How much does it cost to do business online?

It’s easier than ever to have an online presence for your business. That is a good thing. However, easy does not mean free. There are some things for which you’re simply going to have to pay to do business online.

When I talk about doing business online, I’m not only referring to companies that sell products. Businesses that provide services can be very successful with an online presence, too. Gone are the days when someone picks up the phone book to find a company that can help them. These days, people turn to online resources (whether a search engine or social network)) to find a solution to their problems. Just as it cost you to get listed in the Yellow Pages, it will cost you some money to have an online presence for your business too.

It’s not an expense. It’s an investment.

When I talk about these costs, I want to remind you that the following are not expenses but investments in your business. While you have to pay for these items, paying for them should make you money. You should know precisely how much money you earned after paying for these items. Being able to quantify your ROI is the advantage of doing business online. You want to be making more from these than you’re spending- and you should be able to know if you are.

People who think of these expenses as sunk costs don’t understand that a business website should make money. Set up your website with analytics (Google Analytics is free and helpful). Then you know how people find your website and whether or not they become customers when they do. Web analytics will help you realize that you’re not just spending money on a website- you’re making money. 

In the following article, I’m basing numbers on a survey I did in late 2021. Disagree with my data? Give me your two cents by filling out this form:

How much does it cost a year to do business online? 

If we tally all the expenses together, it could cost a sole proprietor at least $306 a year to do business online. This cost will grow based on the size of your business. This price does not include the initial expenses of designing and developing a business. Nor does it involve promoting or marketing that business. 

Is that all?

For some businesses, this seems inexpensive. Why wouldn’t you pay for this? However, be cautious about that attitude toward the online portion of your business. I’ve seen multi-million dollar companies have a nonchalant attitude to online marketing because it’s cheap. They build a website, and if someone finds them, great! If not, no loss. That’s an unfortunate perspective because they could get so much more from promoting their business online if they put more time and effort (and, yes, money) into it.

Some might see this and think, “I’m paying way too much.” Read on. You might find that you’re paying too much for certain aspects of your online business.

Is it that much?

For smaller businesses, this seems expensive. If you find yourself balking at that cost, remember: it costs money to make money. 

The most significant benefit of online marketing is that you can know (for sure) the ROI of your efforts. That will help you think of this as an investment to make more money from your business. Whether this is expensive to you or not, you need to measure the return on your investment. If you have that approach, you will know where to spend more money- and where you can afford to save money.

What are the main expenses to have an online presence for a business?

How does this cost break down? Here are the main things that will cost you money to have a business with an online presence.

Pay for your domain.

For one, you’re going to need a domain. The domain is the address people enter into their computer to find your business. A domain will typically cost you about $16 a year with a credible registrar. You’ll have to pay this cost every year (typically with a discount if you pay for more than one year at a time).

You don’t need to buy an existing domain name. I know you might have heard that “keywords” in your domain name will “help your SEO.” If you want to try this strategy, you might only encounter domains that others are squatting on- but they will be happy to sell to you. However, remember: several years ago, Google got tired of gaming their system in this way and stopped giving people the benefit (or, at least, not as much as it used to). Besides, does your business only provide one thing? What will happen if your business grows to offer additional services? It’s better to find something easy to remember and unique to your business. 

Make sure you own your domain name. Be warry about special offers that will give you a domain name for free. Make sure, if you stop working with them, you can take that domain with you. Some well-meaning designers might buy and renew your domain for you. That’s very kind of them, but what will happen to your domain name if they go away (or, god-forbid, die- it’s happened)? That assumes they are well-meaning designers. A nefarious designer could hold your domain name hostage. The same is true for your web hosts (see below). If you get a “free domain name with your host,” make sure you can take that domain name with you if you choose to move hosts. You need to control your domain name. Make sure you buy it and maintain it. Don’t forget to renew it every year.

While we’re talking about domain names, I need to bring something to your attention. Some shady people will mail you an apparent “invoice” to trick you into paying for your domain name. Don’t fall for this. Only pay your registrar (from whom you bought your domain name originally) for your renewal. If you spend a little extra, you can keep your personal information private (or some registrars- like Google Domains- give you this for free) and prevent this problem.

Pay for a web host.

If we oversimplify things, your website is like a Word document. For people to see it, it has to be somewhere. That somewhere is a web host. Your files sit on a computer (somewhere), so someone else can find it and read it (and, hopefully, become a customer). 

Hosting costs can vary significantly- but don’t have to be very expensive. You could expect to spend as little as $57 a year to host your website. However, be very wary about very cheap web hosts. Cheap web hosts tend to have significant security problems- and it’s hard to promote a hacked website. Cheap web hosts also suffer from performance problems in the search engines. They can be slow (which Google doesn’t like). Or you could be sharing a computer (in technical terms, your IP addresses) with disreputable businesses with which you wouldn’t want to be associated. Avoid “shared hosting” to sidestep these problems. 

There are a couple of features a good web host should include as part of their service:

  • An SSL (Secure Socket Layer)certificate encodes your website in a particular way that prevents people from intercepting information as it travels the wires that make up the internet. You’ll know you have an SSL certificate on your website when you see a lock icon near your web address at the top of your browser. SSL is critical if you collect sensitive or financial information on your website. If you don’t encode credit cards or even passwords, hackers can intercept them and use them against you.
  • A CDN (Content Delivery Network). As more and more people visit websites from their phones, it’s more important than ever that your website is fast. One way to speed up your website is to use a Content Delivery Network (CDN). These services can share your images (often the most significant part of any webpage) and other code faster to your website visitors. 

Whoever builds your website for you could recommend a quality web host.

Pay for your website.

While, earlier, I compared a website to a Word doc. While you could use Microsoft Word to create a website, it wouldn’t be very good-looking or functional. Instead, you’re going to have to pay a web designer and developer to build your website.

Now, you might be able to get started using Squarespace or Wix. However, I find that businesses quickly grow out of these solutions. These might be a fine place to get started, but don’t think of them as long-term solutions.

Don’t rent your website. Sometimes companies offer a cheaper solution where you seem to save money by renting your website. While this might help with your initial cash flow, you might not be able to move it off their platform if your business is successful. That means you might have to start over even though you’re already successful. You should own your website and pay for it upfront.

Costs to have a website designed and developed can vary significantly upon your website’s number of pages and functionality. The good news, you don’t have to build a new website every year. A good website should last you between 3 and 5 years. After that, design trends and technical requirements have probably changed significantly, and you should consider developing a new website. 

Pay for website maintenance.

There are several technologies behind every website. It can be challenging for a novice to keep up with changes and improvements to these technologies. That’s why you should pay for website maintenance. Someone (maybe even the designer or developer who first built your website) can ensure your website is still running at optimal performance. For this, you could expect to pay around $63 a year.

While technology is constantly improving, another thing that’s always getting better is hackers’ abilities. That means, unless you want your website hacked, you need to keep it up to date. It’s just like your iPhone: every once in a while, Apple sends you a new software patch you need to install. If you don’t, you might be vulnerable to hackers.

What will happen if your website gets hacked? 

  • Hackers could steal your customers’ information. You could be liable for that breach of data.
  • Hackers can change your website to promote their own nefarious goals. That might mean they use your website to hack someone’s computer. Or they could send your visitors to their website- so they can sell their off-brand or counterfeit designer handbags, pharmaceuticals with questionable origins and effects, or worse.
  • Google will not serve hacked websites in the search results. Recovery from this (in Google’s eyes) can be difficult.

Don’t build a website and walk away. It would help if you kept it running and up to date. Sometimes your developer can provide maintenance or webmaster services. Some web hosts offer managed hosting, which can help with this, too.

Pay for a Privacy Policy, Cookie Policy, or Terms of Service.

All websites collect information about their visitors. This information allows you (among other things) to tell how people found your website and what they do after finding you (hopefully becoming a customer). There are many more ways that website analytics can help you grow your business. 

Unfortunately, some people have abused this information. As a result, governments have set up laws to protect customers and their privacy. The European Union has passed one set of rules (called GDPR). California has passed a different set of laws (CCPA). Brazil another. More and more governments will be making consumer privacy and data protection important in the next couple of years. 

Suppose your website does business in an area with these laws and does not comply with these laws. In that case, you could receive a fine, and the governments could hold your company liable for how you use that information. That not only means you need to understand what information you’re collecting but how your business uses that information. You also need to disclose this information to website visitors and give them the option to opt-out if they desire. I’m sure you’ve seen popups on websites to this effect before.

It can be an overwhelming task to manage all these laws and data. Now, you could pay a lawyer to draft the statements necessary for your website- but that will be expensive, even if you can find one who is up to date on the laws. However, it is much easier to pay a service to manage these statements and data for you. I use and recommend Iubenda for this. It’s a little complicated, but that’s because it’s comprehensive.

According to my survey, only 25% of businesses pay for a privacy management service. Some of these could comply with the laws in other ways (besides using a service). Other companies might not need to comply (for instance, they don’t do business in the EU or are too small to qualify for CCPA). Still, others might take a chance that they would not get caught. Those who paid a service only paid $50 a year to comply with privacy laws. That seems like a small price to me.

Pay for an email service.

Nothing says “amateur” like receiving an email from a business that uses a free email account like Gmail (or, god-forbid, Yahoo or Hotmail). If you’re doing business online, you should have an email address that uses your domain name. 

Some web hosts provide free email with hosting. That might work for starters, but I’d recommend using a more reliable and robust service such as Google Workplace or Microsoft Office 365. These services will cost you less than $10 a month (or $120 a year) per email account and offer many features (such as superior spam protection) that are worth the expense. It takes a little setup (configuring things with your host or domain registrar) to make this work, but you can also find people you can pay to help you with this. 

Pay for marketing.

This cost does not include marketing. Unfortunately, many businesses do not pay for marketing. According to my survey, only 18.8% of respondents pay anything to market their website.  

Please remember: you can’t just build a website and hope people find it. You need to promote it. Marketing costs time and money. If you don’t invest in your marketing, you waste all these other expenses. 

Now there might be ways to cut some of these expenses. There might be cheaper options or ways to do something yourself- rather than pay someone to do it for you. However, the old adage is true about online businesses: you get what you pay for.

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