Wise Web Strategy

Conversion rates

Conversion is an often overlooked factor that you must be on top of if you plan to achieve success online.  If you imagine your web site as a funnel, you have (hopefully) a lot of visitors pouring in at the top, some visiting more than one page, some adding something to a shopping cart, and some checking out. 

At every step of this process, the number of visitors shrinks.  If you have a normal business, the percentage of customers who actually purchase from you will be less than 2%.  This percentage is called the conversion rate.

There are a lot of naive folks in the business who do not have a clue about their conversion rate.  I cannot tell you how many people I have talked to over the years that think they have a 100% conversion rate.  I have had many tell me things like "if I can get them to the site, I know that they are going to buy."

We used to do a lot of business with Google.  My Google rep once told me that he had a client who purchased 10,000 views (not clicks) on Google and also purchased 10,000 bottles of a certain product.  He actually believed that he would sell a bottle of product every time his ad appeared on Google.  As you can imagine, that did not work out well.

Unless you are something special, you are probably like the rest of us with conversion rates of less than 10%.  On our sites, we see conversion rates of anywhere from 1% to 10% depending on how niched the product is.

Let's say you have a website getting 1,000 visitors a day and have a 1% conversion rate.  Is it better to focus on getting your traffic to 2,000 visitors a day or on improving your conversion rate to 2%?  All things being equal, there is no difference--either option will double your business. 

However, for most businesses, doubling traffic means increasing your average cost per visitor.  Because of this, most businesses should focus on improving their conversion at least as much as they try to generate more traffic.

I always find it ironic when I see businesses paying thousands of dollars to Overture every month for traffic when a few hundred dollars of investment in their website could double or triple their conversion rate.  I am not going to give specifics here because I have competitors who read this blog.

That being said, I can assure you that improving the conversion rate is not easy work.  We have doubled the conversion rate on Vitabase this year, but it has been an intensive process.  There are hundreds of factors involved.  You can find information all over the web about how to improve your conversion rate, and some of it is useful.

The most important thing I can tell you about conversion is to make it part of your strategy.  In other words, start watching it and develop a plan to improve it.  You will find that it is tedious work and the improvement will come slowly.  You might improve your conversion rate from .7% to .8% the first month.  As insignificant as it may seem, that small change will generate a 15% increase in revenue.

Also, you need to understand that improving your conversion rate raises the value of your visitors, which in turn means that you can pay more for visitor acquisition.  Here is the math:

Let's say that you have a 1% conversion rate and a $50 average order.  That means that your visitors are worth $0.50 in revenue each.  If your product cost and variable expenses are 60% of revenue, that means that you can pay no more than $0.20 per visitor to break even.

If you can increase your conversion rate to 2%, your visitors will be worth $1.00 in revenue.  Now, you can spend $0.40 per visitor, and can bid higher on PPC's.  Bidding higher will get you more traffic.

The net result of this benefit is you double your revenue initially on the conversion rate increase, but also multiply your revenue again by a factor of how much more traffic you can acquire.

You cannot achieve this kind of benefit by focusing on traffic.  Conversion rate improvement is not glamorous work, but it is critical to your success.

The next frontier--local search

I am often asked where the Internet is heading and where the opportunities are.  People don't usually understand that if I knew where the best opportunities were going to be, I would already be working on them, and I would not be telling anyone either.  Being successful online is difficult enough without telling everyone what I am doing.

That being said, there are some general trends and predictions that I am glad to talk about.  One of the biggest trends is the move toward local search. 

When I refer to local search, I am referring to the concept of people searching for information about local services and products in their area.  Currently, this is not done very much.  The average small business in your local town still does not have a web site, and if they do, they are not actively trying to reach the community through it.

This is all going to change over the next few years. 

Already, fewer and fewer people ever look at their local yellow pages anymore, but instead go to yellowpages.com or a similar site.  Before much longer, many people will use Google or Yahoo to look for a plumber or local furniture store.  Businesses will use the Internet to offer services to their customers.  For example, restaurants will allow you to order ahead online, and service businesses will allow online scheduling of appointments.

I am thrilled about this trend for two reasons.  First, it is an enormous opportunity for online entrepreneurs.  If you are interested in getting started online, I encourage you to find a way to take advantage of this trend.  I know that we will.

The second reason that I am happy about this trend is that it is going to reduce prices and bring up the quality of the services you get on a local level.  The reason for this is that most online local directories have rating systems where consumers grade their service providers.  To demonstrate what I mean, I will tell you about a recent situation I encountered.

We had a simple plumbing problem at our house, and my wife called a plumber.  His name is Donny Hardman, owner of Hardman Septic & Sewer in Conyers, Georgia.  He came out, supposedly fixed the problem, and charged $120.  As soon as he left, my wife noticed that the toilet was still leaking.

She called Donny Hardman, and he initially said he would come fix the problem in an hour.  He did not show up, and ignored all subsequent calls.  Not a bright move on his part.  I work just a few minutes from the courthouse, so I went down there one afternoon and sued him.  The time I spend in small claims court will not be worth $120, but I consider it community service to help rid the community of riff-raff plumbers.

That is not the worst thing I did to Donny Hardman.  I went out to several local search directories and posted a review of him and his company.  As you can imagine, they are not complementary, and over the next few years, they are going to cost him an awful lot of business.  You would think that Donny Hardman would wise up at this point and refund my money so I will revise the reviews, but he is not bright enough for that.  Instead, he tried to change his information on the directories to get rid of the reviews. (It did not work.)

Just this post is going to cost Donny Hardman a lot of business.  In a few weeks, if you type "Donny Hardman plumber" into Google, you will see this post come up.  I doubt many people will hire Donny after reading this.  Too bad, Donny...

My point is this.  Local search and its ability to find out what local people are saying about local businesses are going to put people like Donny Hardman out of business, and that is a good thing.  If you live in Georgia where too many people in the construction and repair industry are like Donny Hardman, you will be especially happy.

The emergence of local search coupled with the emergence of blogging and community sites is a big deal.  If you are a local business, you need to take it seriously.  It is going to make or break your business in the coming years.

Yanni, the entrepreneur

While exercising this morning, I started watching Yanni on PBS. I admit to being a Yanni fan.  I have been to two of his concerts, and will go again when he comes back to Atlanta.

Last time Yanni came to Atlanta, the newspaper here called him “Yawn-i" in their review.  Yanni’s music, like much new age music, is widely considered to be simplistic and lacking compositional depth.  This is at least partly true.  I sympathize with Yanni—I am a musician/arranger, and my music does not have compositional depth either.

I like his music, but when watching Yanni, I am also struck by the fact that he is a natural businessman, and a very savvy one.  While music elitists make fun of Yanni, he laughs all the way to the bank.  There is a lot that all entrepreneurs can learn from Yanni, and here are some of the major lessons.

Yanni has been willing to adapt to the market.
The new age market is full of music that frankly is very boring to many of us.  It lacks some elements that our western ears are accustomed to hearing.  What it lacks in structure, it tends to make up in improvisation.  While improvisation is effective, it gets old after a while.

If you listened to Yanni’s music from the 1980’s, you would probably fall asleep.  At that point, Yanni was stuck in a slow, piano-heavy style.  Sometime in the 1990’s, he decided that the market wanted something else, and if you go to his concerts today, you will hear just enough of his old style to bring a bit of variety to the show.

This change was instrumental in making Yanni a star instead of a wannabe. 

I know how hard this must have been for Yanni because I am a musician too.  Musicians and other artists tend to think their style is best and try to “educate” people to like their style. Of course, this is a futile effort.  Musicians are not supposed to educate people—they are supposed to communicate with them on a deep level.

Like many musicians, we can get stuck in business doing something that does not work because of our own stubbornness.  In effect, we are focused on our own biases rather than what the market needs.  Bias is a killer in business. 

Yanni has created “blue ocean” for himself. 
Blue ocean is a business term that refers to being in a position where you have no competition.  In business, we can open businesses in niches where we are faced with killer competition, or we can look for ways to position ourselves so that we are not competing with anyone.  In effect, we can develop a whole new market niche.

Along with changing his music, Yanni has done something extraordinary.  He has successfully fused together music from cultures all over the world into something that sounds good.  I know of no other artist that has even tried.  If you go to a Yanni concert, you will see classically trained violinists playing with African drummers.  You will see someone playing a hammer dulcimer in a way you never would have thought possible.  You will also see someone playing an Armenian flute that is 3,000 years old.

This fusion of cultures and different time periods within cultures is unique and is worth seeing, believe me.  It has also positioned Yanni in blue ocean.  He is there all by himself.

Yanni is willing to risk money on good ideas.
Along with changing his style and infusing in other cultures, Yanni made a critical decision in the 1990’s that catapulted him into big time.  He hired an expensive orchestra, rented the Parthenon in Greece and put on a memorable concert that most of you have probably seen on TV.  It has been used extensively on PBS stations during fundraisers over the past ten years. 

This concert was the one event that made Yanni a household name.  He has never looked back.  It is important to understand just what Yanni risked on that event.  I cannot imagine just how expensive the orchestra was.  I am renting an 18-piece orchestra later this year, and it is costing me over $1,000 per hour.  Yanni used an orchestra probably of 200 musicians, and undoubtedly spent weeks and weeks practicing with them.

There is no question that the concert cost millions to produce, and was paid for by a person who was not yet well known and probably not yet wealthy.  That was a huge risk, but because Yanni knew he had a good idea, it was a risk that he was willing to take.

Yanni surrounds himself with the very best people.
One of the most enjoyable aspects of watching a Yanni concert is the skill of his musicians.  Besides possessing incredible technical skills, they are ingenious improvisers.  His string players are a good example.  There are numerous technically good string players in the world, but very few that can improvise well. Yanni has a couple of the best string improvisers I have ever seen.

At every position in his orchestra, Yanni has people with incredible talent that are also excellent entertainers.  They are happy people who make what they do look easy.  They are a joy to watch.  The orchestra does not appear to use a conductor, but they stay together remarkably well.

It is obvious that Yanni has not “settled” for sub-par musicians.  You should not settle for sub-par employees either.

Yanni creates an environment that his people can excel in.
From a musical standpoint, Yanni’s music follows a very simple formula.  He uses his orchestra to create a base of sound and then gives his feature musicians an opportunity to improvise on a theme.  They do that spectacularly. 

Yanni writes the music, but in reality, I highly doubt that he puts many restrictions on his feature musicians.  They are working within the theme of the music, but have the ability to do what they want within that framework.

In business, you need to have a framework for your people to work in, but then you need to give them the liberty to improvise and use their skills.  If you have hired good people, you need to turn them loose to do their job.

Yanni knows his own weaknesses and compensates for them.
Yanni is a pianist, but not a great one.  He stands up there surrounded by a half dozen keyboards, but rarely plays much on them.  They are there for show, and I would be surprised if they are all even turned on.  The real keyboard work in the orchestra is done by someone else—an incredible keyboardist that Yanni has hired.

It would be easy for Yanni to play the keyboards himself, and he would do a pretty good job.  However, he knows that for his music to be all it can be, he needs an outstanding keyboard player.  In that regard, he does not let his ego stand in the way of his success.

In business, we need to know our weaknesses and compensate for them by hiring the right people with skills that we do not possess.

Yanni has created something better than himself.
It is a well-known fact that Yanni cannot even read music.  He writes his music using his own shorthand.  If you go to a concert, you will see that Yanni does little more than stand between his keyboards, peck a few notes every now and then, and wave his arms from time to time.

The obvious question to ask is why Yanni is important to his own show.  In reality, his show is bigger and better than he is.  We should all be so lucky as to build something that is bigger and better than ourselves.  That is my passion for my business—to grow it until it is bigger than myself.  When we finally get there, I know I will be humbled by the fact that I am no longer necessary.

Remembering what is important

Recently, we built a commercial building.  Every day, I went out to the job site and checked up on things.  There was a contractor there who was responsible for one of the major parts of the job, and he was there almost every day.  As time went on, we became friendly and spent a lot of time talking.

As the project progressed, it became apparent that the contractor had taken an opportunity to enrich himself at our expense.  He probably did not expect us to get hurt by his action, but what he did ended up costing us at least $40,000.

Understandably, I was very upset when I figured out what had happened.  I would have sued him, but suspected that it would have been a losing cause because of a lot of ambiguity in the contract.  Eventually, we just decided to let it go, but I never talked to him again.

A week or so ago, I got a call from the general contractor on the job, and he told me that he was on the way to a funeral--the funeral of the contractor that cost us $40,000.  He had gone in for a gall bladder surgery, and a fluke thing happened during recovery that ended up killing him.  He was young--probably his late 40's and had a small son.

Suddenly, the $40,000 did not seem so important.  Even though $40,000 may seem like a lot of money to many of us, it is insignificant compared to the gift of life.  I only feel sorrow for the man and even a bit of guilt that I did not handle our relationship as well as I could have.

A few months ago, a vendor stole $13,000 from us.  We wired him money for product that he never sent.  We sued him, but he has disappeared.  We have a detective looking for him, and the story we are learning is not pretty.  There is a nasty divorce that involves domestic violence in process.  He is on the run hiding and his wife is living in a shelter.

It is amazing how fast life can fall apart, and all of a sudden, $13,000 seems insignificant.  I am still trying to find the guy and will sue him if possible, but I am tempted to just let him get away with it.  I don't like losing $13,000, but I sure am thankful I am not in his shoes.

Our country seems to get more materialistic by the year.  In the area I live in, people seem obsessed by money, and throw away their lives to get as much as they can.  That is a poor trade. 

Being wealthy is not worth losing your integrity, health, friends, or family.  It is not worth giving up all your time for either.  Don't live in a huge house if you are never home because you have to work all the time to pay for it. 

A healthy financial perspective keeps me from losing a bit of sleep over the fact that two individuals have cheated me out of $53,000 in the past few months.  Money is not worth losing sleep over.

Good ideas deserve funding

A few posts ago, I discussed business with poker analogies and described my tendency to "limp into the pot."  Specifically, I stated that if you had a good idea, you should shoulder as much of the risk as you can without shoving it off on somebody else or some other company.

In day-to-day operations of business, this tendency to run away from risk demonstrates itself more often than you might think.  One relevant way involves the natural tendency not to fully commit to good ideas.

Your ability to grow your business depends largely on two things:
1) Your creativity and ability to come up with good ideas
2) Your execution of your ideas

Great companies do both of these things well.  Many companies are good at either creativity or execution but not both. 

If you are good at creativity but not execution, your company probably appears to be run by bright people.  However, most likely it cannot seem to gain traction because you run from one plan to another looking for cheap home runs.

If you are good at execution but not creativity, your company also appears to be run by competent people.  However, your growth is slow, and you cannot seem to find ways to break out and differentiate from your competition.

If you asked me if I would rather Vitabase have creativity or execution, I would not want to choose.  They both are equally important, and the fact is that if we plan to succeed, we need a healthy dose of both.

I do consider us to be creative but sometimes weak on execution.  I also think I know why, and I take full responsibility. 

It goes back to my tendency to "limp into the pot."  How that happens is this:  We have a great meeting and come up with a good idea.  I give the idea to someone to implement (along with all the other things already on his plate).  I do not commit other help to the project, and commit a marginal amount of money (if any).  My thought is that we will test it a little, and if it shows promise, we will start investing more into it.

In my mind, we have so many good ideas that I want to "throw the mud against the wall and see what sticks."  This goes back to my days when we would throw up new sites every week with niche products and see which of them could develop traffic and revenue.  Few of them would, but if only 10% of them did, they would easily pay for the cost of all the failed ones.

That tactic may have worked in the past online, but those days are gone.  Weak sites do not perform well anymore.  If you want a site to generate any revenue, much less a lot, you are going to have to invest in it.

With this being the case, my philosophy has had to change.  We can no longer "throw mud against the wall."  If we have a good idea, we have to commit to it, and take on some risk. 

If you do not have an idea that you are willing to take a risk on, it is not a good idea.  Go back to the meeting room and come up with a new idea.

In our world, taking on risk means dedicating the right amount of people and money to a project so that it actually has a chance of succeeding.  That means we have to be more selective of which ideas we will take on, because we do not have enough people to properly execute every idea we have.

My commitment to our people is that if we are going to try new things going forward, we are going to do them at an industry standard level.  If we are building an interactive tool for a website, we want it to be the best in our market.  If we start a marketing campaign, we want it to be the best in the market.  For that matter, we want our websites to be the best on the market.

This approach is expensive but necessary.  Good ideas are worth the risk or they are not good ideas.  If you find yourself trying to push the risk off of you onto someone else, you are setting yourself up to fail.

Lawyers

I thought that some lawyers only chased ambulances and accident victims.  How the world has changed.  Today, I got a fax from a lawyer in Salt Lake City.  He informed me that we have been sued in federal court there.  I guess he has some way of keeping track of who is suing whom.  He also thoughtfully provided some information about his firm in case I need to hire them.

I have not even been served with that lawsuit yet.  I suppose it is good to get the advance notice, but these lawyers sure seem desperate these days.

Last time I was sued in federal court in Utah, a lawyer named Paul Droz (now lives in Nevada) tried to run off with $20,000 of our money.  He tried to rip off the wrong guy.  I tenaciously fought to have him disbarred, and am glad to say that I was successful.  Even though I successfully reduced the lawyer pool in Utah, it seems that some lawyers are still hungry.

Anyway, back to my lawsuit.  I have not seen it yet, but have been told what it is about.  It is typical harrassment by a large company to try to force us to stop competing against them.  Unless there is something interesting in their complaint that I do not know about, we are going to bury them in court.  Their case is 100% nonsense.  It is unfortunate that companies are allowed to file claims like that, and is a great example of why loser should pay all attorney's fees and court costs for both sides.

I do not trust many lawyers out there, but there is one that I like a lot and use regularly for these kinds of things.  She is a bulldog, and I am going to turn her loose on this company.  I will share much more about this as I find out more.  These kinds of things drag on forever, and generate great stories.  Because I have not actually seen the lawsuit, I will not name the company at this time, but will do so shortly.

Going "All In"

I like watching poker on TV.  In many ways, poker is like life--you are dealt a hand that you have no control over, but how you play it is largely up to you.  Lousy hands can win a lot of money, and great hands can lose a lot of money depending on how they are played.

There is a phrase in poker known as going "all in."  This refers to a player putting his entire stack of chips in the pot.  In other words, he is risking everything he has on that hand.

Going "all in" can be smart or stupid.  Regardless, sometimes it is necessary.  I have seen players risk millions of dollars on one hand when they go all in.  Sometimes, they do not even have good cards.

In business, there are occasions where you might have to go "all in" to be as successful as you need to be.  Our entire economy tends to reward people who are willing to take high risks.

"Limping into the pot" is another poker term.  It refers to bidding enough to stay in the hand but not enough to scare the other players into folding.  This strategy is not so effective and usually is a sign of weakness.

From a business prospective, I have a tendency to "limp into the pot."  This goes all the way back to 1999.  I had a friend who told me I needed to start a web site.  I researched and found out I needed about $2000 to get started, and I was unwilling to put up that much money.  I asked him to put up 50% for half the business.

You can guess what happened.  Before long, I was doing well online, and realized I was in a situation where I could not continue to do most of the work for only half the profits.  I had to make a difficult decision to either shut down the business or buy out my partner. 

My partner agreed to be bought out, but it conservatively cost me about $100,000 as I paid him off over the next few years.

If I had "gone all in" and risked another $1000, I would have come out way ahead.

You would think that I would have learned from that situation, but I have not learned as much as I should have.  Several times, I have gotten stupid and either not invested enough in a project to ensure its success, or tried to reduce my risk by getting other investors involved.

A year ago, we purchased commercial land and built a warehouse.  When you build, the larger the structure, the smaller the cost per square foot.  I came up with the idea of building a building twice as big as we needed and finding a partner to buy the other half.  I thought that would reduce my cost per square foot.

Everything went fine until the building was finished and we moved in.  Immediately, we had problems with the other investor.  I am not going to go into the problems, but it was clear that our philosophies were too different to be partners.  Within two months, you guessed it--I had to buy him out.

Now we have a building that is too big for us, and I need to lease that extra space.  It is costing me a lot of money in the meantime.  Also, we configured his part of the building to his specs, which are not likely to be required by a tenant, meaning that we wasted a lot of money on building materials that will soon be ripped out.

When you add it up, I would have come out way ahead by building the building without any other investors.  Instead, I "limped into the pot."

The moral of the story is this:  If you have a good idea, go for it and accept the risk as much as you can.  Trying to push the risk off on someone else will cost you dearly if you are successful.

In my next post, I want to discuss how not fully funding projects is another dangerous example of "limping into the pot." 

My other blog

If you are a consumer of nutritional supplements, you might be interested in my other blog at www.insidesupplements.com.  I give a prospective from inside the nutritional supplement industry that you will hear nowhere else.

Buyers remorse

Every few days, I feel the need to wax philosophical.  When I post from a philosophical standpoint, I try to at least have a business focus.  I understand that no one cares about my personal life and no one wants to read about it.  If you did want to read about other peoples' boring lives, there are about two billion boring blogs out there to read.

I want to talk about buyer's remorse today from an entrepreneurial standpoint.

If you have ever read the book The Millionaire Next Door, you know that most affluent people don't act "rich."  They drive older cars and live in modest houses.  I would say that for the most part, I am that way.  I have a 2000 Mercury Villager and a 2001 Toyota Tundra with dents on it.  Our house is nice, but not outrageous. 

Let's just say that when compared to many of my friends, I drive less expensive cars than they do and live in a less expensive house.  We do have a maid--she drives a nicer car than we have.

At least, she drove a nicer car than we have until last night.  Last night, I bought a new car for the first time in my life.  It is not an overly expensive luxury car, but is still very nice.

I have to admit that I have buyer's remorse about that car.  The explanation of why is a good example of why I think some people are affluent and others are not.

First, understand that affluent people are overwhelmingly business owners and entrepreneurs.  The quickest way to wealth is owning a business.  Successful business owners tend to see the world differently than other people in these specific ways:

1) Entrepeneurs look at money as entrepreneurial opportunity. In our society, most people see money as the means to security and happiness.  They think money is for buying toys.  That is why broke people often live in nicer houses and drive nicer cars than multi-millionaires. 

On the other hand, entrepreneurs see nice cars and fancy homes as liabilities that depreciate.  Affluent people try to keep their money in things that appreciate as much as possible.  While homes do appreciate, the fancy things in them often do not.  For example, fancy electronics become outdated on a yearly basis.

Rather than spending money on a car that will depreciate steadily over the next three years, entrepreneurs would rather invest the money so it will double over the next three years.

2) Entrepeneurs are more sensitive to the inherent risks of life.  While most people in our society have no cash reserves, successful entrepreneurs usually are liquid with many of their investments so that they have a large cash reserve.  In other words, they want money available because they understand that we are all just a few bad breaks away from going broke.  When you live with risk every day, you tend to respect it more.

3) Entrepreneurs are motivated more by challenge than toys.  I often say that I can walk through a mall and never see anything I want.  I am not bragging, but it is true.  My friends will tell you I dress like a geek but I don't care very much.  I am passionate about certain things in life--family, my relationship with God, business, and music to name a few.  I just am not passionate about toys or big houses.

I am not implying that entrepreneurs are superior to other people, but I am saying that they think differently.  We also tend to be over-confident (arrogant), unbalanced, and too tight with money.  I fight all of these things.

My entrepreneurial instincts have been bothering me about buying a new car.  But perhaps I am learning to bring some much-needed balance to my life.  Life is not about how much money you have when you die--it is about a journey.

I am reminded of the time I went on the road to Hana in Hawaii.  If you have never been on the road to Hana, it is perhaps one of the most beautiful stretches of road in the world.  It is probably a 20 mile drive of great things to do and see, but when you get to Hana, you will be disappointed.  Hana is just a small unremarkable town.

Entrepreneurs like me tend to get on the road to Hana and try to beat the record for getting there.  We forget that that the road to Hana is not about getting to Hana--it is about an experience.

Buying a new car is not going to make me any happier, but it is something I wanted to do.  It is also a good reminder of this truth.  Life is more than building a business and amassing as large a fortune as possible.  It is about making the most of the experience itself.

Now that that is off my chest, I will get back to web strategies next time.

About web designers

I noticed last night on the way home that a little computer shop has a big sign up promoting their web design services starting at $395.00.  Since web design is a big issue for everyone in the business, I thought I would share my thoughts with you.

Most web designers are awful.  I would say that 95% of them are extremely bad.  We have hired several designers over the years.  We run ads on sites such as CareerBuilder and get hundreds of resumes.  At that point, we weed through them primarily by looking at portfolios. 

Don't think of hiring anyone without looking at his portfolio.  A quick look at the portfolio will usually tell you if you are dealing with a designer or some programmer who thinks he is a designer.

The portfolio is a first step, but not the most important step.  Often, portfolios can be deceiving.  Designers have a bad habit of putting web sites in their portfolio that they worked on with other designers.  They might have actually done only a small part of the design.

The most important step is to ask the designer to actually do some work for you.  An interested designer will be glad to design a sample page for you.  You might be shocked by the results.  Often, the work you get is of a very different quality from the work you see in his portfolio.  You can expect that the designer will be doing his/her best work for this sample, and unless it is very good, proceed no further.

The rates charged by designers are not representative of quality.  If you do not want a full time designer but are looking for someone to design a site for you, do not believe for a second that paying more will get you better results.  There is at least some correlation between price and quality, but there are enough bad designers charging a fortune for their lousy work that you must ignore the temptation to think spending more will keep you out of trouble.

If you are a smaller business looking for a site that does not contain an online catalog or other technical features, you can get a very professional site design for less than $1000.  If you have an online catalog, you might need to pay a few thousand dollars.  A larger site with ecommerce capability might cost up to around $5000.  If you are paying more than these prices, you are probably paying too much unless you are very serious about the business or have more technical requirements.

To conserve money, I have two great options for you:

Buy a template from a place like Template Monster.  They have templates of incredible quality for ridiculously low prices.  Keep in mind you may need a designer to tweak the template for you, but you will still come out way ahead.

Use Elance or a similar site to get bids.  This is a great way to take advantage of offshore development.  Indian designers will do great work for a fraction of what you would pay for top notch designers in the US.  Be sure to look at portfolios before choosing a designer this way.

Remember that the design itself may be subjective, but if you are interested in selling online, there are rules to follow to increase conversion.  If you can find a designer that understands the marketing aspects of web design, you will come out way ahead.  However, such designers are few and far between.