How much does a website cost?

This is a question that as a web designer I encounter very frequently and it makes complete sense for any potential customer to ask it. 

I must admit that over the years I’ve given numerous answers, from ‘how long is a piece of string?’, to ‘All websites are different. There’s no standard cost’ to simply ‘What’s your budget?’. Not all of these answers are helpful. After all its a genuine question and why would someone not in the industry understand what's involved in producing a website thus know what it costs? And, there are a plethora of companies advertising websites for anything from free (yes really!) to many thousands. Why would a layperson know the difference?

I consider it my job to educate customers into knowing what's involved, the time it should take, the options available, thus how the cost is decided upon.

Recently I have been successfully using house extension analogy, which I have discussed with several  friends of mine in the building trade to make sure I'm talking sense! I would rhetorically ask the customer, would they simply ask a builder, 'how much does a house extension cost'? For the builder to answer that they would need to know several things such as what is the extension going to be? Is it a conservatory, a kitchen or bedroom? Is it one floor or two? Are finishing or decorating required? And many more questions besides.

This seems to make much more sense to people and I can then ask the relevant questions required or send them a Project Briefing Sheet to fill out which has the relevant questions on. One thing to note is that one of the questions on the sheet is 'what is your budget?' This is not a trick question. If you think about it there is no point us spending the time preparing a quote for your visionary website which comes to £5000 when you only have a budget of £500. It wastes both of our time.

I remember one specific example of this. When starting out many years ago, a dentist came to see me and had all these wonderful ideas for his website. It sounded a really good inventive project at the time and we discussed it in detail. However, I didn't ask him his budget.

When I costed it up after our meeting I believe it came to around £3500 - £4000. When he saw the quote and I didn't hear from him in ages, I guessed there was something up. I did eventually find out from him that he was expecting around the £500 mark. By then he wasn't interested in discussing phased development or scaling it down. He was simply too shocked at the price. I've no idea whether he got it done elsewhere. 

When managing projects directly nowadays I always ask for the budget. It makes things so much easier in managing client expectations. For the client above, had I known his budget straight up, I could have told him that wasn't realistic for what he's after and we could have discussed other options.

What sort of responses have you had when you've asked a web designer/developer how much a website costs? And if you're in the industry, how have you explained costs to potential customers?