In my experience, small business owners tend to view websites as either a business card that happens to be online (i.e. excessively low expectations), or as something that is supposed to miraculously provide revenue the instant it is launched.

The problem is partially one of not taking a broader “whole life cycle” view of the website as a business in its own right. It may also be exacerbated by web developers who may be more comfortable with creative or software development, as opposed to a hard-headed business-oriented view of a site.

The issue is that a website is a business like any other, and that implies that there is more going on than its appearance or functionality alone.

Developers also need to resist the temptation to take the easy way out and just implement whatever the customer asks for. This may require developers to pick up some business-oriented skills in order to provide a more professional level of service for their clients.

A look at the full cycle involved in building a website – or more accurately a web business – gives a wider picture that may suggest both areas for improvement on the part of developers, as well as a more realistic set of expectations from business owners.

The “Whole Life” development cycle starts long before anybody discusses what a website is going to look like, and continues (often for years) after the site has been launched.

1. Concept

Frequently, the initial concept for a website originates with the business owner.

In many cases, they take their flash of brilliance and immediately start trying to build it.

A quick feasibility study may be in order though.

This may consist of a quick Google search to see if there are competing products, or bouncing the idea off a trusted friend (I’ve encountered people who are incredibly paranoid about protecting their ideas, regardless of whether the idea is actually valuable or not).

Where web development companies come into this is in the area of professionalism: it isn’t easy to tell a potential customer that their ideas are terrible, or to try and make them modify their concepts in order to allow them to work better online.

Part of that is that developers and designers are by nature creative people, and we don’t like raining on somebody’s parade.

Part of it is also the risk of losing a possible customer.

Yes, this should be done tactfully (that could be a complete article on its own), but if we don’t address this up front, it creates a larger likelyhood of the project blowing up in our faces later on.

Attempting to adjust expectations mid-course isn’t usually much of a solution.

2. Business Model / Business Plan

This is a neglected area with new web businesses, and one that could provide additional revenue for development firms that are willing to learn new skills – or work with other companies that have the skillset.

Frequently new websites are built and launched without a hard look at how they are going to make money. “Oh I’ll just build something and throw ads up on it” or “I’ll have a shopping cart so people will buy things” don’t hold water any more – if they ever did. I’m still amazed at how many people I talk to still think along these lines.

Want a successful web business? Start with a well defined model for how it will make money. Then put together a business plan (and possibly a marketing plan).

A well-crafted business plan can take a long time to put together (Factor at least 35 hours for a simple plan, and 6 weeks or more for a complex one).

If the web development company you are working with doesn’t provide this service (hint: my company does about 3 or 4 per month) then hopefully they have a relationship with somebody else who does.

The business plan may help later on as well, if you are seeking financing for your website.

3. Financing

If you are building a small website, the issue of financing probably boils down to giving the designer an initial deposit and then whatever you owe once its all done.

Larger web projects, however, can be expensive, particularly when you factor in the labour involved in custom graphic design or software development. This means that you could potentially need to look at financing options, in order to complete your project.

Most web companies are far too small to be able to provide sophisticate financing options for web development projects, so it is possible you’ll be looking around for a different way to put together financing.

The current financial situation has resulted in difficulties in obtaining traditional sources of financing (typically loans) for web development projects. As of the time of writing, (tail end of 2009) the people I’ve spoken to have had little success obtaining bank financing for business development of any kind, including web development. It is unclear whether this source of funding is still viable for web projects.

I’ve recently spoken to people in the business of brokering small (i.e. under $100,000) loans, which are typically unsecured. My understanding is that this type of financing still exists, if one is willing to hunt around to find it, and it one is willing to accept the terms as-is. Secured loans on a larger scale can also be obtained for development projects, but again the terms may or may not be acceptable. Personally I haven’t had any experience actually taking out a loan of this nature, so this is mostly based on discussing the topic with people in that industry; I haven’t spoken recently to anybody who has obtained this kind of financing for a project.

“Angel” or “Venture Capital” funding is another traditional (at least in a Dot Com sense) way of putting together financing for web development. I also don’t have personal experience with going this route, although I’ve had “nibbles” from local angel investors that I know regarding specific projects in the past; none of those has resulted in anything to date… Usually people in either of those areas are looking to buy a piece of the equity of whatever it is that you’re building, so your track record is going to be important to them (hence the business plan!).

One unusual source of funding for web development (or software) projects can be equipment financing companies. Many of the “captive” financing companies for computer hardware manufacturers (one example would be IBM Global Financing, but all of the large equipment manufacturers have them) will finance software or web development projects, provided that you purchase equipment from them as part of the deal. So for instance you could buy the servers required to run your site, finance them, and then roll other startup expenses such as off the shelf software and custom development that are also required, into a single loan.

By cultivating relationships with potential sources of funding, web development companies can add a powerful sales tool into their “kit”, which will allow them to land larger projects. This kind of relationship could also be extremely beneficial for lenders and investors as well, since web developers are frequently the first line of vendors to see newly launched concepts. I’ve actively cultivated relationships with companies in these areas for years as a result, and I’m often puzzled when a VC doesn’t “get it” – in their position who wouldn’t want a steady stream of pre-qualified applicants?

To Be Continued….