App Development Cost
App development cost is one of the first and biggest hurdles to overcome when transforming ideas into software. The estimate founders are confronted with when they approach development agencies is often a gut punch. Most founders are bootstrapping and looking for affordability in the initial phase of app development. The unfortunate reality is that software development is in such high demand with such a limited supply the cost is driven up.
Don't expect a rush of volunteers to join you on your effort. Recruiting a team requires vision and sales. You have to clearly articulate what you are building and create a belief that there is opportunity for untold rewards at the end of the journey. Even then, it is highly unlikely that you will secure a development team without a significant monetary investment.
That being said, let's examine some specific strategies for managing your app development cost.
The Technical Founder
If you are a technical founder, you can reduce the overall app development cost by some degree according to your contribution to the effort and how much time you have to devote to the project. The cost comes down to opportunity cost and the time it will take you to develop, launch, and maintain your product. Eventually if your app is successful you will need to enlist additional technical talent to enhance and maintain it. Otherwise, it will not be possible to scale.
Freelancers
Developers that are experienced, and deliver quality work are quickly acquired by large companies with the budgets to pay comfortable salaries and provide benefits that startups cannot. Freelancers are a mixed bag. There's no outside scrutiny of their results that you can lean on to make an evaluation of their capabilities. As far as testimonials and references go, a freelancer is going to hand pick the most favorable.
Freelance rates can appear to be a bargain line item in your total app development cost, however, there are several potential gaps.
- A freelancer is going to be relying on you to manage the overall project. You will need to keep them on task and hold them accountable to their deliverables. If you give them free reign, you will not be satisfied with the result.
- A freelancer is not a reliable source of quality control. They are so close to what they are building that they know all of the “happy paths” in the system. They have the answer key to the test. You will have to be diligent in testing their output to find bugs and usability issues.
Factor in the value of the time you will spend wrangling freelancers into your overall cost. Or include the cost of a dedicated project manager to keep them within the guardrails.
What about Agencies and App Development Cost?
App development cost for agencies follows one of two models. Per project pricing, or hourly development rates.
For a base app on both iOS and Android most per project pricing is going to average between $30,000 and $100,000 for non-US based teams. For teams located in the US the same project will run closer to $200,000.
For teams outside the US, hourly rates will range from $50 – $75 through an agency. In the US hourly agency rates will be between $90 – $120.
Unless you are starting with very specific requirements, an agency will push you towards an hourly rate. Even with well-defined requirements larger agencies will prefer hourly rates. This is because they will have near zero risk in this arrangement. Their hourly cost is fixed so any markup above that will be profitable for them.
The optimum scenario for managing your app development cost with an agency is one that a trusted connection refers to you directly. You can ask questions about the experience your contact has had with the agency. You'll be able to learn about potential pitfalls as well as strengths that could be beneficial to you in your project. With a referral, you'll be better informed and positioned for your working relationship going in.
For agencies I've worked with in the past and recommend see my List of App Development Companies.
A Word About Equity
If you are expecting technical talent to be drawn to your team by promises of future ownership stakes, and you are thinking something in the range of 1 – 3% equity will be enough you are mistaken. Developers need to eat and pay rent. Equity won't deliver that for a long time. Raising the equity stake to 20% or 30% might draw some interest but you only have one or two bites of the pie at those levels.
Once your company reaches profitability this begins to turn around. However, you have a small window in which the potential value is visible but not yet realized. The opportunity for someone to get on board and realize a large return on their ownership stake. Once equity values start to rise, doling them out to new team members becomes unpalatable.
Consult with Me About Your App Development Cost
If you are in need of expert, one-on-one advice on how to manage the development cost involved in your app, I'm here to help. Book a live CTO Consulting session with me to review where you are, what your strategy should be, and the best next step in your journey.
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