Web development companies differ significantly from web design businesses, in that a web design company creates layouts and visuals for a website owner. The web designer is more concerned with user interface and design, while a web developer creates software and applications that power the website using basic and advanced coding.
However, some developers offer both design and development services. Web developers usually start as freelancers and enlist the help of other developers. Other developers can be contractors or in-house employees, depending on the size of your business.
What are the costs involved in opening a web development company?
Basic costs for starting a web development company are minimal. All that’s needed is a computer and some office space. Total costs should not exceed $5,000. Most of the cost will be wrapped up into a good quality laptop or desktop, ample screen space (using multiple screens for design work), a business phone, a pro-grade text editor, and design reference books.
Marketing costs may run you between $2,000 and $5,000 in the first year. This is especially true if you plan on doing any type of direct mail.
What are the ongoing expenses for a web development company?
Ongoing expenses are minimal. Web development companies with offices pay utilities and rent like every other business, which makes up the majority of the ongoing costs. Other costs, like office supplies, tend to be minimal. Costs like cloud storage, time tracking software, and project management software, vary based on the needs of the developer.
Some developers find it helpful to include project management and “whiteboard” apps like Basecamp. These project management applications also make collaboration with clients easier and more streamlined. They work well when you primarily work with clients over the Internet.
Who is the target market?
Ideal clients are corporate clients that have a need for extensive coding and application deployment. Most web design companies try to avoid small projects or projects which have a high overhead and low profit margin.
How does a web development company make money?
Web development companies make money by charging clients an hourly or flat fee for coding websites.
How much can you charge customers?
Entry-level pricing for web developers is between $25 and $100 per hour for small projects. Average pricing is $100 – $200 per hour. Project costs are often calculated or estimated in advance. Any work that goes over this amount is then cleared with the client before more work is performed. This helps set budgets and expectations for the client.
Some web developers charge flat fees for projects. Usually, the flat-fee arrangement is appropriate when a project is similar to other past projects the developer has done and there is a template or guide the developer will use for the current project.
How much profit can a web development company make?
Profit potential is high for this type of business since costs are relatively low. A one-person web development company can clear $65,000 per year. If you have a team of developers, profit potential is much higher. For example, a 5 person company could clear $400,000 to over $1 million in revenue, depending on average project size and hourly rate.
How can you make your business more profitable?
To make your web development business more profitable, consider adding additional services like web hosting and storage. An integrated CMS platform will also help increase revenue. All these revenue sources are scalable so even if you cannot provide development services to clients, you can sell them hosting, storage, and content management platform services.
Some development companies also offer design services or partner with web designers and collect a “finder’s fee.”
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.