Custom Web Development ROI: How to Calculate Your Investment’s Value

When doing anything with your business, we must ask ourselves: why? What purpose does this endeavor accomplish?

Because it’s easy to fall into the pitfall of following the trends. 

• “Everyone’s renovating their website, so we should do as well.”
• “Our competitors are producing video series to promote their brand, so why aren’t we doing the same?”
• “This technology seems really hype right now…let’s add it.”

Trends aren’t necessarily bad, no. But they don’t tell you if this will bring you tangible benefits.

So let’s say, ok, I want a custom web development solution. Now what? Now, we need to talk about its return on investment (ROI) and how to calculate it. 

Only by doing calculations unique to your specific needs and capabilities can we understand if it’s something you should bother with.

Let’s dig in! 

Identifying the benefits of custom web development

Before we start talking about costs, let’s talk about why!

After all, you might not even need custom web development in the first place, so let’s look at the benefits and establish the facts. 

Increased efficiency and productivity

Custom web solutions streamline processes, automate tasks, and seamlessly integrate with existing systems. For example, let’s say that you need a CRM system, but because of the unique workflows, no out-of-the-box solutions can adequately integrate into your processes. While it doesn’t mean you can not use the readymade solution, it will probably be underscored by certain inefficiencies and the need to bounce from one workflow to another. 

On the other hand, custom-made solutions will acknowledge and respect everything you have built so far, thus allowing you to integrate it into the existing workflow seamlessly. 

Per McKinsey & Co.’s report from 2023, companies that opt for custom software solutions experience 25% higher employee productivity and 30% increased customer satisfaction. 

Speaking of these two, let’s look at them in more detail. 

Improved user experience and customer satisfaction

Readymade solutions are easy to start up and run. Still, because they’re trying to be one-size-fits-all solutions, they come with many features that you might not necessarily need but will nonetheless have issues with removing. 

These issues can include the inability to fully customize UI or eliminate certain optimization inefficiencies that slow the website down. 

So, which parts are made easier with custom web development? 

1. Intuitive navigation that guides users to their desired actions
2. Fast loading speeds that keep visitors engaged (47% of users expect websites to load in less than 2 seconds)
3. Responsive design that adapts to all devices (mobile, tablet, desktop)
4. Personalized user journeys that cater to individual preferences

And while we do all of that? Well, because retaining existing clients is easier than constantly getting new ones. 
Let’s say you have a unique value offering that a user desperately needs. Even if your website looks like John Satan makes it from Hell Inc., they will suffer through it because they really, really need it. 

But the moment someone comes up with the same offering but a better user experience? They will bounce, probably forever. 

Thus, you can boost customer satisfaction by delivering an immaculate user experience -> improve loyalty and retention. 

By delivering a superior user experience, custom web solutions can boost customer satisfaction, leading to increased loyalty and retention. Per Bain & Company, a 5% boost in retention boosts the company’s revenue by at least 25%. 

Scalability and flexibility for future growth

This is really the difference between store-bought and bespoke suits. With out-of-the-box offerings, you sometimes get locked into solutions that are a little smaller or larger than you currently need. 

And in a scenario where you go smaller, it might not be well-suited for scaling up, whereas, with a larger solution, you’ll be bleeding money for no reason while growing into these shoes. 

Custom web solutions, instead, are made for your precise and unique needs, which includes a potential for scaling up later. Whether you need to handle increased traffic, process more transactions, or add new features, a custom web solution can adapt to your changing needs. 

Thus, with the ability to scale and adapt to future growth, custom web solutions provide a strong foundation for long-term success in the digital age.

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So, this covers why custom web solutions are pretty awesome (though I might be biased). 

But now let’s get back to the meat and potatoes of this and start talking about them costs of the web development solutions and how they factor into the ROI calculations.

Understanding the costs of custom web development

Before calculating the ROI of custom web development, it’s crucial to understand the costs involved. Let’s break down the different types of expenses.

Remember that these are not all necessary (for example, your website might not need a content strategy, depending on your needs), but I will include these as the most common examples of what our clients ask us for. 

Direct costs

1. Development: This includes the salaries of developers, designers, and other professionals involved in the project. Locality matters a lot here! For example, according to Clutch, an hour of custom web development will cost you $100-150 in the USA or $25-50 in Ukraine.
2. Design: A custom design that aligns with your brand and target audience is essential. Design costs can vary based on complexity, but expect to invest $5,000 to $10,000 for a professional, custom design.
3. Content Creation: High-quality content is crucial for engaging users and driving conversions. Depending on the type of content (filling out a corporate blog or just cooking up some landing pages), it can cost $50 to $500 per page. 

Indirect costs

1. Project Management: Overseeing the development process, coordinating teams, and ensuring timely delivery requires dedicated project management. As a guesstimate, I’d say that project management can add at least 10% to the project’s overall cost. 
2. Maintenance: Do you want to keep your project updated and well-maintained? While short-term, some maintenance and bug fixing is expected from the dev team to ensure that everything’s running smoothly, in the long term, it will be a different arrangement that can add an additional layer of expenses that will vary depending on the developer’s going rate. 
3. Hosting: Hosting your website on a reliable server is crucial for performance and security. You don’t want to be the guy who misses momentum from a promotion or a sale because a sudden influx of users just crashes your entire website. Answering “How much?” is a topic for a more in-depth discussion, as the ranges here can be wild! Depending on the complexity of your solution and chosen hosting, it can be as little as $2/mo to upwards of hundreds. 

Hidden costs

Now, these aren’t costs you can itemize per se…I mean, you can, but it will be a lot of headaches as some of them require layers like a whole new, additional level of math and calculations on top of an already convoluted math problem. 

But I feel like these are still very worth mentioning as they give you perspective and context you need to understand before committing to one solution over the other. 

1. Opportunity Costs: The time and resources invested in a custom web development project may divert attention from other business activities. Can you spend money elsewhere, and is it a better option than a custom solution? Have you correctly identified your business needs before commissioning a project?
2. Training: Implementing a new custom web solution may require training for your team to utilize its features and capabilities effectively. Training costs can vary depending on the system’s complexity and your team’s size.
3. Upgrades and Enhancements: Scalability is a boon but can also be a mischievous goat. So, you plan to expand and upgrade your solution later on, and these later costs effectively become “future you” problems while “present you” remain happy and content with a small bill. Will you regret this decision once it’s time to scale it all up? Will your gains overshadow the expenses? 

Now, while it’s entirely possible to be just hands-off with all of that and conjure some kind of a blank cheque for your would-be custom development partner, I think considering these costs – hidden and direct – is an excellent thought exercise that will help you better identify your pressing needs. 

Calculating the ROI: A step-by-step process

Now that you clearly understand the benefits and costs associated with custom web development, it’s time to calculate the ROI.

Step 1: Determine the total cost of ownership (TCO)

In the simplest form, TCO is the sum of all the expenses and costs discussed in the previous section. 

So it’s not just the cost of development but things such as deployment, maintenance, depreciation of old assets, training of your staff, and such.

Here are a few more things you ought to consider when doing your TCO algebra: 

• Development and design costs
• Content creation expenses
• Project management fees
• Maintenance and hosting charges
• Training and opportunity costs

Step 2: Estimate the tangible benefits

Tangible benefits are measurable financial gains resulting from your custom web solution. Obviously, these are just estimates, so you cannot know for certain how it will turn out (otherwise, all business ventures would be successful).

That said, a team with experience that has seen or created similar projects in the past is more than capable of doing a more precise guesstimate. 

But which benefits are tangible anyway?

These may include:

1. Increased Revenue: Estimate the potential increase in sales and revenue generated by your custom web solution. For example, if your e-commerce website sees a 20% increase in conversion rates, calculate the additional income based on your average order value and projected traffic.
2. Cost Savings: Identify areas where your custom web solution can reduce expenses, such as automating manual processes, reducing paper usage, or eliminating the need for third-party software subscriptions.

Step 3: Evaluate the intangible benefits

I may be cheating a bit because some of these are on the verge of being tangible and intangible. For example, increased employee satisfaction can be gauged through a comparative survey! 

Still, I feel like these are more abstract entities that are, nonetheless, worth considering during your ROI assessment. 

• Improved customer loyalty and retention
• Enhanced brand recognition and reputation
• Increased employee satisfaction and productivity
• Better data collection and analysis for informed decision-making

Step 4: Calculate the ROI

Using the data gathered in the previous steps, calculate the ROI using the following formula:

ROI = (Benefits – Costs) / Costs * 100

For example, if your custom web solution costs $100,000 and generates $150,000 in benefits (increased revenue + cost savings), your ROI would be:

ROI = ($150,000 – $100,000) / $100,000 * 100 = 50%

A positive ROI indicates that the benefits of your custom web solution outweigh the costs, while a negative ROI suggests that the costs exceed the benefits.

Obviously, real-life numbers won’t be as neat as these ones, but you get the idea. If your calculations result in an unsatisfactory ROI, you either need to double-check that all your variables are correct or look closely at the project’s foundation.

Maybe the project is too complex for your needs and scale. Or the team is too expensive?

To make a more informed assessment, let’s look at the precise factors that affect custom web development ROI. 

Factors affecting custom web development ROI

The costs and, thus, ROI of your custom web development project can be affected by multiple factors. 

As I’ve mentioned, when you do the initial calculations, they might not always work out in your favor. So the question then becomes: what exactly do I need to change to ensure ROI makes sense for my needs and budget?

To that end, let’s look at the specific factors in more detail and what we can do to maximize their impact. 

Project scope and complexity

The scope and complexity of your custom web development project directly impact its ROI. A larger, more intricate project will require more resources, time, and budget, which can affect the overall return. To maximize ROI:

• Clearly define project goals and requirements. When you don’t have these, it can become a game of wanting everything at once. That’s, well, I mean, theoretically possible? But it will cost you a lot. It’s not worth it, in my opinion. 
• Prioritize features based on business value. This can mean cutting out some features you don’t need now now. But remember scalability? Thanks to modular architecture, you can always put these back in later! 
• Break down the project into manageable phases. Depending on their necessity, these backlogged features can then be slotted into the project phases. If you’re running an eCommerce store, something like a shopping cart probably needs to be in the first phase. Custom recommendations based on purchase history? Maybe a bit later. 
• Regularly review and adjust scope as needed. On the other hand, what if you suddenly realize that some features you need are missing, like yesterday? Doing small retrospectives and assessing the performance and progress is a sure way to fine-tune the project to specific needs. 

Development team expertise and experience

The expertise and experience of your development team play a crucial role in the success of your custom web solution. A skilled team can:

1. Deliver high-quality code and design
2. Identify and mitigate potential risks
3. Provide valuable insights and recommendations
4. Complete the project within the specified timeline and budget

However, a skilled team also comes with a significant price. So it’s a bit of a balancing act. I will certainly say that an affordable, out-of-the-box solution will perform better than a below-market-rates development team. 

One way to circumvent the high costs while still receiving quality is shopping around the globe (thanks, globalism!). International teams from countries like Ukraine or Poland don’t necessarily cost less because their devs are worse than their Western counterparts. It’s just a matter of living expenses and such.

So, do make sure to consider these options, but make sure you understand how to choose the right web development team for your needs. 

Long-term maintenance and support

Custom web solutions require ongoing maintenance and support to remain effective and secure. Neglecting these aspects can lead to decreased performance, security vulnerabilities, and reduced ROI over time. When planning your custom web development project, consider the following:

• Allocating budget for regular updates and bug fixes
• Establishing a long-term maintenance and support plan
• Partnering with a reliable development team for ongoing assistance
• Monitoring and optimizing your web solution’s performance

Of course, it doesn’t mean that you always need that! For example, we have some clients whose projects we’ve consistently supported over 10 years. There are also one-and-done deals because people are content and satisfied with what they get. 

But remember the golden rule: custom solutions are for complex problems. And when there are complex solutions, many parts may fall apart because of dependencies depreciating or new browsers rendering your website in a weird way. 

To avoid these and other examples of regression, you at least have to consider it as a factor with all appropriate risks and threats! 

Market demand and competition

The market demand for your product or service and the level of competition in your industry can significantly impact your custom web development ROI. To maximize ROI in a competitive landscape:

• Conduct thorough market research to identify target audience needs and preferences
• Analyze competitor websites to identify gaps and opportunities
• Incorporate unique features and functionalities that set your web solution apart
• Continuously monitor and adapt to market trends and user feedback

Basically, you need to understand if you need this solution and if it brings you a proper competitive edge. At the end of the day, all you do for your business should serve one purpose: bringing you more happy and satisfied clients! 

And no matter how fancy or shiny your new website will be, it might be for naught if the demand is not there. 

Maximizing your custom web development ROI

Are you exhausted yet? Don’t worry we’re almost at the finish line!

The last thing we should look at to ensure the highest returns are the strategies to optimize the development and the end product. In other words, let’s look at how we can practically apply all the learnings from the previous section! 🤓

Clear project goals and requirements

Establishing clear project goals and requirements from the outset is crucial for maximizing ROI.  Here are some methods we like to employ to establish clear goals.

1. Defining SMART objectives:
   • Specific: Clearly define what you want to achieve with your custom web solution. Be specific, outlining the desired features, functionalities, and outcomes.
   • Measurable: Establish quantifiable metrics to gauge the success of your project. This could include metrics such as conversion rates, user engagement, or revenue growth.
   • Achievable: Ensure your objectives are realistic and attainable within the given timeframe and resources. Consider the technical feasibility and the capabilities of your development team.
   • Relevant: Align your project goals with your overall business objectives. Your custom web solution should contribute to your company’s mission and support its long-term vision.
   • Time-bound: Set clear deadlines for each phase of the project and the final delivery. A well-defined timeline helps keep the project on track and ensures everyone works towards the same milestones.
2. Documenting user stories and use cases:
   • User stories describe the desired functionality from the perspective of the end-user. They help the development team understand how users interact with the system and what value they expect to gain from it.
   • Use cases provide a more detailed description of the interactions between the user and the system. They outline the steps to achieve specific goals and help identify potential edge cases or exceptions.
3. Prioritizing features based on business value and user needs:
   • Not all features are created equal. It’s essential to prioritize developing features that deliver the most value to your business and your users.
   • Conduct market research and gather user feedback to identify the most critical features and functionalities. Focus on the core elements differentiating your custom web solution from competitors and providing a compelling user experience.
4. Communicating goals and requirements effectively:
   • Clear communication is critical to ensuring that everyone involved in the project is aligned and working towards the same objectives.
   • Create a comprehensive project brief that outlines the goals, requirements, and expectations for the custom web solution. Share this document with all stakeholders, including the development team, designers, and project managers.
   • Hold regular meetings and status updates to inform everyone of progress, discuss any challenges or roadblocks, and make necessary adjustments to the project plan.
   • Foster open communication channels and encourage collaboration between team members. This helps identify potential issues early on and ensures everyone contributes their expertise to the project’s success.

Continuous testing and optimization

Continuous testing and optimization are essential for maximizing the ROI of your custom web development project. This involves:

1. Implementing a comprehensive quality assurance process
2. Conducting regular performance tests and user acceptance tests
3. Gathering user feedback and analytics data
4. Making data-driven improvements and optimizations

By continuously testing and optimizing your custom web solution, you can identify and address issues early, improve user experience, and ensure that your investment continues to deliver value over time.

Conclusion

Let’s recap what we have learned today on how to calculate ROI. 

• Understand the direct, indirect, and hidden costs of custom web development.
• Recognize the benefits: efficiency, user experience, brand image, and scalability.
• Calculate ROI using the formula: ROI = (Benefits – Costs) / Costs * 100.
• Consider factors affecting ROI: scope, team expertise, maintenance, and market demand.
• Maximize ROI through clear goals, agile development, testing, and monitoring.
• Examine real-world case studies to demonstrate the value of custom web solutions.

As you may have surmised by now, calculating the ROI of your custom web solution is trickier than subtracting development costs from quantifiable profits.

It involves a lot of variables, often unexpected, and the thing that surprises people the most is that ROI can change over time as the project unfolds.

It’s really a lot of things to keep in your head! But it all really comes down to practice and experience. The more projects you work on, the more you begin to observe hidden patterns and connections you would have missed otherwise. So, if you are wondering how to get started with all of this, and if you really just want an answer to “Should I even bother with ordering custom web project?”, then don’t hesitate to contact us!

We’d be more than happy to talk with you and see if you should pursue it or if you are better off with a readymade solution. 

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