Like you James I come across many people who have paid considerable amounts to have a web site that is worth ziltch ,in terms of earning a revenue.
Not so sure one can lay all the blame at the feet of web designers,as I believe it is more a case of the blind leading the blind in many cases.And quite often a client will insist on a particular type of site which is very often not good SEO wise.
I gave up doing SEO for the general public some years ago,as I realised that very few web based business's were going to make it.
I now look for an idea or a product that I consider a viable proposition and will then build the site,do the SEO and provide any capital needed.
For this service I charge 50% of the profits.I believe this to be the fairest method of working possible as if I do not perform I do not earn a penny,and I am the one who has taken all the risks as the business owner has had to do nothing cost wise or work wise.
So far all concerned have been very happy with the arrangements.
I am at present not taking on anymore projects owing to the need to get out more.
Alvin