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You’ve got a great idea for an app. Like really great. Maybe even the next Snapchat.
You know the idea is brilliant, but you’ve got zero idea what type of investment you need to get it off the ground.
But come on, with 2 million apps available in the Apple and Android stores, surely it can’t be that hard.
You’ve read the newspaper headlines “19-year-old builds app in his dorm room, now runs a Silicon Valley powerhouse!”, or “Couple sell app for $10M! Start brand new life on tropical island and spend days eating squid and riding quad bikes!”
That could be you, right?
After all, you love tech, you’re full of great ideas, and the “Appreneur” lifestyle is totally you. But how much cash do you need? And how the heck do you actually get started?
You are me exactly 12 months ago.
After 10 years of desperately wanting to start my own business, I had a great idea for an app that I knew would help thousands of people make money using Instagram. I had no app experience, but a gangbusters startup mentality, hyperactive amounts of passion, a little extra cash in my pocket, and a ridiculously optimistic attitude.
Through my research, I found that apps with small functionality can be built from $20,000 and those with much heavier functionality can reach over $200,000. WOAH. Way more expensive than I thought. I weighed all the pros and cons and came to a conclusion: $20,000 for a business that I get full control over and get to build myself? I decided to go for it.
Of course, everyone’s experience is going to be different. In execution, costs can vary wildly, and a lot of it depends on your own personal skills and connections. But I thought it would be useful to walk through my experience—as someone who dove head first into building software with practically no experience—to offer detailed information and bits of insight I wish I had known before getting started. These are all the real figures that I personally experienced in my first app-building undertaking.
I hope you find it useful as you take on your own entrepreneurial adventure!
FIRST THING TO CONSIDER:
Question 1: Are you going to go gung-ho and throw your entire weight behind your app? OR, are you going to build a barebones, super-simple version of your idea (a Minimum Viable Product, or MVP) and try pitching for full funding and investment to fully build out your idea later?
To decide between the two, you might assess if you’re likely to turn a profit straight away, how much money you have for scalability after launch, or how confident you are at asking friends or family (angel investors) if they’ll join you when things get tough.
If your idea is world domination and you’ve got few funds, you might be heading down the MVP route, and you will need to prove to investors later that they’d be making a good decision on your business (it’s very rare to get an investor on board at the idea phase).
Alternatively, if you are confident the product and market is—in Guy Kawasaki’s words, valuable, viable and validated already—and you have some money up your sleeve, going all-in could be perfect.
Whichever you choose, both options need to be able to handle everything your users throw at it. I’ll explain later how unexpected popularity and user habits tripped me up and wildly drove up the cost of the app.
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WHAT COSTS SHOULD YOU INITIALLY BUDGET FOR?
If you ask an app developer how much an app costs, you’re likely to hear the “How long is a piece of string?” response, or something similar. And that’s accurate. App projects have unlimited scope and functionality.
To work out your project’s scope and cost, your next big decision is:
Question 2: Are you going to build your app for iOS or Android users, or both?
This is what I found: Each has a different programming language, so you’re going to need a different developer for each. If you’re not coming from a development background, you might also need a technical project manager to decipher the language that developers speak.
I decided to build both, because: ridiculously optimistic.
In hindsight, I should’ve started with iOS and then determined if there was enough demand for Android among my audience. However, the advice I was given at the time was different.
Everyone told me how big Android was getting and that it was potentially easier to build, but I should’ve really researched my audience, because it turns out 85% are on iOS. The costs of building and supporting both platforms before truly proving demand can be incredibly high.
Question 3: How much do features really cost and what other costs are involved?
My app had very few initial features, no API (integration into other software), only a couple of screens, and a rough timeline of three or four months to complete both Apple and Android versions. In the world of apps, mine was considered fairly simple. After six different quotes, here are the costs I budgeted for:
GLOBAL TRADEMARKS + SETTING UP COMPANY + ACCOUNTING:
DEVELOPMENT: 4 months
$3,500 p/month Android
$3,500 p/month iOS
OPTIMISTIC BUDGET: $35k
Yep, before I started my budget was already stretched $15,000 more than what I thought I originally needed.
Like in all Startups, Nothing Will Go Smoothly
App building is a crash course in the ins and outs of software creation, and you might catch yourself a few months later shoveling cash into the mouth of a monster.
Bugs, developers going off task, testing, and UI/UX challenges can quickly blow out your timeline by months. In fact, during the frustrating development phase, my estimated timeline of 3-4 months quickly became 8-9 months. I learned the hard way this is quite normal in app-land and the cost of mine climbed.
This is why, if you are going to build an app, I suggest getting a mentor who has “been there before.” This will help you work with your developer on delivery milestones if things go awry, so there is adequate reasoning behind and response to the blowout—including detailed timesheets of what your developers are spending their time on—to protect your budget.
That way, you’ll be able to make an informed decision as to whether your idea is still worth pursuing, and whether it’s time to seek funding earlier.
Or you could just borrow on your mortgage, like I did.
Be Ready for Curveballs, and Set Cash Aside for the Unknown
After you’ve started building an app, you’ll soon become familiar with “The Curveball” and you’ll need to start budgeting for when they hit.
Just when you think you’ve handled everything like a champ, you’ll get body slammed so hard the wind gets knocked out of you. That’s The Curveball.
For example: Discovering I needed to rebuild an entire piece of the app because Apple users hoard over 10,000 images on their phones, crashing my app and requiring an extra 2-3 months of development.
Or how’s this for a Curveball: Rebuilding the entire app after launching.
One week after launch, my development team let me know they had didn’t have the resources to handle the popularity the app was seeing.
Ok, seemingly good news. But with no one to service the bugs not seen in testing, no one available to add the list of features remaining, and user complaints filling my inbox, I had to make a heartbreaking decision to completely move teams. On finally finding, negotiating, signing, and migrating all my systems over to the new team, we discovered that for the vision I had, the code had to be completely re-built and pushed out under the guise of an “update.” Additional cost, $8,000 Apple, $7,000 Android.
You could get a few of these. For example, I’ve purposely left out the costs of a trademark infringement, resulting in an entire rebrand, $7,500 additional cost, and 10 days of living in a state of delirium while questioning the meaning of life.
The lesson: You really can’t know everything that will happen as you embark on this journey. The only certainty in the app startup world is uncertainty. Plan for it financially and mentally so you don’t turn into a zombie when things take a turn.
Like Building a House, Multiply Everything by Three
Here is a very transparent view into my costs, from idea to launch. Including re-builds, The Curveballs, mistakes and delays, the cost from idea to launch was….close to $70,000.
That could buy a lot of pizza, a very fancy car, a trip around the world, or if I didn’t live in Sydney it might even be a house deposit.
This figure doesn’t include paying myself a salary either, despite working approximately 100-hour weeks. And trust me, when you are living on no sleep, no amount of motivational quotes on Instagram help.
That’s not to say that your expenses won’t be worth it in the end. After all, this is an investment in your business, and nobody said it would be easy. But you should be ready for higher expenses than you might expect. If you don’t spend that money, buy yourself pizza.
How to Avoid My Mistakes and Cut Your Own Costs
As mentioned, my app was re-started three times with three different development teams and this definitely increased my costs.
It would have been different had I not had to change teams, and I possibly could have avoided this by spending more time looking at the portfolio of the developers or asking for more personal referrals, rather than my gung-ho, “OMG I just want to get this made” approach.
I used an outsourced international team without any help during the first build. Heck, I thought I was smart enough and this would be a walk in the park. But I didn’t even get past the design phase with this team.
Then I agreed to partner with a new web/app agency, leaving my corporate advertising job behind and instead offering to pay using my skills and time.
Truth be told, I wish I had paid with cash. It seemed like a smart idea but trading time and skills can get tricky. You might find out it is cleaner just to stick to your day job and pay.
The lesson here is, resist the temptation to try and cut corners or get too creative when you’re hiring your team. Put a lot of time and caution into this step, and it will save you loads of time, and money, later.
The Secret Cost of Building Traction After Launch
Your app is live in the App Store, you’ve done it! Your idea has come to life!
But what happens now?
In my opinion, the next steps and expenses probably make up the most important part of app building. Also known as the traction, or growth phase, getting users to adopt your app doesn’t come for free. Whether it’s cash, staff or time, there are expenses involved.
It will differ for everyone, but here is the breakdown of my current ongoing costs during this phase.
Monthly operating costs, 5 months after launch:
Ongoing development costs (iOS + Android) $2,200
Bug management + customer feedback dashboard $150
Website, emails, hosting and Gsuite, $25
Accounting, phone bills and Internet $330
MailChimp email services $30
Masterminds/Mentors + online education $300
Virtual Assistants $900
Ongoing Monthly Costs USD $3,960
There are also other tasks I currently undertake myself:
- Currently work from home
- CTO and management of development team
- Continual optimization of app UI/UX design
- Marketing/PR/Partnerships Manager
- Social Media and Community Management
- Blog writing
- Customer service
- Graphic design
- Personal Sacrifice
Building an app is no get-rich-quick scheme. You’ll soon discover how much money and time it requires. Around 90% of apps never make it to the app stores featured page, and you certainly never hear of the failures.
Be prepared for the amount of time you will need to spend, or think early about co-founders or development partners. Only 1% of apps go viral, and that either means you’ll have to spend a lot of money on publicity, or look down an incredibly hard road of hustling.
You’ll probably not earn any money upon launch, you might put on a few pounds, and you will wonder what happened to your time at the beach, and this mythical work/life balance thing you’ve heard of.
Buckle up for something like a 12-month road ahead, which means whatever you’re planning, make sure you LOVE your idea, LOVE your audience, and LOVE challenges!
The Final Tally
So, how much did it cost? Drum roll…
After 12 months of building, re-building, learning and growth, my total spent comes in around the $95,000 mark. Ouch.
Speaking with a few software founders, I’ve learned the $100,000 mark for a startup (not MVP) is fairly common. So if you’re going to bootstrap, an app can be quite the investment.
“After helping many App Founders from pre-launch through growth phase, it’s not unusual for a new business to cost over $100k in its first year. That’s why it’s important to focus on traction and product/market fit immediately so you can grow revenue ASAP.” Dominic Coryell – Founder, GimmeGrowth.com
Are You Up For It?
I don’t bring up these numbers and the nuts and bolts of my own story to scare you away, or to make entrepreneurship sound like a nightmare. But we often get caught up in the excitement and the glamour, without meditating on the slog.
So I’d encourage you to read these numbers. Let them sink in. And before you do anything, ask yourself, “How much am I willing to put in?”
If you’re thinking, “I’m going to give it EVERYTHING!”, then tally ho! Your great idea could be the best thing that happened to you!
Before you even spend $1, research the heck out of your audience, your target market, the problems you’ll encounter, and how you can get in front of them.
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Where There Are Sacrifices, Determination, and Grit, There Are Rewards
App building is incredibly addictive.
Everyday I switch between absolute terror and absolute elation!
In the few months that Plann, my visual planner and scheduler for Instagram has been live, my work has been rewarded with amazing validation and social proof that it might have all been worth it.
Plann celebrated 1,000 users in its first week and has already received three awards for helping the Instagram community, including:
‘People’s Choice Award- Startup of the Year AU/NZ 2016’ with Startup Daily
‘Best Social/Lifestyle App – Summer 2016’ with Best Mobile App Awards
‘Best Bootstrapped Business – Australasia 2016’ with StartCon
It’s a pretty happy ego boost that I can write “Internationally award-winning” on my work, make claims I’m ‘The Mother of Unicorns” but realistically, awards aren’t everything.
If you’re completely new to app building, or software, finding your technical partner is going to be the biggest decision of them all, and not just for the expenses.
Take this part of the journey incredibly seriously, think about it as though you’re about to get married to this person—you need to be able to communicate well and speak truthfully. I cannot stress enough. Referral, referral, referral.
And if you’re truly ready to join this crazy club of app builders, go for it, and best of luck!
Was there anything that surprised you about the cost of building an app, or any questions you still have that have been left unanswered?
Leave your comments below.