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Thread: A business plan theory for the smaller designer/developer

  1. #1
    An Inconvenient Serving Size hurricaneone's Avatar
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    A business plan theory for the smaller designer/developer

    So, here's the idea.

    Is it possible for a smaller designer/developer to close enough original site development deals so that from the profit earned from monthly update/maintenance fees (outlined in contracts), you no longer need to add new customers and develop brand new sites? - Or at least no longer need to keep up the furious pace, hunting for new leads, anyway.

    I've been shooting for this for going on four years, and I don't know if it was the local economy (since about 2001, not great) that did not allow me to complete this goal, or if it was too far-fetched from the beginning to ever actually work. Whatever the reason, I'm still not there, perhaps only taking 40% of what I reckon would be a comfortable number to take in each month in total maintenance fees.

    Of course, please take into account that at some point, realistically, you're going to have to farm new customers (we ourselves have lost a few that needed to be replaced, for no other reason that they went out of business), but I'm really talking about developing a reliable core of sites that need a website as part of their mix and keep the monthly payments coming in, in return for a reliable, dedicated service.

    So, somewhere in that mixed up explanation, is there a feasible business model, or is the whole idea of basing your income from maintenance fees alone just not going to hold water?

    Thoughts, comments, much welcome.
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  2. #2
    Waaambulance Pilot sk8Krog's Avatar
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    talk to aversion. He has some real insight into this.
    It must be obvious day at camp stupid

  3. #3
    The Excentrifugal Force SSC Cosmic's Avatar
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    I'm not an authority, but I can't imagine any business succeeding without a certain amount of time dedicated to creating new business. If you connect with Aversion on this, do share!
    if (you expect help){
    then.help(others);
    }else{
    gotoAndCheck.aSite4.somePoorBastardinSiteChex;
    }

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    A big factor would be how much you charge for maintenance I guess. I'd be curious to know how much you charge for maintenance--whether it's more or less than what you charge for the actual development. And then there's feature additions and upgrades. Would you call that maintenance?

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    Retired Mod aversion's Avatar
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    Originally posted by sk8Krog
    talk to aversion. He has some real insight into this.
    do I?

    I guess we are self-sustaining to a certain extent but we have a full service for clients, including hosting, we don't actually charge 'maintenance fees' we charge for hosting and we have some yearly contracts, where we do do development as well as a bit of maintenance and even tech support for one project.

    I don't know if there is a market for just charging maintenance fees anymore, we run our own boxes for hosting and make a profit on it but you also have to factor in the hassles of hosting, email problems, all that crap. We got lucky with our situation so it's not a big factor, but for most people you'll have to find a way to deal with that stuff, and it shouldn't be underestimated.

    When we first started three years ago we had a major client who was paying us enough per month to cover all our costs, personal, hosting, the lot, but they, unsurprisingly went belly up after a year and we had to rethink pretty much everything, but it worked out in the end, as much through luck as anything.

    Which is why I'm not sure I'm in any position to give advice, we've been up and down, there are never any guarantees, we're in a good place right now where we're solid through to next summer but who knows after that. Most of the projects we have now are development projects, some we've hijacked from other developers by undercutting them because they were overcharging (which is typical in the govt/institution sector) and once you make a solid name for yourself people start to come to you. As I'm sure you can see, there's nothing on our website really. I'd love to have the time to finish it but we're busy and frankly, we've never gotten a client through a the web, it's all from word of mouth and sub-contracts from government RFPs.

    We're always looking for new clients/projects, there's no reason to ever stop looking for new work, sometimes we hire people we know we can rely on to do contract work, there's always someone who can pick up the action and everyone wins. Plus you never know when it's all going to come to an end, so never stop looking!

    In the end you need to do good work, you need to satisfy the client and be reliable. I don't think we could survive by offering maintenance contracts, a lot of the work we get includes application hosting as part of the schedule, we couldn't even respond to these projects without controlling our hosting so tightly.

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    An Inconvenient Serving Size hurricaneone's Avatar
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    Interesting views, av.

    By offering in-house hosting as your billable, rollover income generator, I'd venture a viewpoint that you're attemting to do the same thing that I am (develop guaranteed income), but instead of charging fixed, monthly site maintenance fees, you offer your customers the hosting option. Different paths to the same goal; developing relationships that bring in a reliable monthly income shot.

    I am still certain, though, that for some types of customers, a maintenance plan can be an ideal solution. More so, when teh updates are primarily adding new content to already-existing pages. For example, amongst others, we are currently handling a shopping center site and a magazine site. Each of these has a comprehensive yet quantifiable update pattern, which we outlined at contract time, estimated billable hours, reduced that by about 10% as a 'signing bonus' and included it as part of the final paperwork.

    Now, for 12 months, the customer has assurance that their site will feature the latest offers or the latest articles, and we benefit by knowing that aside from any new work, there's some bankable payments arriving each month. Adds a little security to a business that is (seemingly) desperately insecure for all but the biggest companys.

    As for Lifeforce's question - for us, the maintenance is considerably less than the cost of development. Though of course, whether we have a maintenance contract or not is a very large factor in how the site is put together. If I already know that I will be handling the maintenance, I take a lot of extra time figuring how the updates will be made and I make customized changes throughout the site development process that will keep undating time to a minimum. As I know exactly how many hours have been alloted in any given site update contract, if I can beat that time by a few hours, it only ends up I make more per hour. (Also, you should note that our maintenance covers only existing pages - original, additional work is billed per hour).

    And SSC Cosmic - there's no way that a site development business can completely drop farming for new customers - I think though, that basing your business solely on new site development is just making life overly difficult for your self. Generating hot leads and developing solid, original sites are probably the two most difficult things in this business, so if you can keep those two points to a minimum and still make money, you have to consider yourself ahead in the game.
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    Illuminatus! fospher.com's Avatar
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    Great read for a tuesday morning. Sorry guys, I have nothing more to add - just enjoying the mild debate.

    *sips coffee*

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    Waaambulance Pilot sk8Krog's Avatar
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    A agree with everything you said H1.

    Aversion: You have mentioned to me that you havn't been actively searching for clients for some time. Thats what I thought the original question was, if there was a point where you have 1 client who refers to 2 others and each client from there refers to 2 others then you have a line up of several companies who need work done. Granted, that cannot last forever because soon they will realize that not everything needs to get put on the web/in one system (I have delt with a client who had wanted everything in their intranet online. I just had to ask: WHY?!?!?).

    So we have already established that by just offering web design you cannot make a living with that and maintanance fees so you suggest we offer different services as well. Hosting seems to be a major hitter right now so I'm not sure if that is a big thing people want to jump into.
    It must be obvious day at camp stupid

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    Retired Mod aversion's Avatar
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    regarding our business model.

    Our model for recurring revenue isn't hosting, I think hosting really just serves to complete a package, especially these days when so many projects require hosting.

    The way we view maintenance fees is that they shouldn't exist. I think modern websites should be easy enough to administer that the client can control their own content and we do everything we can to persuade them that it's in their interests to do so, to retain control. If a client is going to put content together in word and email it to you then there's no reason they can't log into a CMS interface on their site and change it themselves.

    Our strategy of late has been to take a project and see where it can be expanded in these terms. As an example I've used on FK before, we were approached by someone at a canadian art institution to make an online gallery in flash for a collection of photographs 800+ strong. The mantra is that if you have to do something more than twice then you need to design it so you can do it a million times. So we suggested to them that instead of building a static gallery of these images we build them the 'viewer' in flash and supply them with a flash administration app which would allow them to upload their own photos and organise them into 'chapters' and 'galleries' with text articles thrown in for good measure. This way they can create as many online exhibitions as they want and we proposed a price that was a bout 80% above the initial cost of the project but of course they saw the value in that (some clients aren't always so smart). The design of the viewer is quite bland so they can use it in different situations and we included a clause in the contract where we would customise the aesthetics if they wanted something specific. The app works from one SWF, a single flashvar determines which 'archive' to load form the db and whether to show chapter/gallery navigation, ie show a single gallery. The admin app for it is simple to use and all data is handled in XML.

    Now we are using the same system we developed for the gallery for a jewellery site after realising there's not a lot of difference between displaying a collection of products and a collection of images. Once we're done with that we're setting up a sub-domain to promote this 'retail/gallery' system using these two examples and an online demo you can play with, administrate etc. So we turned one static project into a potential revenue earner. It's not an out of the box system but it certainly makes similar developments cheaper.

    So I guess I would think content management systems rather than manintenance, hosting and design rather than just design, and always look out for opportunities, even the blandest project can be developed into something exciting.

  10. #10
    An Inconvenient Serving Size hurricaneone's Avatar
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    Although I'm sure there's some money to be made with hosting, unless you resell space (bleh), that cash crop is unfortunately out of reach for mere mortals and best left to the experts.

    So I'm somewhat limited to relying on update packages for the sites I develop as a 'peripheral' service. Gotta make the most of whatcha got, I guess.



    As for allowing customers to update their own stuff, I agree, if they're qualified/interested, that's fine. Set up a CMS, build a basic interface and they're off - rest assured, I'm by no means ramming maintenance packages down people's throats.

    Hell, I've even offered to come down for a a half a day or a day (billed, of course) to teach the responsible person how to use the system I design, but there are still many, many people/companys that are one of the following: don't have time, don't have the skills, don't have time to learn the skills, or my personl favourite, 'I just want a nice site and don't want to think about it again, dammit'. The last one is actually quite common.

    So you see, I don't know if I'm only getting all the stupid fish in the sea, but from what I've seen, there really is quite a potential to make some cash offering maintenance. I just want to know if anyone has actually got to the point where they've developed enough customers that the maintenance fees alone are enough for a comfortable lifestyle (with the occassional addition of another customer if a current portfolio member goes AWOL), or is the idea just to good to be true?
    Last edited by hurricaneone; 12-02-2003 at 10:32 AM.
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  11. #11
    Retired Mod aversion's Avatar
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    Originally posted by sk8Krog
    Aversion: You have mentioned to me that you havn't been actively searching for clients for some time. Thats what I thought the original question was, if there was a point where you have 1 client who refers to 2 others and each client from there refers to 2 others then you have a line up of several companies who need work done. Granted, that cannot last forever because soon they will realize that not everything needs to get put on the web/in one system
    word of mouth is the most important aspect of promoting your business. As I said we have no website that would attract clients, I really only put it up to stop people asking me at FK when it was going to change! We have actively sort projects that were put out for tender, usually by the govt or some institution, but we've never had to advertise or cold call anyone. If we're responding to a RFP we use previous clients as references and that's as good as word of mouth. Plus this kind of business sector is as nepotistic as hollywood so we meet a lot of people who know someone else we've worked with before.

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    I like the idea of keeping your website simple as a lot of it comes down to how you come accross communicatively and how reliable you are. Just a simple statement and contact info and a little something interesting to play with is enough in my opinion. The whole two clients i've had so far don't even know I have a website from what I can tell.

  13. #13
    Retired Mod aversion's Avatar
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    It does depend on your clients, ours aren't individuals looking for their first site, but we would never make any money doing maintenance though less experienced clients might go for it. I would recommend that as a business plan however you start thinking in terms of fully dynamic websites with an administrator's section, web sites as web applications if you will.

    To grow you must take on larger clients and larger projects, especially if you want to get to the point where you're doing continually developing projects on long contracts which provides a security of income, and to do that you must know how to provide clients with complete solutions, front and back, you should know how to deploy on any system (we prefer LAMP but we have to deploy an application on websphere in two weeks which meant hiring someone).

    I think if you rely on maintenance from small clients as income you're going to be on shakey ground, people are developing more sophisticated sites and expectations are changing all the time, you might do ok with 'non-dynamic' sites of a certain size but you'll also be vunerable to losing clients to cheaper or more sophisticated operators.

    I'm not saying it won't work, I hope it does, but the key has to be continually development of yourself as an agency.

  14. #14
    tell me, is this sellable..... OddDog's Avatar
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    Yes I am with Aversion on this one.

    he/she pretty much states what has happenned to my little agency.

    That said, we do make approx 4000€ a month on maintenance, tracking and its analysis, SEO contracts. In the little corner of the world were we are based, La Coruña, Spain, thats not to bad.

    Hurricane, I have a personal opinion, in that the single person agency is doomed to a slow but sure death. Why? Well as the web evolves that single operator must attempt to evolve as well. That as a long term proposition is tough. (Do you really think at 50 you wont to be learning the lastest prog language?)

    We none USA based operators have a great advantage. We can see what is happening in the market leader and then apply it in our local markets and be considered local gurus!!

    Hurricane, get involved in SEO, tracking and its analysis, hosting, if interested in getting those pesky monthly bills paid. But the money is with the big accounts, and I for one have not been able to sell to those as a small entity. Which is why I just started a publicity agency. (but thats another thread).

  15. #15
    An Inconvenient Serving Size hurricaneone's Avatar
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    Originally posted by aversion
    I think if you rely on maintenance from small clients as income you're going to be on shakey ground, people are developing more sophisticated sites and expectations are changing all the time, you might do ok with 'non-dynamic' sites of a certain size but you'll also be vunerable to losing clients to cheaper or more sophisticated operators.

    I'm not saying it won't work, I hope it does, but the key has to be continually development of yourself as an agency.
    If you'd said that these dynamic sites were going to be offered for the same price as the 'non-dynamic' sites that some of my customers are currently featuring, then perhaps I'd be worried, but I know that developers will want a fair return on the time invested to learn and implement such work - a price that many of the guys I deal with are likely unwilling to stump up, whatever the benefits you may put before them.

    And I'd like to think that we are continually developing - but again, the principal I mentioned above is creating a glass ceiling for the skills I learn. Quite frankly, with many of my customers, even the higher hosting charge for a site running with php capability is prohibitive (or they're just CHEAP, CHEAP, CHEAP ), which makes me really wary of investing the time to get super-familiar with the skill.

    Thankfully, that is not true for all the guys I deal with, and I do have an on-going gig with a chain of stores to develop a system for them, possibly one that could be resold, so there's light at the end of the tunnel, but this is the exception, not the rule.

    And OD, if I'm still stuck doing this at 50, I will demand to be crowned king of all the Sad Sacks, for I shall be known world-wide as the saddest sack of them all.
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  16. #16
    Retired Mod aversion's Avatar
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    I think then that your business plan should be to find new clients with greater needs and budgets and to find the time to develop your skills. Experiment on the clients you do have, adding dynamic content to their sites, even if they don't pay you it's the best way to learn.

    you really have to always be moving forward in this business I think.

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