Every single website project has the potential to be profitable, but it’s up to you to decide how profitable projects can be. Have you ever felt that you never have enough money to pay yourself? Or that no matter how large the projects are, you still find yourself short on funds to give yourself anything decent?
There is a monumental misunderstanding when it comes to profit. There’s a myth that profit is what’s left over after expenses and costs. Hands up who’s ever thought that, but miraculously never sees said profit after they’ve done a project?
Frankly, for years I wasn’t even sure if my websites were profitable. The project size and scope seemed to increase, but was my business really making money?
The long and short of it is, even if you’re experienced and have a few customers under your belt, you still could be scrambling for funds. A massive part of the equation that you might be missing is that you’re ignoring the profit margin in your own projects.
Beyond even paying myself, most of my website projects never seemed to feel profitable. I always just felt that at the launch, I basically broke even. I felt that the project I took on paid for itself and a few bills, but for all the headache and stress, I probably wasn’t that better off.
Profitable projects in 5 easy steps
Building profitable projects means factoring things like monthly costs, business overheads, wages, etc. into the equation from the get-go. Let’s take a look at what you need to consider to create profitable projects.
Determine price first.
Factor personal costs.
List monthly business overhead costs.
Determine project costs.
Build profit margins into your pricing.
I’m a coach at WP Elevation, and I also teach funnel builders how to sell marketing funnels to their customers. Our agency deals with a very specific side of website design, and ever since we started following these principles, we have seen unprecedented growth and profitability in our business.
What it’s done for me, my business partner, our staff and our board of directors, is prove that were are not only profitable, but also secure financially.
So with that, let’s get into the steps.
1. Determine price first
The most important thing that you need to do for your website business is determine the price you want to charge first. For many website businesses, this is a massive shift in how we perceive pricing and project costs. We are fed the lie that the market determines the price, when in reality, we as businesses must determine the price.
Ask yourself, how much money do you want to make per project? At first, lots of businesses look at this and say, “OK, well then I want to make $100,000 per project.”
My response to them is always the same. “OK, that’s great. What are you going to deliver for that $100,000?”
Most website businesses will package up a series of services and products and deliverables, and then think, “What am I going to charge for this?” Determining results before price often leads people to skew the price down and undercharge. You might be bias toward what you should charge, and instead compare when you should be setting the bar on your own.
A funny thing happens when you decide to determine the price of something first. Let’s say tomorrow I’m going to put $25,000 into your bank for web work. There’s nothing you can do about it. You can’t return it.
Now, tell me what you would deliver for that $25,000 to be seen as a worthwhile investment. Write down the price that you want to charge per project, then list out what it is you’re going to deliver for that price.
Think about it as justifying the results you can deliver for a budget, as opposed to what can you charge for the services you want to provide.
Once we are clear on cost, it becomes much easier for us to work out what we are going to deliver. The reality is that the price has absolutely nothing to do with how many customers you will either work with, or discover, or generate leads for. In fact, I personally know of many businesses who have lost clients because their prices were too low.
If you’re still having a hard time nailing down a price, think in terms of yearly income. How much do you need to make to be comfortable? I know that it takes roughly one month for me to build one of our website projects. I also know that my goal is $100,000 a year in revenue.
Therefore, 10 projects at $10,000 would net me the amount I’m looking to make per year. I can then work backward from that and think, “What am I going to deliver for that $10,000?”
2. Factor personal costs
Next, you need to list out your personal costs per month. Remember, you can use our Project Profitability Worksheet to help you through this process found here.
List out personal costs that you need to survive and enjoy life. Consider things like:
- Going out
These are the personal expenses that you as a human being have to pay every day, every week, every month.
If we’re not realistic about how much we need to make per month to live, then we never going to be able to maintain profitable projects.
If you ever find yourself scraping the barrel to pay bills, rent or any other personal expenses, the key isn’t to think, “I need to cut back on this” (although that might be the case). Instead, evaluate your personal budget and see how it compares with your profit margins.
If you’re not clear on what your personal budget is, the rest of this exercise is never going to make sense. The profitability of your business is directly tied to how much you need to survive.
Pro tip: List out every single one of your costs for both personal survival and quality living expenses. Draw up a monthly running total of how much you need to make through the business per month to both survive and enjoy a comfortable life.
Remember, you can use our Project Profitability Worksheet to help you with this process.
3. List monthly business overhead costs
Next, look at the business overhead costs you have to pay. These could be much lower than your living costs. Factor things like:
- Office rent
- Virtual assistant
There are costs to your business you might not even be aware of. The co-working desk you use might be an obvious expense, but what about the gas you need to put in your car? The accounting software you pay for monthly? Or the analytics package you’ve installed for your own website?
Similar to our own personal living expenses, we need to make sure that you have a monthly budget for your own business. You have to be aware of how much you’re spending per month on your business and what your overhead costs are.
Things like rent, virtual assistants and hosting all would have to be paid even if you didn’t find any customers or have any income that month. Again, you can use our Project Profitability Worksheets to help with your business budget.
Pro tip: List out your business overhead costs and write down how much per month they cost. Then, note how much your business needs to make to cover these costs.
4. Determine project costs
Next, we’re actually going to get into project costs. Remember when we decided to look at how much we are going to charge per project? For example, let’s stick with our $10,000-project budget.
This process can even be used for proposals and projects that you are pricing outside of what you usually deliver. For example, if your pricing a proposal for a project that includes work that you wouldn’t usually do, you can still use this exact same process to make sure you build profitable projects.
To start, list out all the deliverables, services, products and results that you are delivering in this project. This could be themes, plugins, hosting, content outsourcing, your consultancy time and anything else that has to be bought in order for the project to come to fruition. Consider things like:
- Staging server
- Plugin stack
These are just some examples of the costs you might incur on any project. In my opinion, laying out individual costs is the most underutilised method available to all website design and development businesses. If you are unable to understand how much it’s going to cost to get the project off the ground, you’ve got absolutely no way of making profitable projects.
Think of it like baking a cake. While you could argue that five-tier cake with all the dressings is a decent investment, you also need to weigh the cost of the individual components. How much flour will you use? What’s the going rate of fondant? Eggs? Labor? You get the drift.
Knowing how much each individual component costs will help you determine whether or not the investment is worthwhile — no matter how appealing the end product might look.
Pro tip: Use the list of deliverables you explored when determining the price first, to see what kind of tools, software, apps, themes and other resources you need to buy to get the project off the ground.
5. Build profit margins into your pricing
Finally, we need to build profit margins into our pricing. We use the Profit First method by Mike Michalowicz for our pricing model. The concept — you guessed it — is what we’ve already been outlining: work backward to build your profit margin.
For the project price that you decided in the first step, five percent of that should go toward your profit. When I say profit, I mean pure profit that can’t be touched and goes toward a separate bank account. It’s essentially savings, for your business, you are going to leave and let grow.
You can see that with our $10,000 budget we’ve already guaranteed ourselves $500 profit per project. You can also see that of that $10,000, $500 has already gone and can’t be spent on the individual project itself.
Next, we take 15 percent of the project price for tax. Again, ideally this lives in a separate bank account you can’t touch. If your tax rate is higher than that, increase the percentage that comes out as needed.
It’s evident that part of the budget is being eaten up by other expenses before we even get to the project costs. Remember, the project price does not just pay for the project costs.
Next, 30 percent of the budget is going to pay for the project costs and your business overhead costs. If you know it takes a month to build one of your projects, then your 30 percent needs to pay for one month of your business overheads. Profitable projects might require you to raise your prices or cut back on the deliverables within those projects. Without making one (or both) of those choices, your business won’t be profitable.
Finally, 50 percent of the project budget is for your personal expenses. That percentage can go down as project prices go up, but for a $10,000 project, 50 percent is more than fair to pay yourself.
Again, don’t fall prey to thinking you can use that 50 percent designated for yourself to pay for project costs, tax or profit. Also, don’t allow yourself to think you can cut down that percentage in order to lower the price. Lowering your price will not make the project seem more appealing to the customer — being clear on what they get is what makes it appealing.
Pro tip: Redo this exercise as many times as you need to make the numbers work. There’s nothing wrong with evaluating individual proposals or projects as much as possible to guarantee you’ll make profitable projects.
Finding the right customers
So now that you understand how to determine your profit, the next part is actually listing the price. The most common objection I hear is, “My customers will never pay that kind of money.”
On one hand, a $10 project can be profitable, whereas there are $10,000 projects that have been absolute disasters. I also know of turnkey, plugin solutions that sell for $79, which are extremely profitable and scalable. The thing is, end price doesn’t always determine profitability.
Understanding what you’re going to pay yourself, before paying project expenses, is the most reliable way to determine profit margins. All of the sudden, I could prove our business was growing five percent year over year, project by project, without failure.
Start your journey to more profit every single project. Register below to watch the webinar, and download your copy of the Project Profitability Worksheet.