For what reason does one choose Magento? For its extensive functionality, of course! We’re confident that no other framework comes close to Magento in this respect.
However, as we’ve already mentioned before, it’s not for everybody.
The main reason for this is the required budget: Magento development is not cheap, since it requires highly skilled professionals who guarantee the delivery of a high-quality product.
Questions about development costs are the most frequently asked ones that Magento development companies encounter.
Giving an estimate on the development costs is not easy: prices change from year to year, vary region by region, there might be huge differences in available resources, affecting either time or project based Magento pricing alike.
The purpose of this article is not simply to provide you with pricing information.
We will explain why Magento costs what it costs, why you still shouldn’t cut corners, and how to avoid being ripped off.
This way you can better estimate your ecommerce budget and avoid any surprises along the way.
We will discuss the following topics:
- Magento Community vs. Magento Enterprise Edition
- What Everybody Should Know About Extensions
- Magento 1 vs. Magento 2
- In-house vs. Third-Party Development
- How Much Does In-house Development Cost?
- Web Development Agencies vs. Freelancers
- Experience and Professional Approach
- Magento Pricing by Agencies
- Magento Developers in 2017 – Interview with Kalen Jordan
- What You Should Always Keep in Mind (About Quotes and Other Factors)
- Magento Hosting Prices
- Price Categories
- Low-End Magento Store
- Basic Magento Store
- Custom Magento Store
- Magento Enterprise store
- The Real Question Is: What Do You Actually Need?
Magento Community vs. Magento Enterprise Edition
First, you have to decide which Magento edition you want. This already has a great impact on your budget.
The Magento Community Edition is free, however, it comes without support.
Any customization has to be taken care of by you, an agency, or freelancers.
Enterprise Edition is not free.
Magento enterprise pricing: The Gold Support package costs more than $22,000 a year. The Platinum Support package costs even more, and you have to pay commission based on traffic.
In return, you get support, improvements and features that speed up the webpage, database management, and so on.
To achieve the same level of functionality with Community Edition, approx. 65 extensions are required. (Depending on what modules we actually need.)
After the launch of Magento 2, licenses for new Magento 1 Enterprise Edition stores are no longer available.
Renato Medina has published a collection of information on the new pricing system on the MDN blog.
The license cost is based on a revenue model. The higher the revenue band you fall into, the lower the percentage that has to be paid to cover the fixed license costs.
A Magento 2 EE ecommerce store costs $22,000 whether it generates revenue or not. Above a $100 million revenue the support might cost $250,000 per year.
Prices are 20% higher in the Platinum package.
If the license is not renewed after the first year, the ecommerce store remains functioning, however, without further support. This means all updates have to be made by the owner or a third-party developer.
Extensions, of course, can be purchased. Most available extensions are more expensive for the EE than the CE.
What Everybody Should Know About Extensions
It is not easy to decide which extensions we actually need. Making an educated decision requires a deeper understanding of the available choices, their functions and performance. Even experts need some time to make the right decision.
The chosen modules then also have to be installed.
Installing extensions can take a lot of time, even under ideal circumstances.
Let’s say, a professional developer needs two hours to install an extension. Even if you only need 10 out of 60, installing them adds up to 20+ hours of work, probably involving even more people, since they have to consult the management, the hosting service provider, and maybe even marketing professionals.
Depending on the hourly rate of the developer, installing as few as 10 extensions might cost you $3000-4000 even under ideal circumstances (which is not very likely).
Then, it’s time for performance optimization with the new extensions. Learning how to use the modules also takes some time.
You can read more on developer and agency pricing soon.
Magento 1 vs. Magento 2
Picking the right Magento version is also important.
The tens of thousands of ecommerce stores currently running Magento 1.x versions generate tens of millions of revenue annually.
For completely new projects, it is advisable to think long term, and choose a Magento 2 platform.
In case of Enterprise Edition, Magento 2 is the only available option.
In-house vs. Third-party Development
If you don’t want to outsource the development to freelancers or agencies to stay in control of all processes, you will still need to involve other professionals besides developers.
Even in the simplest case you’ll need a designer and a UX expert to ensure meeting basic visual and user experience requirements.
As we’ve already mentioned in an earlier article, even picking the right colors may play a major role in achieving your goals – that’s why you need a dedicated design professional.
Somebody has to specify realistic business requirements and – taking the target audience, the product, the competition, etc. into account – the essential functionalities to achieve them, and prepare specifications for the project.
A frontend professional’s help might be necessary for the development of frontend functionalities.
And, of course, you will need a project manager to coordinate the development process.
More complex solutions require the involvement of additional professionals, such as ERP integration specialists or 3D model designers.
Building an in-house team is a pricy and complex task.
Building your own in-house team focusing solely on this project might still be worth it, if you’re expecting to make a multimillion-dollar annual revenue.
How much does in-house Magento development cost?
Experience has shown that the in-house development costs of Magento CE and EE are similar.
Hiring a junior developer (with less than a year of experience) costs $60-80,000 a year and a senior developer costs at least twice as much. A developer with some experience will cost you around, let’s say, $120,000 a year.
You can add server, software, and other equipment-related costs to this.
Even for bigger enterprises, this has its risks, since building a team from scratch is not easy. For a team to work most efficiently, its members have to be accustomed to one another and it makes it easier to trust them if they already have good references as a team.
This is why working with an already existing – and experienced – development team or agency might be a good idea for even the biggest enterprises.
Web Development Agencies vs. Freelancers
There are numerous aspects that have to be considered when deciding between these two options.
Working with freelancers is usually cheaper, there’s a reason, however, why agencies cost more.
The following list of important aspects helps you make this decision:
Availability is one of the weaknesses of freelancers compared to agencies.
This is not about expertise or personal qualities: just imagine a scenario where your freelancer falls ill and can’t work on your project.
At an agency, life doesn’t stop if one person can’t work – a developer can be substituted by colleagues. There are probably more developers working on the project anyway, who know enough about it to be able to carry on with the development.
Our experience has shown that clients who contact us for our project rescue services, named uncoordinated communication and the lack of project management as the main reasons for not hiring freelancers.
It’s not easy to determine the pricing for freelancers.
The cheapest developers (typical of South-East Asia, India, Pakistan) may work for as little as $10-20 an hour.
The typical hourly rates range from $20 to $60 in Eastern Europe, while in Western Europe, the UK and the US it’s around $150-200.
Everybody has to decide for themselves whether they believe that the lowest price range can guarantee actual quality – in our experience, it’s not a good idea to entrust freelancers from this pool with a complex project, and expect a customized, high-quality product.
However, hiring them to install Magento templates or modules is less risky.
Experience and professional approach
Entrusting a freelancer with a complex project might mean that they will approach it from only one point of view, with less emphasis on the bigger picture.
A Magento agency offers several professionals who can develop a system functioning well in every aspect, by approaching challenges from different viewpoints.
A professional agency might charge $20,000-60,000 for a Magento website with a basic functionality and visual appearance.
Obviously, as little as a couple of thousand dollars might get you a Magento online store – if you hire someone who uses auto installation to install Magento templates worth only a couple of dollars, without doing any actual development work.
Magento Pricing by Agencies
Looking at agency prices, you might find different pricing approaches.
It’s common practice to set a project minimum – check out our infographic to see what minimums are set by agencies in the US and on a global scale.
Developers with lower prices in Asia or South America are typically freelancers, so you will find less agencies with low prices there.
Western European agencies typically work on bigger projects with $20,000-50,000 project minimums.
As opposed to this trend, there are numerous smaller teams in America that specialize in smaller projects.
Another approach is when agencies set a monthly price, usually starting from $7,500. This might be the best option for long term projects with complex development requirements.
There are agencies – usually targeting smaller projects – that don’t set project minimums at all.
Always pay attention to what is covered in the quote.
It’s not easy, even for an experienced developer, to determine an exact price, but the elaboration of the quote is a good indicator of a team’s professionalism.
For instance, items like design, SEO, frontend and backend development, and support listed separately is a good sign.
We’ve consulted CommerceHero.io, a Magento professionals hire service site, to get a deeper insight into agency and freelancer pricing. They list hundreds of developers and agencies specializing in Magento.
We’ve examined freelancers by region and by types of certifications.
Basically, the more qualified the developers, the higher their hourly rates.
Compared to a Certified Developer, a Solutions Specialist can ask $10-30 more per hour, regardless of where they are based.
Regional differences are not surprising.
North American developers have the highest prices, followed by Western European, Eastern European, South American developers respectively, and prices in Asia are only half as high as those in the US.
If you’re looking for a developer and want to check out the options in your region, we recommend this site. It’s free and its filters work great.
Now let’s take a look at global Magento development freelancer rates:
As for agencies, the following prices can be considered as project minimum rates, in different countries:
Q: What trends do you see unfolding in the ecommerce professionals job market?
A: I’m not sure which way it’s going, but I want to figure out whether more people are hiring developers in-house as merchants as opposed to hiring agencies. I see everything happening: people bringing developers in-house for merchants; developers, solutions, consultancy with merchants moving to agencies; people moving from agencies to freelance – you see it going in every direction. This is something I’m trying to figure out, but it’s probably going to take a little bit longer to understand better.
Q: Do you think developers are keeping up with Magento 2 development challenges? Is there a shortage of high caliber Magento 2 developers?
A: You’re definitely paying a premium for Magento 2 development talent, as not many teams have experience with it. There is a super high learning curve – a lot of people say learning Magento 2 is almost easier without the Magento 1 background, because it’s so different.
At the same time, obviously the vast majority of people learning M2 are M1 developers. We’re seeing more and more M2 work go through Commerce Hero. It’s definitely come a long way in the last 18 months having bug issues with M2’s earlier versions. I think we’re over that hump and I’m starting to see more and more projects, more and more developers that are comfortable with Magento 2.
You’re definitely still paying a premium for that though because it’s early on. I was and am very wait-and-see on Magento 2, it’s not totally there yet, but I see more and more of it.
Q: How flexible these minimum individual / agency prices for Magento development can be in your opinion?
The rates that you see published on Commerce Hero tend to skew a little bit high. Most people, it depends whether you’re looking at an individual or agency etc., can store a private rate, a minimum rate they will be willing to accept. Those can be anywhere from 10% to even 50% lower than what the published rate is.
The rate skewed a little bit high because of the way the site was seated, with top level developers posting their highest rates. So we do have private data which tend to be 10-50% lower. We’re working on building a matching workflow where you’re getting matched up based on your requirements, and we’re able to match that up based on what we know about their minimum rates as well as their published rates. That way we can keep people’s privacy intact but also match up based on budgets.
Q: Do you have any crucial insights you think every e-merchant should know about in 2017?
A: I’m really not sure that I do… I come from a development background and I think the merchants know what they are doing to be successful – they know their product, they know how to market, they have great content. Obviously, if their technology is super whack, they’re gonna run into big problems.
I feel like I don’t even know enough about the business of retail to necessarily give advice. One thing I see, as far as some of the projects I see come through, just something that came top of mind, is that people are moving to AWS.
Probably because there’s a certain hype to it, but I definitely think AWS is super useful for a lot of types of merchants, particularly if you have very spiky traffic or if you’re out a certain scale. I see merchants that maybe are paying 20-30 bucks a month move to AWS, now they are paying $200 a month and they are paying more than that to the development retainer.
To be fair, full disclosure, Commerce Hero’s in partnership with MajeMojo, which is a hosting company, so I have some incentives here, but I really do feel like some people are moving to AWS just for the sake of moving to AWS – particularly the smaller end of the scale for merchants, in the $500,000 to $1,000,000 range where they’d probably be better off with managed hosting.
Q: Why did you think it would be important to create a dedicated Magento developer hire website?
A: I’m generally not the type of person that does a lot of looking at competitors, like doing competitive analysis, that’s not my strength. Really the only reason we thought it’d be important to do is hearing the pain point over and over: people say “Man, it’s so hard to find a developer.” “I need to hire a developer” “I work with somebody and they were crappy.” “I work with an agency, they were bad.” On the flipside, I know solid developers getting paid less than I know they could…
So just seeing that over the past 3-5 years, made me and Eric, my partner, feel like there was a need for that.
Q: You don’t include agencies unless they have at least 3 certified developers, already listed as individuals. Why is that so? Don’t you see any conflict here? Don’t clients go for the cheaper rates of individuals instead of hiring agencies?
A: I don’t fully remember, but I think there is something in the algorithm at some point where if you have less than 3 team members, that reduces your ranking so you may not show up on certain landing pages.
I think the main thing there was just incentivize getting a certain number of team members linked up to the agency. Otherwise they could just create an agency without any team members linked up to it. I saw that if they had at least 3 people linked up to it, they tended to have a more of a robust profile on the agency and the team members.
And for the last question, “Don’t clients go for the cheaper rates of individuals instead of hiring agencies?” – this is similar to the first question about the trends, whether people are hiring in-house or they’re hiring freelancers instead of hiring agencies…
We’ve started doing more and more agency referrals, we’ve seen agencies sub out to other agencies even, we’ve seen merchants hire agencies. I think people’s preferences are usually pretty clear when they want to work with a team if they worked with an individual in the past and it didn’t work very well, they know they wanna work with a team.
We usually try to find out what range they’re looking for as far as what kind of rate they’re looking to pay and if they’re in that agency range, we’ll give those options.
So I think you’re seeing both. Part of the goal here is to open people up to be able to work with individuals with less friction – when you hire a freelancer directly, there’s a lot of risk, friction, and uncertainty about their schedule.
That’s definitely something we’re trying to sell for and hopefully improve that experience. But at the same time we’re also referring business to agencies. So on balance it’s hard to know exactly which way that trend will go.
What You Should Always Keep in Mind (About Quotes and Other Factors Related to Magento Pricing):
There are many things to keep in mind when requesting quotes.
The most fundamental: development agencies and freelancers can hardly give you an accurate estimate for the project costs in advance.
In most cases, we get estimates in quotes, while the invoice will be based on work actually done.
There’s a certain duality about this situation.
Obviously, the client would like to know the exact costs of the development project. The developer, however, cannot commit to an estimated price and risk getting into a hopeless financial situation.
The best thing clients can do is to ask for a minimum and maximum estimate, and plan the budget according to the latter.
Watch out when a developer promises a suspiciously short development time. Developing Magento websites takes time and requires advanced PHP development skills.
Don’t fall for promises of getting a complete and functional ecommerce store in a week. (Just think of the time simply installing extensions can take, as mentioned in our example earlier.)
Additional costs may arise whether you have an in-house development team or outsource the project.
A customized design also adds to the budget (the designer has to actively cooperate with the developers).
Never cut corners when it comes to expertise!
A junior developer or a single PHP developer won’t be able to build a Magento store single-handedly.
Such projects require the involvement of both frontend and backend developers, SEO and analytics experts, web designers and graphic designers.
A single freelance developer can successfully handle installing extensions, but not the entire development of a complex project.
Before accepting quotes from developers or agencies, always make sure to check their references. Especially those of foreign developers: be absolutely sure that the work will get done and you will get a quality product.
It’s never a one-time expense.
You have to stay on your toes in the volatile ecommerce environment, you need constant development to keep you ahead of the competition, changing technologies, and channels.
You will constantly have to spend on keeping your ecommerce store up-to-date, user friendly, and fast.
You might get a functioning one for a couple of thousands of dollars, or find a developer who covers the most necessary tasks for $30 an hour, but this won’t be enough to make you stand out from the competition, ensure a better user experience, or guarantee growth.
Use your profit to facilitate growth. If you have a $2 million annual profit and your business is growing fast, do not hesitate to spend $100,000 on development.
Even a 10% increase in sales as a result would mean you have doubled your initial investment.
Magento hosting prices
Magento’s strengths, such as it comes with an amazing number of features, it’s customizable, and can be made as complex as needed, also mean that running it at optimum performance is resource intensive when it comes to hosting.
Magento’s own hosting service – an option for EE users before 2014 – is no longer available. This means that you’ll have to find your own hosting solution.
Running an EE ecommerce store requires at least a dedicated server.
Many times, hosting costs are not considered when setting up the budget for a project, however, finding the right hosting company is essential for starting a successful business.
For CE users, shared hosting might be a viable option, with prices starting from $150 a month, while dedicated server cluster hosting – needed for more resource-intensive projects – may cost as much as $4,500.
Questions you need to ask yourself when choosing a hosting company – some might even be familiar from our article on Magento AWS hosting:
- How many visits / day do you expect?
- What’s the number of sessions / month?
- What was the highest session value at peaks during the period?
- What is the incidence rate of these peaks per business year?
- How many concurrent sessions do you expect on average and during peaks?
- Where is your target market located geographically?
- Which version of Magento store do we want to develop or migrate?
- How large is the SKU (Stock Keeping Unit) in your current ecommerce store?
- Will you be using SOLR, Elasticsearch or Sphinx search?
- Will you be using Magento Payment Bridge?
- What are the specifications of the current server(s)?
- Will shared hosting be sufficient, or will you need a dedicated server or even a server cluster as a hosting environment?
- What external systems does the ecommerce store communicate with and are there any plans for expanding this list (database type/size, billing software, ERP, CRM, etc.)?
- Will you be using application performance tools (such as Pingdom, New Relic, etc.) to monitor your website’s performance?
- Will you need a content delivery network (CDN)?
Shared hosting might mean lower costs, but it also has its limits: it’s not the right choice for ecommerce stores with bigger traffic.
Thinking long term, more expensive, dedicated servers, rented from professional service providers are the right choice.
Shared hosting services cost $20-120 monthly, depending on your needs.
Dedicated servers cost $500-750 per server monthly.
Magento Pricing Categories
Low-end Magento Store
Price range: $1,500 – $5,000
If you ask some experts about the cost of creating a Magento web store, they’ll probably tell you “At least 10-20 thousand dollars”.
We’d say this is only partly true. You can have a functioning Magento store for as little as $1,500.
But we wouldn’t recommend creating such a store.
For such a low price you can only find very cheap freelancers who offer only the most basic installation and then there won’t be any budget left for more features and further developments.
There is, of course, a good number of small and medium sized enterprises that use Magento, but the very essence of this platform lies in its complexity, sophisticated features and a huge array of possibilities for development and customization.
Such a low budget does not allow for harnessing all these possibilities. Therefore, other ecommerce systems such as BigCommerce or WooCommerce would probably be more suitable for serving the simpler needs of a smaller business.
Basic Magento Store
Price range: $10,000 – $40,000
If you want to switch to a new ecommerce system or you’re about to start your online business and are thinking about using Magento, then this is the minimum budget you should calculate with – and it’s just enough for having a range of basic features.
As we’ve seen earlier, thousands of dollars may be spent on installing the necessary extensions alone.
That said, you can get the latest version of Magento CE, a default or very cheap theme and the most important features added for this price.
This includes Magento system, extension and theme installation tasks performed by a pro freelancer or a smaller agency, minor web design customizations and setting SSL parameters.
However, any developments, complex extension installations, custom modules, unique appearance, or back-office system integrations are beyond this cost range.
Custom Magento Store
Price range: $40,000 – $100,000
For this price you’ll get a custom Magento ecommerce store developed by a pro agency, meeting basically all your expectations.
The point is, you need to maintain a budget in the long run for ongoing developments, hosting services, and expansion plans.
In this price range you can have customized extensions and features that suit your product range and business policy.
User experience can be improved thanks to thorough testing and you will also be provided with a custom website appearance, created by pro designers working together with frontend developers.
Here you can also take advantage of tailored features like making coupon offers, sending out newsletters, publishing content and using sophisticated search solutions.
Additionally, you can enjoy the benefits of advanced support and testing services as well as detailed service documentation, guaranteed store performance and data migration from other ecommerce store systems.
Magento Enterprise Store Pricing
Price range: $100,000+
Magento Enterprise Edition, “The World’s Most Flexible, Customizable Commerce Platform”, is an online store platform developed for large companies (costs related to it have been mentioned earlier in the post).
- mobile friendly appearance,
- multi store environment,
- default extensions,
- search engine optimization (SEO),
- targeted special deals,
- customized coupon offers,
- retargeting and remarketing tools, etc.
The real question is: What do you actually need?
Magento is not the best choice for small and micro enterprises.
As we’ve mentioned in earlier articles, for launching smaller ecommerce stores not expected to generate revenue exceeding $1-2 million, other, free and easily customizable platforms might be a better choice.
The reason for this is that Magento development is not cheap.
The smallest ecommerce stores don’t require such diverse functionalities Magento can offer, but it is essential for medium and large enterprises that have to be able to afford developers, even agencies, to stay ahead of the competition.
It is also a question of long-term thinking.
As we’ve mentioned earlier, Magento is not a one-time expense when taken seriously: it requires constant development and refinement to respond to market volatility.
This is why Magento is not the best fit for those who don’t have $100,000-200,000 allocated for customized development.
Such small ecommerce stores can be launched by working with freelance developers. Even though these can be profitable, there’s small chance for considerable growth in the long run.
Of course, many ecommerce stores use Magento – we’ve already written about their market share – many of these don’t generate profit or are not capable of growth.
90% of new businesses have to file for bankruptcy – due to their bad business policies, and not because of their Magento based ecommerce stores.
Investing in ecommerce stores works the same way as investing in physical stores. If it’s in a bad shape and the cash registers aren’t functioning well, it’ll scare potential customers away, right into the hands of your competition.
On the internet, they don’t even have to make a real effort to find a better store.
If you can afford to invest $100-200,000 into a Magento web store while paying your employees and investors, while also investing in expansion in other areas (marketing, for instance), and have a budget buffer (expecting the unexpected), then you should definitely invest in your future.
If improved functionalities, payment methods, and user experience result in a 10% growth, your investments will probably pay off – and a customized system can do so much more for you.
As we’ve discussed it in our earlier articles: with the support of the right online marketing tools, and working with professional developers, achieving a 10% growth in revenue using a Magento ecommerce store is a realistic goal.