Table of Contents
- Defining Your Goals for Your App
- Planning for Building Your App
- Infrastructure Costs
- Planning for Launching Your App
- Planning for Maintaining Your App
- Customer Support
- Ongoing Design and Development
- Software Updates
- Infrastructure Maintenance
- Crafting the Perfect Budget
- This All Sounds Expensive! Is It?
Planning the budget for your mobile app is critical to its success. You need to understand the cost of building an app, the cost of launching it, and the cost of maintaining it. Software development costs aren’t the only consideration in a mobile app budget. There’s also infrastructure, marketing, customer support, and other costs.
While the cost factors in your budget may be complex, the budget itself doesn’t have to be. Let’s look at the costs worth considering, and then walk through crafting the perfect budget.
Defining Your Goals for Your App
Before you dive into the numbers, consider what you wish to accomplish. What is the goal of building your app? What do you hope to achieve in the first twelve months?
Startups may set a goal of having a sustainable revenue stream within six months after releasing their app. Larger corporations may see a new app as part of a broader marketing campaign and care more about user acquisition than app-driven revenue.
Regardless of your goal, it’s important to understand why you’re building your app before you plan it out. The goals you set should direct how you allocate money in your budget. For example, an app focused on capturing revenue quickly may spend less on design and more on marketing. An app focused on user retention may spend more on design.
Your goal should be specific. “$500,000 in net profit by month six” is more concrete than “make money.” The reason this matters is that specific goals require your budget to be specific. It’s easy to justify any amount of spending if you believe every new feature will “make money.” However, a specific net profit goal requires you to understand the cost of each feature and whether those features contribute to generating revenue. You may decide to skip building a $20,000 whiz-bang feature if it costs more money than it will make.
Planning for Building Your App
Once you know your goal, it’s time to consider the costs of building your app. There are several factors that go into the cost of building an app.
In-House Team or Outsourced Team?
Building with an in-house has different costs than outsourcing (shameless plug: we can help!). An in-house team requires you to hire and manage developers, designers, and support staff. That team will require a workspace, equipment, and benefits in addition to their salaries.
A small mobile app development team should include:
- 1 project manager
- 1 designer
- 1-2 mobile developers
- 1-2 backend developers
- 1 tester
- 1 customer support representative
- 1 marketer
Note that some of these roles may be part-time (e.g., a tester or marketer), but others will require a fully dedicated person (developers or customer support representatives). The full annual cost per employee depends on your team’s location, but a reasonable estimate for your budget is $100,000 per employee per year. That amount covers salary, benefits, equipment, and workspace.
On the other hand, you can use a software development agency like Twin Sun to build your app for a fraction of that cost. Instead of paying for a team of permanent employees, you only pay for the time that the team is dedicated to your project. For example, a tester may only spend a fraction of their time testing your app. When you outsource to an agency, you only pay for the time that the tester spends on your project, instead of paying to employ your own tester with a full salary and benefits.
Agency rates vary depending on their location and experience. U.S.-based agencies typically have a substantially higher rate than overseas firms, but complete work at a faster rate. Generally, most U.S.-based custom mobile app development agencies charge between $100 and $200 per hour whereas overseas firms charge $50 to $80 per hour.
Your project scope is the list of features you plan to include in your app. The more features you want to include, the more it will cost to build your app. Your project goal’s should dictate your scope.
For example, if your goal is to generate revenue quickly, you may want to include a feature that allows users to make in-app purchases. That single decision will increase the cost of your app, but may increase its profitability. The cost increase comes in additional design for the in-app purchase feature, development of the feature, and testing.
Once you have a list of features, you can estimate the cost of each feature. Your development team should be able to provide a rough estimate of the cost of each feature. Their estimation is probably inaccurate (things typically change once you start using the app during development), but it will give you a ballpark figure to work with. To safely estimate the cost of your app, you should add a 20% buffer to the overall anticipated cost.
Mobile App Design
The design of your app is critical to its success. Design typically accounts for 20% or less of the cost of building your first app release. However, a good user experience can be the difference between a successful app and an unpopular app.
Your designer is best positioned to estimate the cost of your app’s design. The cost of design is typically based on the number of screens in your app, and the expected number of “iterations” (back-and-forth revisions) for each screen.
Similar to your development costs, it’s a good idea to add a 20% buffer to the overall anticipated cost of design. These 20% buffers are adding up! However, it’s better to plan for some overages than to run out of money before your app is complete. As your app progresses and project risks decrease, you may decide to decrease these buffers and reallocate these funds to other areas of your app.
Most mobile apps require some sort of infrastructure to provide meaningful features. If your app lets users log in, you’ll need a database to store user information and an API (web app services) to interact with it.
Estimating infrastructure costs takes time and effort to get right. Unfortunately, there’s not a simple cost structure that accurately applies to every app. You will need to see some actual production usage of your app to come up with an accurate infrastructure estimate. As your app prepares for launch, you might be interested in reading about how to estimate hosting costs with load testing.
However, for budgeting purposes, you can use a rough estimate that gets you somewhere in the right ballpark. Prior to launch, you can estimate costs around $200 per month or less. After launch, that cost will increase as your app’s usage increases, largely dependent on the number of users you have and how they are using your app. As I like to tell our clients, though, that’s a good problem to have. If you are using Amazon Web Services to host your infrastructure, we have advice for making the best of your AWS budget as your app’s needs grow.
Planning for Launching Your App
Some first-time app creators might believe that most of your app’s costs are incurred during design and development. However, launching and maintaining your app is just as important as building it. Your app’s public launch requires having several things in place, all of which need a place in your budget.
App Store Accounts
If you are building an app for iOS or Android, you will need to pay a fee to submit your app to the Apple App Store or Google Play Store. The Apple Developer Program costs $99 per year and Google’s Developer Program costs $25 per year.
You will want to work with your legal counsel to protect your app, its users, and your business. While you may find free templates for these documents online, we recommend seeking advice from your lawyer to ensure your policies are appropriate for your app and your business.
Your users will need a way to seek assistance if they have questions or encounter problems with your app. You can provide customer support through a variety of channels, including email, phone, and social media. Customer support software such as Zendesk can help you manage your support requests.
Your primary customer support cost will be the time spent responding to customer support requests. Depending on the size of your anticipated user base, you may need to hire a full-time customer support representative, or seek support assistance from your development team.
Marketing is one of the most important and most often overlooked budget items for building a mobile app. There are so many mobile apps these days that your first launch rarely offers any meaningful exposure through the app stores. Most apps simply get lost in the noise. That means you have to treat marketing for your app like marketing for any other product. It requires investing time and money to get your app in front of potential users and convince them to use it.
Your goals for your app should dictate how you budget for marketing, just like they dictate your app’s design and development costs. If your goal is to generate revenue quickly, you will probably make a significant investment in marketing.
Some marketing campaigns can give you a decent reach for a few hundred dollars. Facebook Ads are cheap and let you reach a precisely targeted audience. Google Ads, on the other hand, can be expensive depending on the market’s competitiveness for your type of app.
Ultimately, you can spend very little on marketing or hundreds of thousands of dollars on a national campaign. Discuss your goals with your marketing team to form a strategy and come up with a reasonable marketing budget.
Planning for Maintaining Your App
After you launch your app, you will need to support and maintain it. This includes fixing bugs, adding new features, and keeping your app up-to-date with the latest versions of iOS and Android. It also means fielding customer support requests and continuing to grow your user base.
As your user base grows, you will need to increase your customer support budget. If you didn’t hire a full-time customer support representative prior to launch, you may need to do so as your app gains popularity. In addition to fielding support requests, you may find users searching for an online community or requesting thorough written documentation.
It takes deep knowledge of your app and significant time to maintain user documentation. Documentation itself can become a full-time job as your support team identifies patterns among support requests and your development team releases new features. Again, most of your customer support budget will be allocated to retaining your customer support staff.
Keeping momentum up after launch will require continued attention. While you may plan a large marketing push around your app’s launch, you will likely need some amount of continued investment in marketing after launch. The costs associated with ongoing marketing depend on your goals and your marketing strategy.
Ongoing Design and Development
Similarly, how quickly do you wish to release new features after your initial launch? Some of our clients keep the same pace of development after launch, while others slow down and focus on maintaining what they have. If you view your app launch as a milestone instead of a finish line, you can use your initial design and development budget to estimate ongoing costs.
Instead, if you hope to pump the breaks after launch, you can plan for a smaller budget for ongoing development. You may not spend anything for a while, or you may limit yourself to a few new features per month to keep your long-term costs low. A budget of $1,000 per month may suffice if you do not foresee any major changes to your app’s features after launch.
Generally, though, long-term user growth requires a continuously improving mobile app. A larger ongoing design and development budget will be necessary to respond to user feedback, optimize existing features, and offer new features to keep users engaged with your app for the long term. $5,000 to $10,000 per month is a reasonable ongoing development budget for a successful app. It’s an adequate budget for responding to user feedback and building several new features every month.
Apple releases annual major version updates to iOS. About every two years, these updates coincide with significant visual design or user experience changes. Google maintains a similar release cycle for Android.
Operating system (OS) updates mean your app will need be tested and updated on an annual basis. Apple’s updates are often accompanied by mandatory design enhancements, enforced through Apple’s App Store submission process. While most OS updates maintain backward compatibility with most app features, your entire app will need to be tested against the new OS. Generally, you can expect to spend a few thousand dollars per year on OS updates.
Aside from required design updates, you may wish to occasionally refresh the look and feel of your app. App design standards change every few years, and older apps can look dated very quickly. A design refresh can be a more expensive endeavor, but something that you should budget for 3-5 years or so. The cost of a design refresh depends on your app’s complexity and the number of screens that need to be updated. For budgeting purposes, assume that a future design refresh will cost approximately 20% of your initial design and development budget.
Your app’s infrastructure will require long-term support and maintenance as well. You will need to keep your servers up to date with the latest security patches, ideally on a monthly basis. If your app is popular, a sudden increase in new user activity may require immediate attention from your technology team. That means you’ll need to retain some level of support for your infrastructure, even after launch. Expect to spend $2,000-$5,000 per quarter on infrastructure support and maintenance.
Crafting the Perfect Budget
Now that you have considered all of the costs associated with building and maintaining an app, you can craft a budget that fits your goals. Your budget should include line items for all of the aforementioned aspects associated with building, launching, and maintaining your app.
As you build your app and find success after launch, regularly revisit your budget. Review your actual costs and compare them to what you expected. This will help you better estimate ongoing costs and plan for future growth in a revised budget.
This All Sounds Expensive! Is It?
Yes, building and supporting a mobile app can be expensive. However, the costs depend on your goals and desired timeline. Just because the long-term vision for your app may be expensive doesn’t mean you have to build it all at once. Consider launching your app with a few core features and work your way up to your long-term vision.
Plenty of products start with a simple idea and focus on doing one thing well. As your app gains traction, you can add new features to grow your user base or create new revenue opportunities with existing users. If you have a great idea for an app, we can help you plan a reasonable budget that attains your goals.