Voodoochilli Design

It seems that with inflation growing and allegedly set to rise dramatically over the next financial year along with VAT at an all time high, many companies are increasing their rates in an effort to make ends meet. Our overheads including costs for phone, hosting and internet services have gone up considerably over the last couple of years. We are desperately resisting the urge to increase our prices in line with the trend and have managed to keep our rates fixed as of 2009. The main problem for us is not these spiralling costs, but rather short term, but expensive cash flow issues caused by some clients that pay late. On any project we have many costs which we have to pay for upfront (staff, general overheads, wages etc.) and when we are paid late this means we have to borrow from the bank to ensure we can pay all of the costs associated with that particular project. This accrues interest and astronomical fees which are not accounted for within the original quotation of work.

Like most web design companies we do charge a late fee which for us is currently 13% per month and this does cover many, but not all of the costs involved in short term borrowing. Anyone that has gone overdrawn will know that short term, unauthorised loans can be very, very expensive. It really is the case that going £20 overdrawn can sometimes cost hundreds of pounds if not dealt with quickly, and these fees seem to be higher on business accounts. This problem is exasperated on very small projects whereby the 13% fee only accounts for a very small percentage of the borrowing costs. Even when late payments result in minor borrowing from our own working capital overdraft, this can still be costly when combined with the efforts and time required to chase up the payment.

Every web designer that I know (and I know quite a few) is frequently asked “how much does a website cost?”. The question is a complicated one since it depends on many factors. I like the analogous question “how much does a car cost?”. The answer depends on whether the vehicle you want is a brand new Ferrari or a 1972 Robin Reliant. Website costs vary just as much, and some people will build you a website for £400 and others will charge you hundreds of thousands, if not millions of pounds depending on who you hire and the specifications of the brief.

When I first started working as a freelance web designer, about 10 years ago, I was extremely naive. It was only several years later that I realised just how much I had undervalued my own position as a web professional. I was building websites for just £500 each and earning less than the minimum wage. To be fair, I wasn’t very good initially – and counter to popular opinion it takes a long time to become a professional web designer. Regardless, it didn’t seem right that after spending over 6 years in further and higher education that I should be earning less than a bin man. (No disrespect to the bin men, they are the smart ones for they didn’t spend a decade training how to do their jobs before receiving their first pay cheque.)

What was the point of all of that work, and even worst, the tens of thousands of pounds of debt I had acquired paying for this so very expensive education. Even as a lone freelancer and with my then minimal overheads my earnings did not cover my bills and I supplemented my income with a (better paying) part time job. It didn’t occur to me that I was actually worth more than £5 per hour, after all I loved building websites. In time as I become more experienced in the art of running a business I gradually put my prices up to cover my expenses and make a marginal profit in-line with the local competition. I was eventually able to rent an office and take on staff whilst continuing to offer a constantly improving service at a reasonable price.

We are currently developing a free company website service. It has occurred to us that in the current clime, many start-up companies are simply not in the position to afford the design and build of a bespoke website. We hope to help solve this problem with CompanySite.org.

Although there are other free website services available on the net – most of them are extremely unsightly and barely function. We hope to rectify this.

The site will be funded mostly by advertising but there will also be a premium service for those that wish to have a website at an affordable price.

It’s all very hush hush at the moment, so I can’t reveal too many details except that we hope to have the system completed soon.

As always, your thoughts and comments are welcome.

First there was Irie who have been trading since 1991, a stable company to say the least. They used to be based just down the road from us when we were based in Broad street, Hereford. It came as quite a shock when I first heard about this, considering how close (literally) they were as competition. Only recently I have noticed that WyEd has also ceased trading.  It saddens me to see web designers go out of business, even through they are competition.  I know how hard small companies like this work for a living. I know exactly the sort of work they have to do, and the hours they have to put in to pay the bills.

It is a reflection of the overall economy, and although in a previous post I pointed out how many designers should not be affected by this so called credit crunch, of course there will be some casualties.

How have you been through the recession? It seems to me that being small, efficient and most importantly smart helps during times like this.

It’s been really hard lately keeping up with all these blogs I run lately let alone do much personal work. This is a shame as I have quite a lot I want to get done! The reason for this, believe it or not is that we have been inundated with work. A client of mine believes this is because smaller companies like ours are very attractive during times of financial crisis as our overall costs are lower than bigger companies with larger overheads.

Although it is true that by being competitive a company is likely to survive where more bloated companies cannot, I do not believe this is the only reason smaller companies are doing well right now. I think it all has to do with people being smarter with their money. Companies need to make money – this we all know, and when there is a downturn in the economy it becomes harder and harder for the majority of businesses to keep going as at the end of the day they are all affected in some way by the the demand and disposable income of the general public. When times are hard it affects the average family quicker than anyone and this has a knock-on affects to nearly all business. People just don’t spend as much when they are feeling the pinch.

So with shrinking advertising budgets due to lower turnovers what should a business do to survive? Keep pumping more money into the same methods of selling? Or try something smarter? It really does amaze me that some clients approach me with successful businesses that have only recently considered getting an online presence. A website can not only act as a non paid salesman for a company, it can also be used as a tool to increase efficiency and do many of the tasks that normally take a lot of time, money and effort. Why post or fax documentation that is needed before a sale when your website can email it straight to your customer, for free and within minuets? That’s just one example, and I am sure you can think of loads yourself, you get the point, I think this kind of thinking will benefit companies prepared to adapt to a changing financial climate. It’s survival of the smartest.