How to Start a Web Development Business
Do Business the Right Way
As a web developer you have a choice—work for a company or start a web development business for yourself. Given the high demand for web development services, both are viable options. If you’ve decided on the latter, then you’ll want to set yourself up for success.
Below, we’ve done the legwork for you to provide a free guide to starting a home-based web development business today.
Not interested in starting a web development business? Visit our generic Start A Business Guide.
What Does a Web Development Business Do?
Web developers take the conceptual work created by web designers and translate that work into the code that makes a website function. “Web developer” is actually an umbrella term that covers three specific roles in the web development process—the front-end developer, back-end developer, and full stack developer:
- Back-end developers work behind the scenes with the data that makes a website functional. They are responsible for server-side web application logic and integration, and the database that makes the front-end possible. They program the server using languages, platforms and environments like ASP, Python, PHP, or Node. They also are responsible for the site’s speed and efficiency. Back-end developers manage the storage of data using programs and systems like MySQL, MongoDB, and PostgreSQL.
- Full stack developers do it all. The term full stack developer is, in many ways, a misnomer, because in fact all web developers are full stack. Being a good web developer means that you know how to develop end-to-end. The terms front-end and back-end just refer to the areas of specialty one web developer might focus on over another. However, this term is often used in job ads and in conversations with recruiters and should be understood to be someone who is capable of working in a silo to develop end-to-end. Regardless, if you are setting out on your own, you will likely be developing end-to-end for the foreseeable future.
Steps to Starting a Web Development Business
Create a Business Plan for Your Web Development Business
Before you get started, you’ll need an idea of what resources you’ll need—and how to monetize your business in a practical way. We’ve answered the biggest questions about clients, costs, and profits below.
Who is the target audience?
If you are freelancing you should decide whether you want to target small businesses looking to expand their web presence or contract out to corporations that need a lot of coding done.
The benefit of contracting with corporations is they can provide steady work and are much less likely to skip out on the bill. If you’re looking to corporations, you’ll want to utilize your social capital and network. You’ll want to stay engaged with people you know in the industry and ask for their business.
If you are seeking total autonomy, you may want to target local businesses who are ready to step up from their Squarespace pages. Here you will wear all of the hats. You’ll be your own marketing team, sales staff, and web designer, but you’ll also have all that freedom. Customers in this market often need to be sold on the value they’ll realize when they make the move to a professionally developed web site.
How does a web development business make money?
Web developers make money by charging clients an hourly rate, a flat fee, or a recurring monthly fee.
- Hourly Rate: Most web developers charge $75/ hour for their labor. This is the most straightforward approach, but it can be limiting. Under this model, your earnings will always be tied directly to the time you spend on a project instead of the value which that project produces.
- Flat Fee: The average flat fee for a completed web site is $6,000. But you may create a tiered approach for this model. Perhaps offering $1,200 to a freelance business, or $15,000 to a larger operation. Regardless, under this model, you will need to focus on ROI to the business your services will provide. In turn, your client will think of your product in those terms instead of the number of hours you spend physically laboring on their site.
- Monthly Fee: The optics of this model might make sense to your clients as it is the way that so many online web building services charge. This model also creates a stronger tether between clients and your services over time, allowing you to create a more predictable income.
How much money will it take to get started?
The minimumstart up costs of a web development business are very low. You’ll need a good laptop or desktop (multiple screens for design), and bookkeeping/billing software like QuickBooks.
- laptop – $2,000
- additional screen – $400
- QuickBooks – $200
That’s a total of roughly $2,600.Of course, there are plenty of other tools and programs you may opt to invest in as well. While there are plenty of free resources out there to find templates and components (think Bootstrap), you may want to upgrade to more powerful tools as needs arise. For example, popular code-testing programs like Browserstack and web design and development programs like Adobe Dreamweaver are available on a subscription basis.
How much do web development businesses make each year?
The average salary of a freelance web developer in 2019 was $75,430 per year. The earning potential, of course is very high, especially if you are willing to bring on partners or employees.
How much should I charge?
The average hourly rate of a freelance web developer is $75/ hour, and the average price of a professional website is about $6,000. If you’re starting out new, you may want to offer competitive rates to attract business and then raise them as you become more secure.
Select a Name for Your Web Development Business
Have a great name idea? Before you start marketing and branding your business, you’ll need to ensure your name is available. Most states prohibit or restrict businesses from adopting names that are already in use. Even if it’s legally allowed, a copycat name puts your business at risk of a lawsuit.
See if your business name is available in your state with our Free Business Name Search.
Trademarks and Domain Names
Plan to trademark your business name? You can see if the trademark is available on a website like Trademarkia. It’s also a good idea to see if the domain name is available, which you can do on websites like Network Solutions and GoDaddy. Even if you don’t plan on putting together a website right away, you can buy the domain name to make sure no one takes it in the meantime.
Choose a Business Structure
Should you form an LLC? A sole proprietorship? Your choice of business structure will affect many aspects of your business, from liability to taxes.
Sole Proprietorships & General Partnerships
If you don’t file any paperwork to legally form a different kind of business—you have a sole proprietorship or general partnership. Essentially, these are “default” business structures. A sole proprietorship has one owner, and a partnership has multiple owners.
These structures have a few initial benefits. They’re easy, fast and cheap to start and maintain. However, the limitations and risks of these business structures quickly become more apparent as your business grows. In both of these business types, you are your business, legally speaking. Your company’s legal business name is YOUR name—so you’ll need a DBA to operate under any other name. Any business debt is YOUR personal debt. If anyone sues your business, they are suing YOU personally.
LLCs & Corporations
Limited liability companies (LLCs) and corporations are business entities formed at the state level. The entity is legally separate from its owners, meaning the owners are not personally liable for the debts and obligations of the business. As a separate entity, the business also has multiple tax election options. For example, both LLCs and corporations can choose to be taxed as S-corps if they meet the requirements.
LLCs and corporations are not quite as simple and inexpensive as default structures. LLCs and corporations come with formal requirements like state reports. They also have more fees than default structures, such as formation and annual report fees. However, the benefits of an LLC or corporation—especially liability protection and tax flexibility—are significant.
Legally Form Your Web Development Business
If you opt for a sole proprietorship or general partnership, there’s no formal paperwork to file to legally create your entity—you just start selling your product or service. However, you will not have anyliability protections or tax flexibility.
LLCs and corporations are formed by filing paperwork with a state agency, typically the Secretary of State. To start an LLC, you file articles of organization. To start a corporation, you file articles of incorporation. In most states, you can file these forms online or download a paper form from the state’s website.
Whether you’re forming an LLC or corporation, your articles will require certain basic information about your business, such as your company’s:
- business address
- registered agent and office
- business purpose
- members/managers or directors/officers’ names and addresses
- number and type of authorized shares (for stock corporations)
You’ll also need the signature of someone authorized to sign on behalf of the business, along with the state’s filing fee. Fees vary by state but are typically between $100 and $200. If you hire Northwest to form your LLC or corporation, we complete and submit your formation paperwork on your behalf for just $100 plus state fees.
Create Internal Policies and Procedures
It’s important to put your company’s internal policies and procedures in a written document, especially if you’re starting your business with others. Partnerships have partnership agreements. LLCs have operating agreements. Corporations have bylaws.
These documents look a bit different for each kind of business, but they serve the same general purpose. They ensure there’s a clear path forward for any major issue that may arise, from changes in ownership to closing the business. LLCs and corporations also typically need an operating agreement or bylaws in order to open a bank account.
Get an EIN and Register for Taxes
Nearly all LLCs and corporations will need to request a federal employer identification number (EIN) from the IRS. If you file corporate income taxes, have employees, or file certain franchise taxes, you must have an EIN. An EIN is also a common requirement for opening a business bank account. Most businesses can request an EIN by filling out the IRS’s online form.
Your EIN is for federal taxes—but you’ll likely have state and local tax obligations as well. You will most likely need to set up an account with the state’s Department of Revenue, and you may need to apply for a state tax ID or a sales tax license as well.
Learn more about how to Get an EIN for your business.
Open a Bank Account
A business bank account keeps your personal finances separate from your business finances. For LLCs and corporations, keeping separate finances is essential for maintaining liability protection. To open an account, LLCs and corporations typically need to bring to the bank a copy of their articles, their operating agreement or bylaws, and their EIN.
Obtain Required Licenses and Permits
Many businesses will need a business license to operate. Licensing information—as well as any zoning requirements or other permits—can usually be found on the city or county website.
If your home is part of a homeowner’s association, you’ll also be subject to any of their restrictions for home-based businesses. Some areas may also require home-based businesses to obtain a Certificate of Occupancy (a document certifying the property owner has given the business permission to operate).
Next Steps for Your Web Development Business
After your business is up and running, there are a few additional steps you may want to take as you grow:
- Get online: With your domain name, you can create a business website. You can hire a professional or use a website-builder like Wix or WordPress. You may also want to invest in online ads through a program like Google Ads.
- Hire employees: Hiring employees requires quite a few steps. You’ll need to collect W-4s and I-9s from employees, report the new hires to the state, set up withholding, pay for unemployment insurance, distribute any required documents and notices to employees, and display wage and safety info in the workplace. Employer.gov is a good place to start, followed by your state’s tax or labor office.
- Get business insurance: While LLCs and corporations protect you from personal liability, you don’t want your business to go bankrupt in the face of an accident, injury or other disaster. At minimum, it’s a good idea to look into general liability insurance. Home-based businesses can sometimes add insurance onto their homeowner’s policy.
How Do I Know If Web Development is Right for Me?
What’s it really like to work in a web development business?
A typical day in the life of a freelance web developer is much more dynamic than that of a web developer working at a large corporation. Working on your own, you will find that you are more than a web developer to most of your clients. You will be designer, SEO specialist, and more. Many of your clients will consider you their technology specialist. So you will wear a lot of hats in that regard. Additionally you will need to be much more social and spend a set amount of time networking and marketing yourself. But you will also realize the freedom of a business owner. You’ll be able to run out for that mid-day yoga class, take that impromptu vacation.
What does it take to succeed in the world of web development?
To maintain a successful web development business you’ll need more than coding skills. A successful web development business owner will be versed in design, principles of animation, multimedia design, content management, video and audio editing, hosting, and SEO strategy.
Additionally you’ll need to understand that running your business is part of your life now. You’ll need to be fastidious about billing and marketing and bookkeeping. Lots of people go out on their own as web developers, but often what makes the successful stand apart is what they’ve done in the setup; setting goals, forming a business plan, and structuring their business in the way that best suits that plan. Writing good code is only part of making it in the long run.
Ready to Form an LLC or Corporation?
Northwest Registered Agent is here to help with all your small business ideas and needs. Answer a few simple questions about your business, and we’ll prepare and submit your formation paperwork to the state. We also provide your new business registered agent service, free business forms and guides, and much more.