This post is a response to Chris Lema’s post titled, “Four mistakes WordPress theme vendors make.” Chris makes some fantastic points about theme companies that I must reiterate here and also expound upon.
As a leader of a company that sells themes, calculating the potential profitability of a single WordPress theme is absolutely critical to building a business around them. There are other factors, such as determining the size of a potential market for niche themes and understanding the needs of the consumer, but for now, I’d like to break down the expenses and potential sales of your average WordPress theme, throwing out outliers like Divi, X Theme, and Avada.
The Cost of a Theme
Just like any business, you need to factor in the cost to bring a product to market. Figuring out this cost allows you to understand when a product will be profitable, if at all. There are generally three major expenses when it comes to building and selling WordPress themes:
- Design & Development
Each of these aspects will cost time and/or money. If you are not spending your own time on these, you will be spending money in exchange for someone else’s time spent in one of these areas. Let’s get into the specifics.
Theme Development Costs
Depending on the complexity of your theme, depth of your WordPress knowledge, and ability to design and/or write code, the cost to develop a WordPress theme as a product can vary greatly. If you’re a hybrid designer and developer, you could build a theme all by yourself and the only cost would be your own time. If you’re simply a developer, you can “forego” the design phase a bit and build a theme that may not look as great. There are big choices and potential sacrifices to be made to make selling WordPress themes a viable business.
Let’s say it costs you $2,000 to hire someone to create a concept for a theme. This designer provides you with PSDs that you can then turn into code, CSS and images. Let’s say you spend $3,000 worth of your own time or a hired hand to build the theme and prepare it for release. Initial Expenses
I would say this is a somewhat conservative estimate because a theme can take very little time or it can take quite a lot. There are so many factors to consider in estimating cost, I cannot cover all the different scenarios here. Once you’ve determined the cost of development, you can move on to figuring out what it will cost to actually sell the dang thing to a wide audience.
Once you’ve built a theme, you’re going to need to decide how and where to sell it. Most theme sellers opt for a marketplace like ThemeForest, Creative Market, Mojo Themes, Mojo Marketplace or even WordPress.com. Each of these marketplaces has its positives and negatives along with a varying percentage of sales. A marketplace will also come with its own set of requirements such as exclusivity clauses, performance-based commissions, type of audience, and different levels of visibility.
As of right now, ThemeForest is the big fish so most sellers opt to start there, especially when building a new audience. At ThemeForest, you can better your sales percentage by selling more units so we don’t have a great way to measure the average commission for selling through a marketplace. Let’s assume you make 70% of each theme sale and the marketplace(s) you choose make 30%.
At UpThemes, we sell through our website, Mojo Marketplace (which offers themes through major webhosts like BlueHost and Hostgator), and WordPress.com. We found this setup to be most appropriate for our business but everyone is different. ThemeForest could be the more lucrative and fastest way to obtain sales but also can present the greatest challenge in support load. In addition, pricing limitations can be frustrating due to some legal issues selling products in Australia (in case you’ve ever wondered why Envato doesn’t allow authors to set their own price, it is mostly due to price fixing laws in Envato’s home country).
If a theme costs $5,000 to build (which is a fairly low estimate), and you sell 600 copies over 12 months for $40 each, you better hope your customers don’t need more than 15 minutes of support time each in the first year (maybe support drops after the first year and maybe sales drop right along with it). If you are selling themes at a one-time price of $40 and a customer comes back to you multiple times, you could end up spending anywhere from 30 minutes to 2 hours dealing with just one customer. If your goal is to make upwards of $35/hour and you spend more than one hour with a customer in support, well, you’ve probably already figured out you lost money on that particular sale.
In terms of your capacity for support, let’s say you work 5 days per week and are absent about 20 days per year during the work week and are trying to keep a traditional 40-hour week (ha, you’re a developer, let’s at least try to pretend you’re not working every minute of every day). That means you have approximately 2,000 hours per year to simply “support” the one theme you’ve released. It’s all downhill from here. For every hour you spend in support, you lose time, which equals money. Any time spent in support is time you cannot spend building more themes. That means for each theme you support, you could be losing 150 hours (or about 7.5%) of your available time per year. Multiply that by 10 themes and you may be looking at as much as 75% of your own time being spent just in theme support. The other option?
Hiring One or Multiple Support Reps
For the table below, I’ve come up with a fairly low estimate of $15/hour as the cost of a entry-level support representative. The more technical the support rep, the higher this cost will be. In addition, complicated themes require more technical knowledge and generally more time spent with customers. Enter your own figures here to determine what your support will cost based on type of theme, supporting documentation, support rep hourly rate, etc. First-Year Support Costs
|Support Representative Hourly Rate||x $15.00|
|Support Time Per Customer||x .25 hours|
Estimating Sales, Expenses & First-Year Revenue
One of the trickiest parts of being a theme seller is understanding the release cycle of most WordPress themes. As David Perel explained, a theme generally makes the most it is ever going to make within the first 3 months of sales.
The problem is that maintaining old products does not mean more revenue. After about 60 to 90 days, that theme will hit the long tail and begin to fall short of justifying support and maintenance. – David Perel of Obox Themes
That means typically you will see the most support load within the first 3-6 months as people who bought the theme early on start to discover edge-case bugs, usability issues, and generally learn how to use it. So let’s assume you sell 600 licenses of your theme in one year. First-Year Sales
|Units Sold||x 600|
Now, keep in mind, $24,000 is the total theme sales amount before any expenses, so now you need to figure out your total expenses. First-Year Expenses
|Theme Design and Development||$5,000|
|Marketplace Commissions |
600 units x 30% commission on $40
(600 customers x $15/hour x 15 minutes per customer)
That means if we calculate net profit ($24,000 sales – $15,950 expenses), you’d be looking at just $8,050 in net revenue in one year. Even if you double sales to 1200 units (averaging 100 sales per month), that would equal just $16,100 for one theme across an entire year.
Where Do We Go from Here?
So the question becomes, how can we build themes that are making good money beyond 3 months? Should we raise prices? Should themes come with a yearly cost? How can we lower support and development costs to achieve greater profitability? How can we actually build stuff people want?
At UpThemes, we are building themes with simplicity as the focus, which means it takes less time to build themes that solve specific problems and require less support. We also sell at a bit higher price point, which we’ve found doesn’t affect our sales volume. In addition, we use and create common code libraries like the Underscores theme and our own UpThemes Framework. These libraries allow us to shorten our time-to-market and keep code overhead to a minimum.
I’d love to hear your thoughts on how to make better commercial WordPress themes. Tweet at me: Tweet to @chriswallace