How Much It Really Costs to Start and Run a Daily Deal Website
Depending on the volume of sales that you target to make, the costs of starting and running a daily deal website can vary widely. Let us assume a small, growing daily deal website (low- to mid-6 figures in yearly turnover) for the purposes of this article.
1. Daily deal solutions and other software
The most obvious expense is the cost of building the daily deal website itself. There are three choices here: 1) build one from scratch, which costs a bomb (read: five figures) but is customizable to the bone, 2) get a daily deal script at a couple of thousand dollars and install it on your own servers, or, least overwhelmingly, 3) get started for a small monthly fee or a percentage of sales with one of the many daily deal platforms out there (including ours). The most recommended option for those starting out is obvious, so let us settle with that.
Cost: US$50-100 per month and/or 10-20% of sales
2. Subscriber acquisition
Subscribers are basically people whose email addresses constitute your mailing list. It is too naïve to assume that people will come to your website once it is set up without you needing to spoonfeed them your daily deals. There are two choices here: 1) acquire email addresses using traditional methods of online advertising (e.g. Google Adwords, Facebook Ads) and social media (Facebook and Twitter) by building a following and organically growing your list over time (the slow way), or 2) buy a list of email addresses (the fast way). If you go for the second option, beware.
Cost: US$300-500 per month
3. Email marketing software
Email marketing and deliverability is really an entire industry on its own. Your daily deal script or daily deal platform may come with an in-built emailing system, but, when you scale up to tens of thousands of subscribers, it is most prudent to start using email marketing software (MailChimp, SendGrid, PostmarkApp, etc.) that are built specifically to ensure that your mails are delivered on time and past the spam filters and that you can know what is going on (how many opens, how many unsubscribes, click-through rates, etc.).
Cost: US$50-100 per month
4. Design and creative expenses
Design and aesthetics are important and, most importantly, good design leads to credibility and increases trust and confidence (read: increased sales). One of the very first pieces of design work that you might need is a professional-looking logo. Then, you would need to create compelling graphics for other parts of your website (e.g. icons, banners, clip-art). If you are serious about differentiating your website, you would need custom-made videos for video marketing as well.
Cost: US$500-1,000 per month on average
5. Sales/Variable expenses
Even with a gorgeous website and a large mailing list, you will not get revenue unless you have sustainable deal flow, i.e. enough merchants who want to work with you to provide high-quality deals that are in demand. The cost of preparing for-merchant marketing collaterals should not be underestimated: business cards, brochures, data sheets, and agreements all cost money. After the deals are done, more expenses await you: the merchants’ revenue after your commission (which may include unredeemed vouchers), payment processing fees, refunds, etc.
Cost: US$5,000-10,000 on average
6. Administrative and miscellaneous expenses
Office supplies, utilities, and transportation all cost money. If you are required to incorporate your business for whatever reason, legal costs will also eat into your initial capital. Lawyers are notoriously expensive. So are PR firms. Do not forget other vital software which importance should not be discounted, such as analytics software (e.g. SEOMoz, HubSpot, ClickTale, Visual Website Optimizer). Also, let us not forget our obligation to pay our taxes dutifully as responsible citizens. And who exactly is paying for your living expenses, if you are working on your daily deal business as a full-time executive?
Cost: US$1,000-2,000 per month
There is obviously room for debate as to the range and magnitude of these costs, but the purpose of this article is not to provide an exact figure for budgeting as much as much as it is to provide a list of expense items to keep in mind when considering an entry into the highly-competitive daily deal industry. If there is any essential expense that I might have left out, do comment below and share your thoughts.
