Going into business is a daunting affair, no matter what you do for a living. It involves a lot of planning, which will include financial forecasting, market research and provable information that shows your business idea is sound.
For many, especially those starting their first business, the financial side of things is the most intimidating, unless they already possess financial qualifications. However, good research is all it really takes to understand the numbers and how they can work for you. If you have the budget, you can also employ an accountant to do this for you, so that you can access business funding more easily in the long term.
However, let’s assume you’re starting from scratch.
Firstly then, you will need to come up with a business plan and if you want to succeed, it should be a good one. Decide first if you’re going to need:
- Additional staff
- Premises or work from home
- Any additional equipment or software
This will dictate how you’re going to develop the business as if you’re going to need staff, then it’s likely that you’ll need premises, which will drive up start-up costs. Let’s assume that you’re going to start off working from home with a view to getting premises/staff when the mobile app business is up and running.
As a freelancer or sole trader, these will be minimal in terms of what you need before you can begin budgeting for your app. Luckily, the developer community is extremely generous when it comes to open source software tools that can help you, so it’s unlikely you will have to invest heavily in software. You will of course need a decent computer, but it’s highly likely that you already have this. You will need development funds though and a means to live whilst you’re developing, so you should take this into account when calculating initial costs.
You should calculate costs based on:
- Your wage
- Marketing costs
- Development costs
- Hiring an accountant
- How you will raise start-up funding (crowdfunding, banks, savings, etc.)
Forecasts should be for a minimum 12 month outlook, preferably more if you’re looking for funding.
Budgeting for App Development
So you know how much you need to live on, you’ve carried out market research and know how potential competitors gain revenue from their apps and you’ve worked out start-up costs. Now it’s time to look at how much it’s going to cost you in terms of development of the app itself and what budget you’re going to set. Firstly, decide what type of app you’re going to make, will it be a game, a productivity app or a lifestyle app?
- Platforms – will the app be for iOS, Android or Windows?
- Submission fees and processes
As we’ve discussed in a previous post, the cost of the app is likely to be higher the more functionality it has and games tend to be the most expensive to develop. As such, consider first developing a basic app that meets the demands of the market, yet can be added to with updates to give further features in the future.
This is known as a Minimum Viable Product (MVP) and will allow you to keep costs down when first going to market. Also consider using SDKs in order to add functionality at a significantly lower cost than building from scratch.
- Parse allows you to add push notifications, add social elements, cloud storage, updates and run custom code in the cloud
- Socialize allows you to easily add social aspects to your app with their free SDKs for iOS and Android
With Socialize you can also download a Python SDK and it’s also worth checking out the company’s other open source projects on Git Hub. See the screencast below to see how to get started using the Android SDK from Socialize.
Parse also has a free SDK for developers, or you can choose to go Pro or Enterprise, which costs $199 for Pro but you have to get in touch for Enterprise pricing, which it’s unlikely you will need anyway.
You can also use Kinvey’s cost estimator to help you to work out costs for each platform or all platforms, including for hybrid apps.
As you can see, this gives a rough estimate of the time it would take to develop the app with 5 people working on it and the approximate cost.
To submit an app to the iTunes Store, you will have to first sign up for a developer account which costs $99 per annum. If you already have an Apple account, you can sign up using this and that’s not a bad idea as you can keep records of costs in one place if you’ve paid for competitor apps as a part of market research. This will make up part of your start-up costs and it’s a good idea to keep logical records from the start so that you’re prepared for the demands of HMRC at a later date.
For Android, on Google Play, a $25 fee is required and you can use your usual Google account or create a new one. It’s not really necessary to take either of these steps before development, but it pays to know how the process works.
For Windows apps, it costs £12 per annum for an individual developer account, or £65 for a company account.
As an individual account holder you can:
- Develop apps as an individual or a small unincorporated group (sole trader)
- Submit Windows Store apps and Windows Phone apps
As a company account holder you can:
- Develop apps as a business, mobile operator, or OEM
- Submit Windows Store, Windows Phone, and desktop apps
- Use additional app capabilities such as testing on a real phone
There are of course rules that apply to the submission process and it’s common knowledge that it’s more difficult to be accepted on iTunes, as its review process is much more stringent than that of Google Play. Bearing this in mind, it’s worthwhile making yourself extremely familiar with the T&Cs of all platforms, including Windows, to ensure that you can keep within the guidelines.
Google Play developer sign-up
Don’t just think in terms of money, but time too. The more time you spend on getting it right for each app store, the more you’re going to have to budget this in.
You’ll need to decide how you’re going to monetise the app too, so look carefully as freemium and advertising models and work this into your business plan. It will depend on the type of app you’re planning to develop as to what model you choose. It’s also going to make up a big part of the profit and loss forecasts that you will include in your business plan.
This is going to be the main driver for the discoverability of the app, so make sure that you budget for this carefully too. You can use a variety of tactics to market the app, but the best thing you can do is get reviews on the app stores themselves, as the more good reviews you have, the more likely the app is to show up in the top 100 and therefore, the more downloads you get.
Marketing should also include:
- A website, even a basic one, with great SEO
- Bloggers with a good reputation for writing about technology to review the app before it’s officially released
- Advertising via social media
- A great social presence
In other words, you need to get out there and tell everyone how great your app is and why they should download it. This is where you need to know who your audience is and what you have to offer that others don’t, or your Unique Selling Proposition (USP).
It’s not an easy task to set a budget for an app unless you have a very clear idea of what exactly you want to achieve. This is why creating a business plan with as much details as possible is necessary (my first was 32 pages long) – as that good old, over-used cliché points out, if you fail to plan, you plan to fail. The phrase itself might give you a groan but it holds true as a really good plan will cover all your bases, including the risks involved with developing to potential investors and the business as a whole.
Financial forecasting is often viewed as little more than guesswork and this is true to some extent. But if you have done your homework properly, then it’s highly likely that you will be successful as if your product isn’t good enough, this will come to light during the research process.
If this is the case, then you can tweak your idea accordingly and won’t have to go to the trouble of costing it all out all over again.