You’ve had an idea for an app, or online service that you’re convinced it’s going to make you wealthier than Mark Zuckerberg. At this stage, all you have is an idea in your head or perhaps a few simple sketches of how you might want your app to look. I’m also going to assume that you have little or no experience of developing software yourself and perhaps only limited experience of running your own business.
If that pretty much sums up your situation, this post is for you. It will help you understand the basics of what’s involved in creating your own app business, the likely costs you need to get started and how to work out whether your idea is going to make you a billionaire or leave you up to your ears in debt.
What is an app?
It might be easier to first explain what an app is not. If you simply need a website to promote your business or an eCommerce store to sell your products or services, you probably don’t need an app. Simple websites and online shops can be built fairly easily and at relatively low cost using template-based services such as SquareSpace or WordPress or by hiring a professional web designer who will charge upwards of £300.
An app, on the other hand, is a bespoke piece of software written for a specific task and designed to work on a smartphone, web browser (e.g. Google Chrome) or installed on a PC or a Mac.
The key difference between an app and a website is that apps are created from scratch by a software developer and not just created by a designer or built from a template. Apps typically do a lot more than just display text and images on a screen. Apps will have some clever functionality that manipulates and processes data in a way that is designed to be of real benefit to the user.
This definition of an app is not entirely set in stone. There are several examples of otherwise simple websites with features that might require some custom programming. For example, an estate agent might have a website showing properties for sale but with an advanced search feature that allows users to find properties within the range of a specific postcode. You could argue that this feature alone turns this simple website into an online app.
How will I build my app?
One of the key differences between an app and a website is that a website can be built by a web designer alone. A web designer may not need to know anything about computer programming. By using a template-based service such as WordPress, a web designer could create a beautiful website without any knowledge of using a programming language. A typical rate for a freelance web designer in the UK is from approximately £35 per hour at the time of writing. A complete website could be built in a just a few weeks.
To build an app you will need to the services of a developer. The typical rate for a freelance developer in the UK is from around £60-£100 per hour. An app is also likely to need several months of work before it’s completed. This additional time and cost will have a big impact on the total cost of building your app.
It is very rare to find a developer as skilled in front-end design as they are at programming in code. For this reason, you will probably need to employ both an app developer and a front-end designer to build your app.
A front-end designer:
Ideally, you will want a designer and a developer who work together and have done so successfully several times in the past.
The Project Manager:
Unless you have previous experience of managing complex, technical projects you are also likely to need the services of a project manager.
The project manager…
As you can see, building a great app usually requires a team of talented people.
How much will it cost to build my app?
I’m afraid there really is no simple answer to this question. So much depends on the type of app you need to build, which features your app will need and what type of devices you need it to work on.
However, if I had to estimate the minimum cost of building an app, I would say that development costs alone will start at approximately £10,000. More realistically, for an app with the type of features and design you would expect to see in professionally-built software, you are more realistically looking at development costs from around £30,000.
To get a basic idea of the cost of building your app you can use this free tool. The estimates it generates look realistic enough to me.
On top of the development costs you are likely to need additional funds for:
Unless you own your own app development agency the full cost of launching an app business is likely to run somewhere between £50,000 – £100,000 with no guarantee that you will recoup your investment.
Will my app make money?
According to research by Gartner, fewer than 0.01% of all consumer apps are considered a financial success by their creators. That means that of the three million apps available right now in the Android and Apple app stores, only 300 will be considered to have been a financial successful by their makers. That places the odds of your app being a financial success at approximately 10,000 to 1.
Even app businesses supported by an incubator which provides mentoring, legal support and financing are still 93% likely to fail. Incubators only continue to invest in these businesses in the hope of finding the one in every several-thousand app businesses that achieve a billion-dollar valuation. This allows them to recoup their losses from the vast majority of those that will inevitably fail.
TV shows such as the X-factor and the Apprentice constantly encourage people to “follow their dream” and not allow others to dampen your ambition. While it’s true that you need a good amount of self-confidence and determination to be successful in business, you must also weigh that against the very real possibility that you could be putting yourself into a lifetime of debt. To start a business without fully considering the risks involved is nothing short of irresponsible.
Why are there so many apps available if so few of them ever make a profit?
Most of the apps you see in the app store are produced and published by the developers who built them. These apps are often created as side projects by an agency that build apps for other businesses. The apps will be developed during their quiet periods when they are not being paid to develop apps for other people or on evenings and weekends.
An app developer is much better able to take a risk publishing an app that does not make a profit because their only investment risk is their own free time.
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Sammy had an idea to start an online business similar to Groupon other than it would offer deals within a very specific niche industry. Sammy’s decided that he would use his £5,000 savings to fund his business.
Sammy therefore felt dejected when he started to receive quotations of between £25,000 to £45,000 from UK-based digital agencies to build his app.
A friend referred him to the website, Upwork.com which connects businesses with developers and freelancers based in other countries. Sammy posted the details of his project on Upwork and waited for the proposals to come in.
Among the wide range of bids Sammy’s project received was a proposal from an app developer based in India. He offered to build Sammy’s app and website for just US $4,000 (approx. GBP £2,700). The developer had several glowing testimonials on the Upwork website.
Sammy was delighted that he was finally in a position to, not only fund the app development, but also have some money left over to use for marketing and other start-up costs.
Sammy agreed the terms with the developer and handed over a 50% up-front deposit of $2,000. The developer then asked Sammy to prepare a document detailing all the features his app would need. Sammy prepared the specification and the developer started work.
A few weeks later the developer showed Sammy how the work had progressed. Sammy wasn’t entirely happy with how the app looked. The colouring, fonts and layout of the app hadn’t been designed to a high standard. More importantly, he noticed that there didn’t seem to be any way for users to sign-up or register their details. Sammy contacted the developer and asked him why this crucial feature was missing.
The developer explained that as Sammy had not specified a user registration feature in the specification document it was not included in the original quotation. He said that the feature could be added for an additional cost of $800.
Sammy’s only options were to either pay the additional $800 or lose the $2,000 deposit he had already paid. He handed over the additional $800 and waited to be updated on further progress.
The months dragged on with Sammy realising several other important features that had been overlooked in his original specification document. To keep the project going, Sammy took out loans from friends and family, maxed out his credit cards and overdrafts and took out payday loans to a total value of $25,000 (£16,700). For Sammy, everything was now riding on the success of this app.
Life became increasingly stressful for Sammy. He was threatened with eviction by his landlord which also led to his fiancé calling off their engagement. When the developer demanded even more money to complete the project, Sammy had to explain that he had run out of funds and so the developer refused to do any further work. Sammy now had a huge loan that he was unable to repay; single, homeless and with no possibility of ever seeing his app business launched.
Although I have changed Sammy’s name, every other aspect of this story is true. If Sammy’s story was unique this would be a sad enough tale. Unfortunately, I have witnessed many people in similar situations and seen lives destroyed for people who tried to launch an app business with little or no knowledge of what they are getting themselves into.[/color-box]
Can I reduce the development costs by doing away with a team and just hiring a single freelance app developer?
Some apps are built by individual developers working alone. By not having to hire a whole team of people you can reduce the development costs quite significantly. It is however extremely rare to find one person equally skilled at programming, design and project management. Anyone with all of those skills in equal measure will be charging considerably more than the average developer rate just to manage the amount of work they will inevitably be asked to do.
If your developer is not equally skilled in each of these disciplines then, whether you are aware of it or not, you are accepting a huge compromise in the quality of the finished product. An app with good programming but poor design will significantly decrease the chance of your app being successful.
Could I reduce costs by working with a developer based in another country?
Hiring developers based in countries such as India, Pakistan or the Philippines will significantly reduce the cost of building your app. The hourly rate for an Indian app developer is typically less than a third of the cost of hiring a UK-based developer. You must, however, consider the following:
Whatever costs you might save hiring an overseas developer must be weighed up against the significant extra risks described above.
Unless you are an experienced, technical project manager the option with the least risk is to hire a reputable and experienced digital agency based close to where you live or work. The benefits of being able to sit down with someone face-to-face, develop a relationship and explain exactly what you need really cannot be under-estimated.
How do I find a good digital agency?
The first thing to remember when looking for a digital agency is that you are trying to find a team with whom you can develop a long term relationship. Building and launching your app is only just the start of the process. Most apps require ongoing bug-fixing, maintenance and updates. It is highly likely that you will discover new features your app needs only once you have real users testing it in the wild and giving feedback. If you don’t maintain and update your app after launch you will soon find that users will be leaving negative reviews about your app online.
Most developers dislike working on apps that have been built by someone else. For a developer to try to understand the logic behind code that he or she didn’t write is often more work than rebuilding the entire app from scratch. It is therefore crucial that you find a developer who doesn’t take advantage of this situation by charging an attractive rate to build the app and then charge inflated rates when you need the app updated. You are looking for a developer who cares about their professional reputation and keen to maintain an ongoing and long-term business relationship with you.
Without a doubt, the best developers are usually found through a personal recommendation. While an online review might be good enough to find someone to clean your windows, it is not a reliable enough source for a service upon which your entire business will depend; a business in which you will be making a considerable financial investment.
The difficulty with getting a good recommendation is that when someone does find a talented developer who is reliable and charges reasonable rates; they are often reluctant to recommend them to others. They worry that if the agency becomes too busy they may have less time to work on their projects and increase their rates to manage an expanding workflow and increased overheads.
You also have to consider that the laws of supply and demand are not currently working in your favour. There are many more people looking to have apps built than there are reputable developers available to do the work. Those producing the best work have little or no need to advertise their services. They will have the freedom to pick and choose the projects they most want to work on. When you speak to a busy digital agency they are as likely to be interviewing you as you are them. If they get any sense that you might be inexperienced or difficult to work with, they are likely to bump up the cost of their proposal or simply claim to be too busy to take on your project.
In a market where so many agencies are inundated with work, you might find yourself tempted to use outsourcing websites such as Upwork.com and Guru.com. You also need to be wary of agencies that may appear to be based in your own country but are in fact outsourcing the work to a team of developers overseas.
You may have been lucky or diligent enough to discover a great little agency, just starting out with a small and talented team, charging reasonable rates but who haven’t yet managed to build up a large client portfolio. If you do find such an agency, grab them with both hands. Remember, however, that as talented as they might be they are likely to be learning on your project. Any previous experience they might have had working for a larger agency, may not have fully prepared them for the experience of running their own business. Reduced experience on the agency side will need to be compensated by increased experience from you. When the client and the agency are both equally inexperienced, this can often be a recipe for disaster.
Even if you have received a personal recommendation you still need to carry out your own due diligence.
At an absolute minimum, I would recommend carrying out the following checks:
How do I protect my idea?
In short, you probably can’t. There is no patent protection for software in Europe. Even in the U.S., trying to gain patent protection for software is a highly costly and complex process only granted to products deemed truly unique and inventive. The process of applying for a patent requires specialist legal advice costing thousands of dollars.
Realistically, the only form of protection you have is copyright which may help to protect you from someone stealing your code and replicating it. It gives no protection at all of your business idea. While this might deter someone from taking your app and then claiming it as their own, there is very little to stop them launching a similar app and copying all of the core functionality.
Unless there is some significant barrier that prevents another developer replicating your app, your idea could end up becoming a great way for someone else to make lots of money. Someone perhaps, with the skills to develop the app themselves at a lower cost and with better marketing experience.
You therefore have two options; a) keep the idea to yourself and only reveal it to others on a “need to know” basis and once they have signed a Non-Disclosure Agreement (NDA) or b) tell everybody about your idea in the hope that no-one has the desire or ability to launch it before you.
In reality, it is highly unlikely that anyone will steal your idea. Having an idea and turning it into a business are two very different things. My advice is to not go shouting about your idea before launch but do reveal enough information to generate some interest and get feedback from others. It is important that you are able to receive constructive criticism of your idea before you invest time and money in this project. By keeping your idea a secret you could be preventing yourself from gaining valuable feedback that may have a significant impact on your decisions.
How will I know if people will buy my app?
Long before you contact an app developer, you should be researching your app idea to discover whether people are likely to want it and whether it will generate a profit.
Check the app stores
Look to see if there are any similar apps already available in the Android and Apple app stores. If there are no other apps that solve a similar problem, you will need to be honest as to whether the reason is due to nobody having the same idea as you or whether this might indicate a lack of demand.
If similar apps do exist but are not listed in the top charts for their category, you will then need to think about how your app is going to significantly differentiate itself in the market or improve on those that are already available. If your idea is so unique that people are not even aware that such an app could exist, you might find it difficult to promote an app for which nobody is even looking.
Create a simple website or landing page
Even though your app might not yet exist, there is nothing to stop you creating a simple one-page website explaining your idea and asking people to express their interest and give some feedback.
You can create a simple landing page with tools such as Unbounce or Launchrock and use a service such as MailChimp to create an email list for those who expressed an interest. You could email these prospects a link to a questionnaire you created on SurveyMoney, gauge their reaction, discover what they do and don’t like about your idea and how much they would be willing to pay for it. There are a number of free tools you can use to create a basic mock-up of your app to give prospective users an idea of how the app will work.
You could use some of these free and paid resources listed below to drive traffic to your landing page:
Free traffic sources:
Paid Traffic Sources
I also recommend that you experiment using different variations of your posts, ads and landing pages to gauge which features and pricing gain the best response from visitors.
If I have made the process of starting an app business sound risky, complex and littered with challenges then, believe me, this posts barely scratches the surface. We have not even started to explore the challenges of funding, marketing and making your app profitable.
If this post has deterred you from starting your own app business there is a 99.9% chance that I have saved you from losing large sums of money, wasting huge amounts of your time and an unquantifiable amount of stress and aggravation. If you still remain undeterred after reading this post, you are either naïve to a degree beyond my ability to persuade you to reconsider or have truly hit upon such a genius idea that you are prepared to see through despite all of the challenges and the very high likelihood of failure.
Who knows? Perhaps one day you really will become the next Mark Zuckerberg. Whatever the outcome, It will undoubtedly be a huge learning process and one in which I wish you the very best of luck!
About Danny Richman
Danny Richman started his first software business in the early 1980’s. He has designed and created software going to back to the very early days of computing. He now spends most of his time advising and mentoring entrepreneurs on how to start their own online businesses. Danny also acts as a business consultant, trainer and mentor for organisations such the BBC, UK Trade & Industry, The Bank of England and the Prince’s Trust.
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