How much does it cost to run a website based business?

by Chandoo on May 19, 2010 · 45 comments

in Money Matters

One of the advantages of a web based startups is that, they cost very little to setup. Today I want to give you a lowdown on how much it actually costs to run a mildly busy website. I will use Chandoo.org’s real traffic and running expenses to break it down for you.

Please note that the costs go up faster as your site grows in popularity.

Some basic stats about Chandoo.org traffic:

  • Page views per month: 350,000
  • RSS readers (daily): 9500
  • Email Subscribers (daily): 4900
  • News letter subscribers – 600+
  • Bandwidth per month: 25GB
  • Breakdown of bandwidth: 80% images, 10% CSS and JS and 10% text content
  • Breakdown of places viewers visit: Blog  – 85%, Forum – 5%, Formulas pages – 5% , Misc (including sales pages, home page etc.)  – 5%
  • No. of transactions (sales per month) – 65 (roughly 2 every day)
  • Affiliates (people who sell my products for me) – 5

I think this is a very good example of the kind of traffic a small startup generates.

Now lets breakdown the costs behind running a site like this:

There are 3 types of costs in running an online business.

  1. Recurring costs
  2. Fixed costs
  3. Invisible costs

Recurring costs for running a web based business:

  • Domain name – $10 per year
  • Hosting – $15 per month
  • Paypal Commissions – roughly $2 per transaction or $130 per month
  • Affiliate commissions – fluctuates, but  roughly $50 per month
  • News letter costs – $29 per month
  • Shopping Cart costs – $5 per month
  • Amazon S3 space and bandwidth costs (for hosting videos and other files securely) – $10 per month
  • Online backup of computer data – $5 per month

Fixed costs or one-time expenses:

  • Any software you need (for me, this was about $500 spent screen recording software, membership plugins etc.)
  • Web site design (no cost as I knew coding and I modified a free template to suit what I do)
  • Logos, Branding (again no cost as I try to do this on my own)
  • Set up fees (some hosting companies charge one time setup fees when you get a website. For my host there was no hosting fee)
  • Computer / Laptop – to run an online business, you need to have decent laptop or desktop and they usually cost $1000 or so.

Invisible costs:

  • The biggest invisible cost is your time (I work roughly 8 hours a day, 7 days a week). Even if you assume $10 per hour, this number will be 8*30*10  = $2,400. But this is all invisible and you do not feel this cost as a burden on your business.
  • Internet, telephone and electricity charges
  • House rent – most of the online businesses are run from home. You have to factor in certain portion of house rent / mortgage towards the cost of running this business.
  • Books, resources etc – To stay ahead in your business, you need to constantly read books or access resources to improve your knowledge. I purchase one book a month on excel / charting / dashboards / presentations / design concepts and read at least 70 different blogs on regular basis. Most of this is invisible cost.

Total costs:

There you go. If you add up the numbers, it would be $250 per month approx. As you can guess, major portion of it ($130 for paypal transaction charges and $50 for affiliates) is variable costs. That is if I have a bad month, I pay low on these and on good months, I pay more.

If you convert the amount to Indian rupees, it is INR 11,000 approx. It is not such a huge amount if your business can generate atleast a thousand dollars in revenues every month.

But the best part of this set up is that you can run your web based business for very little monthly costs ($10 for hosting, 5 for shopping cart and another 19 for email news letters) and scale up your operations as your revenue builds up.

What are the expenses like for you?

If you already own a business, share the expense details (in %s or in $s) with me thru comments. I would love to know how you keep your business lean and mean.

If you are planning to start a business, share your estimates and constraints thru comments. I can probably guide you by giving some suggestions on how you can reduce the expenses of running an online business.

Go!

{ 41 comments… read them below or add one }

ram June 2, 2010 at 9:01 am

would like to know the difference between websit and domain blog with regard to expense.

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Chandoo June 4, 2010 at 12:08 pm

these days, there is not so much difference between these terms. You can get both of them for same hosting fees

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regan October 11, 2010 at 7:43 am

Hi Chandoo, found your blog through escapefromcubiclenation (somehow I felt that was relevant info) and really loved everything I’ve seen. I’m on the verge of jumping into the deep end too and wanted your advice. My online business (idea) targets customers only in Mumbai. And I’m just not sure which hosting company to go with. I was thinking of buying my domain through rediff, but have seen quite a few red flags about them online.
To be honest, I’m not sure what my criteria for picking a service provider should be.
Yes, I will have online shopping. Not sure about flash, but would prefer the flexibility.
Thanks again, for everything.

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Chandoo October 11, 2010 at 7:52 am

Regan.. you can go with one of the more established players in domain registrations and hosting like godaddy.com . They provide reliable service with good options for customizing.

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T.R. November 17, 2010 at 3:24 pm

Chandoo,

I’ve read your blog and I’m quite impressed with the simplicity of the language and the directness of your responses. I wish to establish a web-based business but my technological prowess is close to non-existent. How can I bring my idea to fruition while not being scammed in the process?

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Ratna Kumar November 24, 2010 at 5:51 am

Chandoo,
I am planning to start a website service business.
->Do I need to register my company name with the government ? Or Web business doesnt require any legal formalities?
->What are the legal formalities in formation of a company in India?
->Where and how do we register our company names with the government?
Please write a page about this or suggest me a link that serves the purpose.

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Chandoo November 30, 2010 at 6:27 am

Good question. I am going to write more about this in upcoming weeks. But here is a quick answer.

> You can start a web based business as a proprietorship. You do not need any explicit permissions from anyone to do this. Once your business grows, you can consider a pvt. ltd. or partnership deed.

> Setting up a Private Limited company is a fairly simple process. But it would appear tedious for anyone with little knowledge of accounting and legal side of business. I suggest hiring an accountant / auditor to do this for you. It might cost some money, but definitely worth it.

> Registrar of Companies (RoC) takes care of company name registration. Name registration is one of the steps in Pvt. ltd. registration. Refer to your accountant / auditor for more.

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Kenisha February 11, 2011 at 7:31 pm

Great post. Thanks for keeping it simple and in plain language.

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Chirag Swadia March 23, 2011 at 6:09 am

Nice Article…. :)

Chirag Swadia, Founder
http://www.activegossip.com

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Gaurav March 29, 2011 at 7:18 pm

Nice post Chandoo, I wanted to know some details about the “Newsletter” and “Cart” costs that you mentioned, what are those for, do you depend on some external service provider to do that..m kind of novice in this area?

Keep up the simple and to the point detailed posts

Thanks
Gaurav

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Ashish Kolarkar April 4, 2011 at 8:34 am

Dear Chandoo,

That is a nice write-up on web business. I’ve set up my own website, which I think is must for any business to be relevant. Initially, the website looks like a replica of manual brochure but as you move on you could revamp/reinvent the contents.

The online business is still at its nascent stages but has great future. The model chosen by you is very practical and relevant. The fixed cost of INR 11,000 is reasonable if the returns are good. The same business in real time would cost a fortune. The reach of the online business can’t be discounted.

I would love to hear more from you regarding your hosting experience and how you tackled the problems.

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Ida Seyoum April 13, 2011 at 8:42 pm

A friend of mine told me it is the best idea to start webbases business for collage textbooks only charging 10 to 40dollars for acesses our web for textbooks do you think it is good idea

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Chandoo April 14, 2011 at 6:25 am

@Ida… I have no idea. I believe that there are no good or bad ideas. Instead there is good or bad execution. Since it would not cost too much to test “whether college text books on web is a good idea”, why dont you go ahead and do that?

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Praveen August 24, 2011 at 4:55 pm

Hi Chandoo Sir,

I am Praveen from Vizag. I recently completed my MBA from IIFT and now working as a commodity trader in Nigeria. I have been a follower of your website for a long time now. I really appreciate your passion with which u have come so far. Congratulations for making it to 1 Million revenue in a month.

I am planning to set up a forum for commodity trader to discuss. I would probably start with a blog, which I will modify over a period of time. What is the “membership plugins” u were talking about in your article above ?

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Pillai August 26, 2011 at 4:12 am

Hi Chandoo,
Awesome information. One thing you might have come across in your early blogging/ecommerce days would be lack of info on indian payment gateways/shipping services.
I have seen you are using E-junkie as a payment gateway. Do they support INR?
Any idea on Indian shipping services ?
I am working on a startup to operate in India .

Is there a full ecommerce company like Shopify/Bigcommerce I can rely on in India?

Thanks in advance.

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Chris October 13, 2011 at 3:06 am

Wud it do chandoo,
Im gonna come out blunt and straight foward and just ask, and hopefully you will give me a straight foward awnser. Im starting a buisness soon and i can handle shopping cart, back up data, email newsletter costs ect…. But im just wondering how much in bandwith (hosting) would i have to pay to support 1,000,000 unique visitors a month (with a little room for improvement) and could you recomend me to some of the finer companys that you would suggest

thank you and godspeed, koolaid (}> ( its a fish sorry its kinda krappy im on a phone no degree symbols and stuff like that but i tried)

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Connor McMichael November 29, 2011 at 6:18 pm

My final business project for this semester is to hypothetically start a business. We need to go through all the costs for everything that our business will need. We are a lecture recording business, so when a student misses class, they can hire us to record it for them and post it on our website. We are planning on being based totally online, but we need a pretty sophisticated website, but our revenues will not be very high (at least for a few months). I was wondering how much would a website that has things like, ordering and paying online, video watching and audio listing online would cost both as an initial investment, and as fixed costs per month (just an estimate would help me a lot)

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suresh September 14, 2012 at 3:05 am

i want to host a online shoping website for handycrafts items with free home deleviry only in jodhpur india….
how much leegal formalities i need for that……

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Blaqgoddess October 29, 2012 at 4:12 pm

I am considering starting an online party planning business. I would like to know if there would be any additional things or start-up costs that I would need. Also, if i wanted to incorporate my business could I? would that be necessary? Thank you for your response and thank you for creating a info page for people like me.

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nick November 13, 2012 at 3:15 am

What about setting up your business? I’m talking about legal costs, setting up accounting systems, ext. I’m quite new to web ventures. I know how to make websites with javascript, html and csss, and I have the software (adobe master suite). I’m working on making my start up website right now, but I’m in the process of determining how much money I need to start off to see if I need investors or not. How much do you think it will cost? Does a formal business need to be in place to own the website, or can the website just be under my name at the beginning. This is the part of the web world that leaves me clueless about how much money one needs. One last thing if you don’t mind, how do you place ads right from the very beginning so users are not surprised when you place them once your website has enough traffic that advertisers are willing to buy ad space in your website. I don’t care about getting much money from the ads at first, but I need to find some ads to place even for free so my users wont be surprised when I put in ads. Email me at snixny@gmail.com if you can.

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Wan December 17, 2012 at 2:51 am

i want to start a website business, but what if the domain name and hosting expires? should i take care of it or i let the customer pay on their own.

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sham January 5, 2013 at 8:01 pm

Chandoo,

Excellent info… Thank you so much. We are planning to start up a forex assistnce business.. Could you please throw some light on the costing.

Thanks,
Sham

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Salah Razek January 24, 2013 at 1:07 pm

Hi Chandoo,
Thank you for your wonderful information.

My company in Morocco planing to start my online shopping business and i do not know what the best solution for connecting my website with payment online broker (visa, master card and elc…), can you advice me?

Also advice me with marketing ideas for marketing my website to females in over the world.

Thanks,

Salah

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one.page@yahoo.in March 4, 2013 at 6:22 pm

Hi

We are an upcoming group making foray into e-commerce,we are looking for web design develpment and maintenence
for an utility website providing online recharege,sending SMSs,online contests and other offers for our customers
payment thru online banking and payment gateways

Kindly provide an insight to the services and the cost estimation you can provide for the above mentioned
activities

looking forward for your reply and doing business with you

With Regards
onepage

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jignesh March 14, 2013 at 2:29 pm

Hi,

i want to host a online shopping website for consumer electronics, apparal and accessories, handycrafts items with free home delevary in india….
what kind of legal formalities i need for that……
curently i have not involved in any type of retail business please provide me complete information for starting online retail business in india

thanks

Reply

K G Jyotish Kumar March 19, 2013 at 2:23 pm

I want to make a website that can make a money through online business or a website like gmail.com, sifymail, yahoomail etc.

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Sasi April 12, 2013 at 3:57 pm

Hi Chandoo,

Thanks for the nice article. I am looking to start an online website and i am currently designing the code. I have acquired the domain and all is set..

In one of the comments, you have mentioned that you will write more about the company registration and related aspects, if you have already written an article can you share the link to it.
If not, can you please let me know whether i can start a website while working in a software company :)
How do we show the revenue that we earn from the site.

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Natalie April 16, 2013 at 6:23 am

Hi there! I know this is kind of off topic but I was wondering which blog platform are you using for this website?
I’m getting fed up of Wordpress because I’ve had problems with hackers and I’m looking at options for another platform. I would be great if you could point me in the direction of a good platform.

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kamal thind June 26, 2013 at 2:24 pm

hello sir,
It’s really nice of a you the way you have shared information and good to see how keen are you help people …Thanku for that …
I have no skills in web designing or any skills in making a site so what will it cost to run a site that sells tradional clothes how much it will cost to get it all done by a proffesional ? Please write to me and settel my querie. Tq

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joyce July 8, 2013 at 7:41 am

what kind of online business can i start with less finance

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Peter BandwidthDiet July 22, 2013 at 6:31 pm

If you don’t have the technical know-how to create, style, and manage a web store, a shopping cart like Volusion is a good option. Online shopping carts are simple enough so that you can have your store up in less than an hour. If you’re familiar with bandwidth fees, a company like BandwidthDiet can save you most of it (20%-60%). Usually bandwidth overage fees will cost you several dollars for gigabyte overage but we help store owners save that money every day. For anyone interested, Google “offloading” for some interesting information!

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Amit kumar August 10, 2013 at 11:24 am

Hi chandoo bhaiya,
you are really guru of internet …many friends are here and really they inspired .kindly call me 8809985518

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Prasoon verma October 7, 2013 at 2:41 pm

hi,
will you please tell me how much it will cost in minimum to start a educational website if i had to start with the very beginig and if i’m a student of b.sc what else i need to know before starting up? and if my initial budget was INR 50,000 is it possible to begin with this amount

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Arvind Yadav November 21, 2013 at 8:43 am

hi i’m also want to start educational website please suggest me how much cost need.

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nitin November 26, 2013 at 6:59 pm

Thanks a lot! A great Article :)

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sudhir January 9, 2014 at 7:43 pm

dear sir
thanks for starting this useful blog for common layman like me to understnd and who start to run their own website.
godaddy offer total price rs. 5000 for domain name, web space,web template, certificates,, security etc. etc
should i go for this as my budget is constraind
p;s guide me
sudhir

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naveenkala May 3, 2014 at 4:17 pm

i want to start a buisness with minimum cost of 50000 so kindly suggest me so how can be it started

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aroopam.com May 19, 2014 at 1:12 am

godaddy is a good hosting provider to start with

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ram kinwar July 16, 2014 at 3:16 am

Hii .. M planning to start website based business and dont have much knowledge about it… I dont know how to start and where to start from… In Mumbai… Any help bro

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Manish July 25, 2014 at 5:24 pm

I want to start own website for contacting(Inquiry) Tutor & Students through online. for Home Tutor Service In All over India. Please Guide me how to Initiate & What will be minimum cost now.
Regards
Manish
8553143744

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Joseph Niedenthal August 13, 2014 at 3:51 pm

Great information, THANKS.
Once a site is up and running, even one that is not meant to make sales, but is a information site for a club, how do others use it to advertise. Example, I have a camping club, so Gander Mountain wants to place an ad and link on my site, how do they do this and how would that help me pay for my site.

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