Thoughts + News
Why None of Your Web Projects are Profitable (And How to Fix It)
You sell projects.
Day-in and day-out.
You get a new client, you land another project. The rest should take care of itself.
And that’s the case most of the time. With one primary exception:
New web projects.
Most are unprofitable. Not to mention, delayed and incredibly F-ing stressful.
Clients are asking about stuff you can’t answer. And your ‘developer’ is hemming and hawing about why that site can’t go live next week.
Here’s why this commonly plays out (along with how to avoid it).
Option #1: Hire that ‘Cheap’ Freelancer
There’s a Catch-22 to working with freelancers that most people don’t realize.
The best freelancers — especially development or engineering ones — already have a 9-5.
They’re busy. Slammed with day-to-day stuff.
Want them to jump on a quick client call to explain that mind-numbing database error that keeps happening so you don’t have to be in the middle — yet again?
‘Cause: day job.
Guess when that status meeting is going to take place? Between the hours of 6pm – 3am most likely.
Or on Saturday. You know, your ‘day off’. Tell your spouse and kids you love them, but can’t hang again this weekend because you’re catching up with that ‘cheap’ freelancer.
‘Cause you’re getting down to the wire on another project… that’s most likely going to be delayed yet again. For the third project in a row.
Not to mention, the best freelancers are already charging agency-like rates that start at a minimum of $100/hour.
God help you if you’re hiring anyone charging less than $50/hour. Trust us, you’re gonna be reciting Rosaries and seeking salvation as soon as that crappy code goes live.
“But it’s not like that”, you say? “This one’s different”, you say?
That’s great. Honestly.
Except it’s only gonna work on one project at a time. (Maybe. Possibly. If you’ve been lucky to make it even that far.)
Wanna sell more website projects? Wanna run two projects at the same time to actually make some green?
Won’t happen. CAN’T happen.
Because scaling freelancers is next to impossible. In theory, it’s doable. But in practice, it’s a bloody nightmare. ‘Cause the best ones are already juggling multiple clients (or that 9-5 gig), and have little-to-no excess capacity available.
So in other words, there’s a fundamental flaw here.
Selling web projects through your business only makes financial sense if you can add another $50,000-$100,000 to your bottom line. Otherwise, it’s not worth the opportunity cost.
And going the freelancer-first route, while appearing ‘inexpensive’ on paper initially, rarely delivers the goods. Best case scenario, you break-even after crunching the numbers on your internal management costs.
There IS, however, a term for these uber-successful freelancers (or small teams) who can jump on client calls at a moment’s notice, combine years of experience in delivering projects on-time, and scale up as needed…
They’re called: agencies.
Option #2. Build an In-House Team
Or you could hire everyone in-house…
If money’s no object. And you don’t care about actually making money.
‘Cause hiring in-house will easily DOUBLE or TRIPLE your project’s costs.
Here’s how it all stacks up:
#1. You’re talking about adding another fixed cost to your overhead (instead of a variable one that will drop-off when project’s completed).
#2. You’ll considerably raise your cost structure (which we’ll look at in a sec). That means those $10-$30k projects that used to be decent don’t even break-even. Which forces you to only look for and sell $75k+ ones.
#3. You also gotta recruit, train, benefit, and manage these peeps. That’s more than just the up-front time it takes to weed through the crap Indeed delivers. Conservative estimates put the cost per hire at $4,000 to start with — on the LOW end.
#4. Then you need someone to vet the candidates.
Who, exactly, is gonna do that? Who’s gonna roll up their sleeves, dive into code, and be able to tell you honestly — no bullshit — that one is better than the other? Objectively, not subjectively.
Then who’s gonna manage the entire project? There’s a reason most development projects run over time and budget. They’re not, despite everyone’s best intentions,
#5. OH, and then there’s the hard costs. You know: the actual numbers that go on a paycheck and are direct deposited bi-monthly.
Here’s where things get crazy.
Uber-software company, Moz, recently surveyed 3,700 industry professionals to tabulate annual salaries by field or job title. Here’s a quick breakdown of what they found, so you know we’re not bluffing:
(a) Your first hire needs to be an engineer or awesome developer, who can actually manage projects (so you don’t know ANOTHER project manager in the mix). They’re gonna run you $90,000+/year.
(b) Then there’s a user experience professional or visual interface designer for another $90,000+/year.
‘Cause designers and developers are like oil and water. They might be similar, but they can’t (and don’t) possess each other’s skill set.
(c) So you’re already over $180,000/year, and we haven’t even found someone who can perform basic on-site optimization, can do copywriting so your website doesn’t read like a jargony mess that repels clients, and someone to hook up an analytics infrastructure so you can make good decisions and one day, eventually, hopefully, generate a positive return on this investment…
… which is looking increasingly unlikely ‘cause you’ve already added like half a million in salaries and overhead.
BEFORE even seeing a single web page go live. Or collecting a damn check. (Thanks a lot, Net 30.)
How You Can Avoid Unprofitable Web Projects (Once and For All)
Agencies can be expensive.
But — compared to what? And at what cost?
Because when you sit down and run the numbers, there’s no comparison.
Working with a good agency delivers the best of both worlds:
- You get the experience, responsiveness, diverse skill-set, and ability to manage technical projects (and people).
- All at a price point that actually allows you to profitably sell web projects. At scale, because you have access to a team of people who’re all on the same page.
That means you can sell more web projects. No hiring staff or managing yet another project.
And you can actually MAKE MONEY that moves the needle — without lifting a finger.