Did Somebody Say “Budget”?

As the year winds down, it’s that time again when companies are wrapping up their year-end fiscal activities. This can mean finalizing and approving budgets, submitting capital budgets for the dreaded FY2000, and tying up loose financial ends.

For the person in charge of developing, submitting, and justifying the budget for the corporate web site, it’s the time of year the Alka-Seltzer advertising people were thinking of for their plop, plop, fizz, fizz commercials.

“Mama mia! That’s a spicy online job database.”

An interesting thing happens this time of year. The department that fought vehemently to have the web site fall under their jurisdiction suddenly isn’t so enthusiastic.

If the site fell into the hands of the marketing department, for example, they’re now lukewarm about the human resources section — even though it may be the site’s most popular feature and the first place new users visit. “That’s not in our jurisdiction; let HR pay for their own site.” (See our previous article about breaking down inter-departmental barriers.)

Even though the company web site may have been online for a year or longer already, this may be the first year when an actual budget — and therefore, a commitment — is made. The web site is no longer an idle fancy of the counterculture. It’s part of the establishment.

No Business Web Site is an Island

If you haven’t done it already, start with a plan for the site. If your budget is due next week, then there’s no time for the extensive web plan which will guide you step by step over the next year. But you have to at least outline your goals for the site for the next year. (Then go back and create that detailed plan.)

Look at the company’s marketing or business strategy for the upcoming year and use that as a baseline. If the company has certain priorities for the next year, then base the web site’s priorities on those activities. Your web site should support the goals and priorities of your entire business — not operate independently in a vacuum.

Make sure you think through each proposed web project for the new year. What features will it offer? How much new design will it require? Do you expect any special kind of programming? How interactive will it be? How will it be promoted?

Anatomy of a Web Budget

There are several components to a web site budget — hardware and software, connectivity, maintenance, marketing, and — the big sink hole — personnel costs. And there are some key factors that influence the cost of the site — amount of content, level of interactivity or personalization, frequency of updates, popularity, and the big sink hole, personnel costs.

Based on that and several polls we’ve seen on the web, you can expect to spend anywhere between $500 and $2 million. Ready? Set? Go.

Technical Expenses: Ouch

If you don’t have to worry about technical stuff like servers and software, bless you. But before you brush off those technical support line items, talk to someone in IT. We say this because in many cases, the marketing department is responsible for content, design, and business strategy while IT is responsible for the programming, system administration, security, and related issues.

Is your site hosted with an Internet Service Provider? Who pays for that? When is the contract up?

If the company servers are in-house, then be doubly sure to talk to IT folks about their budget and if they’ve worked out how they plan to grow with you next year. They also need to know your vision for the web site so they can budget accordingly.

Based on your goals and projections, do you expect many more site visitors? Do you plan to offer rich media or advertising? If so, you should budget for more bandwidth from your ISP. Do you plan to offer more personalized content and/or interactive features? Then plan on needing more computer horsepower.

Marketing Expenses: Double Ouch

As the web site has grown and become big business, so has its need for big-league marketing. While anyone can still put up a web site these days, one of the greatest barriers to entry has become your site’s visibility.

Without sufficient marketing and promotion, your award-winning web site is hardly a footnote among millions of other sites competing for users’ attention. Through both online and offline promotion and advertising, many successful web sites today are forced to compete by buying traffic.

Just as in the formative years of mail-order retail, the web’s increasingly competitive landscape is forcing an escalation in customer acquisition costs.

Personnel Expenses: Triple Ouch

Everything else falls into the personnel column. But you probably need to be more specific, right? You need design and graphics, content, programming, to name a few. The big question here is whether these services will come from your internal staff — in which case you need to budget salaries — or if you’ll use consultants.

All this is fine and good insofar as those specific initiatives you want to launch. What happens once they’re launched? Perhaps the biggest goof you can commit is forgetting about maintenance. Who will update and edit content, check links, respond to user email and so on?

Some circles of conventional wisdom place only 25 percent of your web budget on creating new features for your site. The remaining 75 percent, the experts suggest, should be allocated for the operations and maintenance of these features.

The Black Art of Web Budgeting

The most intimidating part of developing a budget for a corporate web site is that there are no templates into which you can just plug in your numbers. Technology and trends change on a dime. Issues will come up in the second or third quarter that you don’t see now and will sideswipe you.

Since the web’s future is so hard to predict, a good practice is to simply make a best-guess, linear projection based on your (limited) current knowledge. We also recommend creating — if your accounting folks allow it — a contingency fund for those things that spring up in the night from out of nowhere.

Anti-lock Brakes and Global Satellite Positioning System Not Included

If you’re the person who has been evangelizing web technology to administrators, you may be the victim of your own success. The CEO may be whipped into a frenzy of excitement, wanting to do this or that on the web, regardless of whether it may reach the company’s goals or not.

Now is the time to manage expectations. The bells and whistles may be exciting, but they’re expensive — and if you’re developing a budget then at some point you have to demonstrate the return on the investment.

Be clear with the top executives of the goals for the site and how you’ll measure success. Even if you meet all your goals, the CEO may think it’s a colossal failure if it doesn’t meet his unrealistic expectations — making next year’s budget cycle all the more painful.

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