Steve to Peter, “We need to start pushing out efforts for finding the app development costs? I will be pitching soon to Seed Investors, so I need to budget accordingly for it”.
Peter, “I know. But with so many options available and variety of development options from USD 25 to USD 200, it’s not easy to find the answer.”
Above conversations are common, and most of our inbound calls are of that nature. So, we decided to write a small guide to break down the process in steps, present users the options available, a mechanism to determine costs, prices range for different app categories, and budget allocation for app development after raising seed money.
Also, note that all this discussion is super useful for an entrepreneur who will be choosing the option of working with an app development company.
Let’s start. There are 3 options available for an entrepreneur to build his/her app.
First, one can search for technical cofounder willing to work for free and getting the company equity in return. Usually, this process is the most cumbersome one. As finding the ideal candidate, who believes in your vision and is ready to spend days and nights with you for free, isn’t easy.
Second, one can search for an app development company. This search might easier as on internet you will find many such options. But selection becomes an issue.
There are many trusted resources, and you sure can get their per hour development rates easily. Check out clutch.co; there you can browse through companies in your locality and also determine their per hour charges.
Third, you can build a virtual organization by hiring freelance resources. For this to work, you should understand the details and the working of the entire technical and design process. It might be easier for a seasoned professional, but for others, a massive challenge.
For freelancers, you should go to odesk or freelancer to determine the pricing of the individual resource. They have a useful mechanism of rating and client feedback to choose the best talent.
Mechanism to determine App Development Costs
Determine how many developers and designers you need for the project? Then determine the total man hours each resource would work on the project. Then simply multiply the man-hours with the per hour development cost and this will give you the final answer.
For example, you are building an app similar to WhatsApp. Considering the complexity of the project at hand, you estimate 4 developers and 1 designer working on the app for 200 Hours each. Total man hours for this would equate to 5 X 200 = 1000 Man Hours. Considering the cost of development to be USD 150 per hour for the USA, now you have a cost of 1000 X 150 = USD 150,000. If this kind of project is outsourced to a cheaper destination with the Per Hour Development Charges of USD 25, then the total cost would come up to 1000 X 25 = USD 25,000.
App Categories and Pricing
Now, it’s the time to determine which category does your app belong to. I am listing down the major categories that app can be categorized and price ranges.
|Simple Functionality Apps – Without much server programming||Very basic functionalities and are easy to design. For example, if you want to port your blog’s articles into a mobile app.
|$2,000 – $10,000|
|Complex Apps – Server Programming||This category includes apps such as E-commerce portals, Game Centers, your own personalized App Store, an app which regularly syncs data from cloud, or payment portal and so forth. They are complex and will require regular updates to ensure they are in peak working condition.||$35,000 to $300,000|
|Games||For those who are wondering why games aren’t classified in the complex app category then here is the reason. Games are difficult to develop than any other app as they require graphics, animations, utilization of Application Programming Interfaces and artwork. Such resources are either built in-house or licensed from 3rd party sources like Unity Assets’ Store.||$25,000 to $400,000|
|Augmented Reality or Virtual Reality Apps||The best example of an augmented reality app is Pokemon Go or AirMeasure. If you want to develop an app that is merely an extension of an existing app, like Retrica, you will be charged less, and as per the features, you like to develop. For a new idea, entirely based on AR, costs will be different. So, for this category, you will find a bigger range.||$100,000 to $500,000|
NOTE: Depending on the scale and scope of the work, app development costs will differ across these categories. Above ranges are based on our development experience.
Budget Allocation for App development
Many entrepreneurs ask us about the budget needs for their first version of the app. To determine this, assume that the seed rounds of around USD 500k. This will give the team of 3 founders a run for 12 months. Of this amount, USD 24K per month will be going to salaries of the founders. USD 15K – 20K for operational overheads and marketing. With the assumption that the first of version of the app will be ready in 6 months, this leads to a total app development cost of USD 140k.
Most of the industry experts are also of the opinion that one should try to budget USD 150k – 200k for building the very first version of the app. Note mentioned amounts are for USA based developers, living in North America. Such costs can be drastically reduced with Staff on Demand or building a virtual team.
The cost to develop technologies on top of free source tools is reducing significantly. With world population increasing and existing population getting access to cheaper and affordable smartphones, upside of creating a valuable business is increasing. AI, Machine learning, Robotics, Crypto and many such fields are exploding with innovation. With the reduction of costs to build applications and with many folds increase in the market potential, it is indeed an exciting time for entrepreneurs to build their next billion or trillion-dollar idea.