the new ones we spent a fortune reaching listened to our professional recommendations and then got it done for $500 with a template design. That is where the business has gone. There will still be serious clients and customers who understand that learning Dreamweaver, FrontPage, Go Live and Photoshop is a worthy profession and requires skill, experience and knowledge just as setting up DNS and IP addresses do! But to deal daily with those small minded business owners who think a web designer is worth $15 bucks an hour when they are merely the landscaping company owner who wants to charge you $150 an hour to cut your grass and trim the hedges! Go figure. The landscaping business is more lucrative and attractive then is it not! The majority of small businesses these days don't respect what it takes to do web work today. And I don't see it changing any time soon so we have revamped our business model and offer more technical installation and training for those who want to do things themselves.
My humble opinion.........I would not bet the farm on a web design business you would end up living in a trailer!

evodio · #18 (**permalink**) 11-29-2005, 05:59 PM

Great post, bigaussie!

Georgi,

From my perspective, the real estate industry follows a great business model that I found summarizes everything quite well, even for a Web design business: Leads, Listings & Leverage.

Leads:
I've found (the hard way) that growing a Web business successfully requires having certain processes running on auto-pilot. One can never take one's foot off the leadgen pedal, especially when times are good. As you know, the rest is pretty much a human resource matter that requires maintaining the proper talent pool mix in order to execute successfully on current projects, and nurture prospective and existing clients. I’ve never read a book on this matter that is as succinct and actionable.

Listings:
Gotta have a business pipeline at ALL times! I recommend reading “Get Clients Now!” by C.J. Hayden. This book explains the life-cycle of a business pipeline, and details the types of programs that you need to have going at different times in order to keep new projects coming through the door on a consistent basis.

Leaverage:
I think this gets to the core of why you posted in the first place (because you’re obviously making already money, but you don’t know how much longer you’re going to be able to keep up with the game). While you sound like you've succeeded in creating a great "job" for yourself, you may find that the next level of career satisfaction might come when you are able to successfully leverage employees to take yourself out of the equation to a greater extent. When you start running into projects that you “don’t like”, then you’re working IN your business too much, and not ON your business. Alternatively, you may just be ready to add new services to your offering, but you may still need to hire an assistant to take care of some of the things you used to do that will guarantee you can sustain your other business activities. If you're leveraging people effectively, the chances of running into a site project that you don't like are lessened. Leveraging talent allows you not to have to be around to like it or dislike it. ;)

If you know exactly where your company offers real value and you know how to communicate that, then I wouldn't worry about the teenagers encroaching on your space. Yes, they do generate lots of noise in the marketplace, which makes it harder for your clients to reach you. However, the novice Web designer bunch out there does not play offense very well (if at all). They simply lurk around on job boards, waiting for an inexperienced low-level marketing manager to take the low-cost-leader bait. Unfortunately, sometimes it’s those companies that would otherwise be good clients that first have to get burned by a freelancer before they learn to appreciate what you offer. Definitely check out the book I mentioned.

Finally, remember to beef-up your non-compete clauses with your employees and contractors.

As I see it, your biggest challenges lie in learning how to replicate or replace yourself with someone who can do things as effectively as you can, so you can focus on growing the business and other more creative tasks that probably lured you into this business in the first place.

Conficio · #19 (**permalink**) 11-29-2005, 06:27 PM

Hi there,
I'm surprised that there is so much negative sentiment out there.

I think the answer to the question can not be given by any of us. It is ultimately a question that you have to find the answer to yourself.

However, we can try to give you some ides, where to look.

My first question would be, "Are you enjoying building a business?" If the answer is "Yes", pick up a book called "The E-Myth revisited" and see where it leads you. If the answer is "No", pick it up anyway so you know why things are not hunky dory.

My second question is, "Why is your business not flowing?". You got to find out what are your profitable clients and what they want. I guess you are taking on too many clients that do not really value your services. Ask yourself "Which customers would I like to clone?" (make sure they are profitable, not just the most fun projects). Then find out who they are. I mean who is the person who writes the check. This is the one you need to clone. For example, "The forty something enthusiast who cares about this not-for-profit organization more than about his own kids (and therefore spends his money on their website)", not the "mid-size corporation that has a marketing department of at least five people". Make it personal!

Third question, "What can you do to get your cost structure in-line with your business fluctuation?" I hear in your description, that you feel the burden of providing for your employees is hard on you. Find a way to not have all resources employed. See to it that you find (additional) resources on a flex-time/outsource basis.

Fourth question: "What is your specialization?" Businesses that sell exchangeable products (commodities) are force to compete by price only. What does your team better than anybody else? What does your team more than anything else? Is it understand a particular industry and their web-design needs? Is it selling products with excellent photographs? Is it selling services with top rate benefit and feature lists? Look at these capabilities through the eyes of the customers you would like to clone, "How do they benefit from this specialty?". It is much easier to market a specialty than a commodity, because you know where to focus your efforts and can touch each potential customer more often (increasing the chances you are on their mind when they need you).

Hope this helps you a bit. Georgi, I wish you really good luck, where ever this might take you.

K<o>
P.S.: As I think this is more a personal question, you might consider investing in a good business coach. May be a christmas gift to yourself?

kgun · #20 (**permalink**) 11-29-2005, 06:47 PM

some succeed and some does not. The percentage of failure on the internet is much greater then the percentage of success.

I think good design is related to SEO and SEM, so offer a portfolio of solutions. Solution is a better word than product.

If you find the link, you may download a free PDF document entitled "Web Design Mastery" (77 pages) on this http://www.webdesignmastery.com/ site.

It describes some of the subjects that are discussed above in greater detail. I will reccommend it after having read a few pages.