Ill answer these questions with a few of my own. First is building and maintaining your business website the focus of your business, like in the example of affiliate marketing? Second, is your time better spent on more important things, like running your business? Remember every minute you spend performing tasks unrelated to the focus of your business is another minute spent towards the detriment of your business.
If your goal is to be a Web Designer than be a Web Designer. If your company builds a product you would like to sell, isnt your time used more effectively by improving your product or promoting it?
This example refers to a simple thing called, Opportunity Cost. When you are planning your budget for a new business, or maybe looking to restructure your business for more profit then you need to know about Opportunity Cost. Opportunity Cost refers to the actual cost of an action.
Most small business owners think they must do it themselves in order to cut costs on start-up. Well this is not always the case. For example we at Graphic Web Design charge $50 per hour for maintaining our clients websites. We bill on quarter hour increments, so if your update takes 30 minutes you get charged $25. Now when you as a business owner look at those numbers you have to think, How long will it take me to maintain my website every month? You must also look within yourself and ask, How much do I really know about web design? These 2 question will help you see or understand the Opportunity Cost of having us maintain your website.
Maybe we should look at the second question first. Say you love to drive your car, and you know a little bit about how cars work mechanically. You are driving along in the heat of summer and with the AC blasting you are stuck in traffic and your car over-heats. You have it towed home and you look at it after it cools, and try to diagnose what went wrong. Yeah, you can go out and spend a few hundred on a new radiator, and then spend the next 2 weekends replacing it. Or you might take it to your mechanic, and find out that you simply had a bad thermostat, that is a $35 part and it took your mechanic 15 minutes to replace. The same holds true for maintaining your website. If all we do to support our families is Web Design, we have experienced more in this field than the average business owner. What may take you 2 hours to do might only take us 15 minutes. Is it starting to make more sense now?
You start to look at the question, how long will it take me to update my site every month? Say you sell a variety of products, and monthly you must add new products to your site, and move old products that did not sell. You have product images to edit, and then you have to add the product to your shopping cart, after opening all the software required to make these changes. This month you might have 20 new products to sell, and 6 to clearance out and rid of them. This could take the average person a few hours to complete. If it takes you 4 hours to do, what is its Opportunity Cost? Is that 4 hours better spent letting your customers know about your new products? Maybe it is spent talking to new distributors on the phone to extend your reach? Now going by our maintenance fees that 4 hours would cost $200 a month. You must remember the mechanic example mentioned earlier. We already have the software open, we do this sort of work every working day, so chances are we can get the job done at a much faster rate. If it only takes us 2 hours to do the work, now it seems like the 4 hours it would have taken you are now worth a lot more. Lets look at this further. Imagine in that 4 hours you get one new retailer of your product that might net you an extra $3,000 a month. Maybe for reality sake this does not happen every month, but it does happen every 3months. Remember what took your 4 hours a month takes us 2 hours to do, for 3 months at $50 per hour equals $300. By having us to the web site updates for you, you spent $300 to make $3,000. Hey, that works for me.
This is the true definition of Opportunity Cost. What is it costing you to maintain your website?