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How to Build an E-Commerce Development Budget [With Template]

November 9, 2023

by Sydney Wess

Online shopping is becoming a cornerstone of retail and commerce everywhere. Startups and entrepreneurs are smart to adopt online business platforms to increase return on investment (ROI). Companies must learn how to budget for development to ensure they leave engagements with quality work that aligns with their cost expectations.

E-commerce websites are core to boosting retail conversion rates, increasing sales, and developing an elegant marketing strategy. Profit margins in e-comm average at around 42%, and online stores are much more attainable for small business sellers than their brick-and-mortar counterparts.

However, business owners must consciously choose to develop their own e-commerce store rather than using online platforms like Etsy to facilitate sales. Connecting with a Shopify or BigCommerce developer can increase sales and business success. However, it’s important to account for the costs that will go into the development project.

Looking for a development team to create your e-commerce store? Find the best e-commerce development companies on Clutch.

What Goes into an E-Commerce Budget?

E-commerce budgets may seem complex because of the level of technical input required, but they can be greatly simplified by sectioning the budget into general categories. This helps you visualize your needs and identify areas of high and low cost.

Keep the following four categories top of mind when mapping out your e-commerce development budget.

  1. Development Costs: includes front-end and back-end development of an e-commerce website, integration with a content management system (CMS), the customization of e-commerce platform such as Shopify, WooCommerce, or Magento.
  2. Design and User Experience (UX): website design activities necessary to create a responsive design with a user-friendly UI using custom graphics and visuals.
  3. E-commerce Functionality: the integration of payment gateway or payment processing systems (like PayPal or Stripe), inventory management, as well as integrations or plugins that handle logistics and shipping costs.
  4. Testing, Launch, and Ongoing Maintenance: includes the costs of QA testing e-commerce websites, costs associated with launch, ongoing maintenance, and performance optimization.

By breaking down your e-commerce development budget into these categories and sub-categories, you can create a comprehensive financial plan for your project. This structured approach reliably covers everything you need to manage costs when working with an outside development company effectively.

6 Steps to Creating an E-commerce Budget that Meets Business Needs

When drafting an e-commerce development budget, you must be meticulous in planning your plan of attack. Being smart about how you structure your budget right from the start by following these six simple steps.

  1. Define your e-commerce goals
  2. Select your e-commerce service provider
  3. Estimate development costs
  4. Plan user experience design
  5. Factor in the cost of e-comm functionalities
  6. Review and adjust e-comm budget as needs change

Define Your E-Commerce Goals

Defining goals seems slightly irrelevant to budgeting, but it’s actually the core factor that determines what services you need and in turn, what they’ll cost you.

One way to figure out what your goals should be is to determine the scope of your online store, the product range, and the target audience. As a business leader,  you should understand your unique selling points and outline the specific functionalities you need to meet your e-commerce objectives.

These functionalities are a great starting point — with them prepared, you’ll be able to communicate directly about your needs with potential partners and receive quotes for their work.

Further, you’ll be able to start doing your own teacher on pricing once

Select Your E-Commerce Service Provider

Every business is going to want a reputable e-commerce service provider with experience in developing online stores. The tough part is connecting with the right team for you. As part of your selection process, consider the following steps:

  • Conduct thorough research
  • Check references
  • Review portfolios

Once you’ve vetted possible candidates, it’s time to interview them and request proposals to ensure that they can meet the needs you’ve listed within your project scope.

Some e-commerce developers may specialize solely in technical deliverables, but others may be more full-serivce, able to assist with search engine optimization (SEO), e-commerce marketing, and even social media marketing. If you’re looking for additional services, however, understand that it will drive up costs further.

Estimate Development Costs

Development costs will include anything related to expenditures involving the construction of the platform itself.

This should include the expenses for:

  • Website development
  • Custom design
  • E-commerce platform costs
  • Database integrations

Work closely with your chosen service provider to estimate the development costs. This will ensure you have a clear understanding of the proposed services and associated costs.

Plan for Design and User Experience (UX)

Collaborate with the service provider to plan the design and user experience of your e-commerce website.
Budget for website design, responsive design for mobile users, user interface (UI) design, and any custom graphics or visuals that enhance the customer experience.

Direct communication with the service provider is key to aligning the design with your budget. This is especially true if your service provider is staffing different UX designers and developers on the project. Some project management on your end may be necessary to align all contributors.

Factor in E-Commerce Functionality Costs

Every e-commerce company’s dream is to create a seamless buyer journey that delights customers and encourages them to return to shop in the future. While design and development are major players in this effort, functionality makes everything work together smoothly.

Consider how your website should function — and include the small things. You should be planning and accounting for costs like implementing a shopping cart system, integrating payment gateways and checkout processes, or handling shipping and logistics.

These things may not be the first thing that come to mind when creating an e-comm site, but they will be the things that optimize your process and entice customers to return time and time again.

Review and Adjust E-Commerce Budget Over Time

Your budget should be a dynamic document you review regularly throughout the e-commerce development project.

As you work with your service provider, stay in constant communication to ensure the project is on track and within budget. Adjust your budget as needed to accommodate scope changes or unexpected expenses.

E-Commerce Development Budget Template

e-commerce budgeting template

Download our E-Commerce Development Budget Template.

Factors That Impact E-Commerce Development Budgets

Creating a realistic budget for e-commerce development requires understanding the factors that can significantly influence costs. Consider the following factors when creating your budget — demonstrating flexibility in one or more of these areas could save your business precious budget for non-negotiables.

What impacts e-commerce development spending

  1. Website Complexity: Features like multi-language support, advanced search functionality, complex product variations, or custom integrations can increase development costs—the more intricate your website's functionality, the higher the associated expenses.
  2. Integration Requirements: Custom integrations or specific API requirements may incur additional development costs. Accurately accounting for integration needs is essential for budget precision.
  3. Scalability and Performance: Designing a website that can scale with your business requires upfront investment so its infrastructure can handle increased traffic, more products, and additional features without major overhauls.
  4. Design Quality and User Experience: Well-designed, user-friendly websites with custom graphics and a seamless UX often come at a premium. Investing in design can enhance your e-commerce site's appeal but should be considered in the budget.

E-Commerce Development Budgets Keep Projects Aligned

A strong e-commerce development budget is a great way to manage expectations for an effort early on. A budget communicates goals and financial constraints, allowing clients to keep open lines of communication with their providers on managing costs while still getting the breadth of functionalities they require.

Looking for dev help? Find the top e-commerce development companies on Clutch.

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