Budget

Establish a realistic budget for the project. It is important to make a serious investment in web initiatives to avoid ineffective marketing, security compromises, and loss of credibility. The Internet offers tremendous returns and is perhaps the lowest cost medium for reaching your audience, but it is not reasonable to believe that a $500 or even $5000 investment is going to generate $25,000 or $50,000. Instead, consider your investment to be returned incrementally by percentage.

When considering a new website initiative, choose a solution that will produce a positive return on your investment in 12 months or less. Technology changes rapidly so a short-term return should be your goal. Once you recover your start-up costs, returns increase exponentially.

Questions to Consider

• Can you quantify your objectives financially?
• What is the lifetime value of a new customer?
• How much are you willing to pay to obtain that customer?
• What is your annual sales goal?
• What is your average profit margin?

Budget Allocation

The following list includes the different expense types encountered during web development projects.

• Development: Development costs include creating a strategy, application design and architecture, graphic design, application development, testing, and deployment.
• Hosting: Costs vary based on level of service and number of site visitors. A service level agreement provides guarantees that a site will be available at least 99+% of the time.
• Maintenance: Internal or external resource costs necessary to keep the website up to date. Every site requires ongoing maintenance.
• Marketing: Costs may include search, email, and other online media.

The percent of budget to allocate to each of the above varies by project type. However, there are some general guidelines in marketing pricing. For ecommerce initiatives, your marketing budget should be 20-30% of your annual sales goals. Hosting and maintenance costs are generally between 10 and 20% of the total cost annually.

Here are two emarketing strategies that quantify online marketing objectives and provide budget calculators:

Scenario 1:
Project Objective:	Gain 500 new customers through website and online marketing
Lifetime value of a customer:	$20,000
Desired cost to acquire customer:	$200
Reasonable 1st year budget:	$100,000

Scenario 2:
Project Objective:	Sell $200,000 in consumer products online
Average profit margin:	30%
Reasonable 1st year budget:	$60,000