With mobile use now exceeding desktop use and more than 70 percent of smartphone users spending most of their time in apps, there’s clearly a potential market for relevant, useful apps. An enterprising entrepreneur could have a great idea of a mobile app that may very well be the next big thing — or at least something likely to generate a good ROI and a steady profit. However, a new app-based company’s founder may not possess the technical know-how to turn good ideas into a practical product, especially if it’s IT-related. Startup owners in the market for a software developer to transform their vision into an usable product often have to make choices, especially when it comes to investments needed to get started. Having a solid understanding of how much developers costs can help startup owners determine where to invest prior to the official debut of a new app and what potential expenses to budget for ahead of time.
Developer Costs By Region
Costs to hire a development professional are higher, on average, in the North America than any other region, with an average hourly rate of $150 for Apple designs and $170 per hour for Android software. Costs are slightly lower in Australia ($110 per hour for both iOS and Android). Developers in the United Kingdom typically charge about $70 per hour for either operating system while developers in India have fees averaging about $20–25 per hour.
According to the U.S. Bureau of Labor Statistics, developers are likely to command a higher hourly rate in Washington State ($62.23 average hourly earnings), California ($58.04 per hour), Alaska ($57.27 per hour), and New York ($54.38 per hour), and the District of Columbia ($53.86 per hour). Such information doesn’t account for additional fees based on the services requested and rates based on experience, but it does suggest areas of the U.S. where development costs will likely be higher. Hourly rates are likely to be lower in the Northeastern and Southwestern areas of the United States. Costs per specialty and development project type break down as followers:
• Desktop development (average rate: $30/100 per hour)
• Mobile development ($30/150 per hour)
• Website development that includes back-end ($75/150 per hour)
What Factors Go Into Development Costs?
One way for founders to get an app developed is to outsource and hire someone on a per project basis. In a nutshell, app development cost is equal to the development time multiplied by the the developer’s hourly rate. Developers who are freelancing their services often set their fees based on the following factors:
• What features will be included
• How complex the requested features will be
• Anticipated amount of time it will take to complete the work
To get a better idea of what this means in practical terms, let’s take a look at what a founder would need to invest to replicate some of the most popular apps in use today. Real-time messaging app WhatsApp, for example, has a fairly sophisticated architecture with comprehensive features. The total time in hours to develop features for things such as registration, chat, and notifications used in an app like WhatsApp averages about 850 hours.
Additional costs that would normally be considered are related to quality assurance and overall user experience, which accounts for about 500 additional hours of development time for an app like WhatsApp. Using the North American average rate of $150/hour and a total of around 1,400 hours of development time to get results similar to WhatsApp, the total cost would be approximately $200,000.
Depending on the time it takes to develop a new mobile application, total costs could range anywhere from $140,000 to $200,000 or more based on estimates from industry experts and assuming a 4–6 month development time period. Noted investor Jason Calacanis suggests raising about $750,000 in first-round seed money. The basic components and considerations that are typically factored into development costs include:
• What’s going to be developed: This factor includes things like scalability, usability, and the quality of the design. Costs may be higher for quality work that focuses on these aspects, but it’s easier for startups to get a better ROI to justify higher costs if quality is a top priority.
• Scope of the work involved: Scope refers to what it will take to create a minimal viable product (e.g., hosting environment, database design, engineering, and application size). For entrepreneurs not familiar with development, it can be difficult to “guesstimate” the scope of the work involved, although developers can usually help with this estimate.
• Where developers are located or based: Some costs can be saved by app-based business founders by choosing developers (freelancers, agencies, etc.) outside of their own country. While the plus here is in the potential to get the work done for lower rates, communication should also be considered, as should source code security, database access, time differences, and other issues that may present challenges.
Hiring a Freelancer to Do the Work
An affordable option many startups choose is to work with a freelancer to get an app developed. It can a smart investment if a high-quality freelancer can do the same work as an agency without the extra fees that often go along with such services.
With freelancers, however, technical abilities and capabilities can’t always be verified when searching a freelancer on a community website or platform that lists such individuals. It can sometimes be a daunting task for an entrepreneur to filter out freelancers who may not be what they present themselves to be or those who might disappear before development is complete.
Project management support is also worth considering. Some freelancers do not have or offer project management software, which means lack of access to useful tools to track project progress. While it’s a good idea to give developers room to work, not being able to track progress also results in a lot of uncertainty.
Another potential pitfall for entrepreneurs is platforms that aren’t regulated. Freelancers on such platforms sometimes report misleading prices, which often leads to issues with middlemen that ends up with startups paying higher rates for less work.
Costs of freelance developers range from about $70–250 per hour in North America. The low-to-high range based on average costs is slightly lower in Europe and it’s the lowest is in India (about $75 per hour at the high end).
Putting Together an In-House Team
Going in-house can mean hiring people to fill certain roles (e.g., product manager, designer) separately or hiring a single individual who wears different hats. For new businesses that are well-funded, going in-house may be worth the effort, with potential benefits including having constant access to qualified developers should issues arise or change need to be made to improve app performance or add features requested by users.
Also worth considering is the fact that it may take several months to put together a team that can create an MVP. Plus, there may be a need to hire more developers if an app will be available in both iOS and Android versions. There could also be a need for extra staff for apps that will require a lot of back-end support, which could also add to costs.
Additionally, it can be expensive to keep a team in place. And it may not be worth the effort or expense to have a full team on staff for an app that won’t need a lot of tinkering once it has been designed and produced. The in-house decision is one that will largely be based on available financial resources.
Partnering with a Development Agency in the United States
Another solution startups often consider is hiring an app development agency in the United States to handle the specifics of getting a product ready to share with the world. It’s an appealing option because a lot of agencies offer convenient packages that include all phases of the development process. Startups also get instant access to a team that usually includes project managers, designers, developers, and sometimes people with specialized tasks such as back-end structure and maintenance.
With an agency, startups also don’t have to worry about going through an extensive process to search for talent. The necessary staff is instantly accessible, so product development can begin sooner. Reputable agencies also tend to have experienced developers on staff, so there’s usually no doubt about qualifications or capabilities.
As for costs, development agencies can offer their services for rates that can range for $200–300 per hour. For startups without the available funds to pay for such services and expertise, this isn’t going to be an available option.
There is always the option of starting off with an agency and transitioning to an in-house set-up at some point. The downside of this option is that it may be difficult to understand an agency’s logic behind their development process, and different developers may have trouble figuring it out.
Streamlining Costs With App Development
App development doesn’t have to be risky endeavor for startups. Any app that’s going to be developed should have a clearly defined purpose. This includes knowing how money will be made for it since revenue earned from an app can always be reinvested later for additional development needs. Common sources of revenue generation for apps include:
• In-app purchases
• Virtual currencies
• Paid sister versions of the same app
Providing Clear Direction
Simply hiring someone, whether it’s an agency or freelancer, and waiting for results isn’t an option for startups looking to manage expenses as much as possible. Anybody who will be doing app development should have clear direction and a solid understanding of what’s expected. Developers should have the following information so accurate estimates and quotes can be provided:
• A detailed project description
• Listing of features and screens
• User flow and user experience essentials
• Wireframes and other technical details
Interviewing and Researching
Reputable developers won’t mind going through an interview process. It’s a time when startups can ask questions and get a feel for what type of service they’ll likely be getting before anything has been agreed to or signed. As a general suggestion, a productive and informative interview should include:
• A review of the developer’s portfolio to review examples of work to verify skills and abilities
• An unscheduled call or two to see what the reaction is from the staff or freelancer being considered
• References from previous or current clients
Another step startups can take is to do some self-research. A good staring point is with online reviews and feedback. People tend to be fairly candid online when discussing their experiences. While it may be difficult to find a lot of reviews for some freelancers, agencies should have a strong online presence. Comments on social media pages can be just as informative.
Establishing Goals and Milestones
Setting goals and milestones can also minimize a startup’s expenses. It’s not uncommon for payments to be given for each completed stage of the app development process. By setting specific short-term goals ahead of time, app entrepreneurs will know what they’re paying for and what to expect by the time another payment is scheduled.
Saving Money with Testing
Testing can also be a cost-saving step developers can take for startups. Ideally, pre-launch testing should be part of any arrangements made to minimize the risk of experiencing unexpected technical issues that could cut into revenue. Such issues could also damage new companies looking to establish a solid brand reputation.
Cost-Saving Security Precautions
Lapses in security can also quickly drain a startup’s funds and derail revenue potential. It’s equally essential for app entrepreneurs to consider what developers offer in terms of security features such as authentication mechanisms.
Money-Saving Legal Considerations
Costs can be further streamlined with documentation that spells out everything that will be done, when to expect the work to be done, and how much the entire project will cost. Agreements should also include details of what options startups will have if the work isn’t done on time or as promised.
Legal representation is another cost worth considering. While it’s not always necessary for startups to have an attorney available on a retention basis, it’s advisable to factor in potential legal costs before entering into an agreement. A non-disclosure agreement is optional, but it’s a good way to protect a founder’s intellectual property. Such precautions can, however, prevent startups from having their funds drained from legal expenses should problems arise.
Entrepreneurs without previous experience with launching apps may also want to have an attorney look over agreements and related documents first. Having access to legal expertise can also come in handy for startups if developers fail to meet expectations of deliver the requested product as agreed. It’s also wise for startups to confirm that any agreements signed with developers in other countries will be considered valid and legally binding in the United States.
Some degree of leverage can help with cost management efforts. For example, withholding total payment until the app is prepared and accepted provides an added incentive for developers to meet expectations. Taking a step like this also puts the power back into a startup’s hands, serving as a means of getting unexpected glitches or design flaws fixed quickly without extra fees, delays, and hassles.
Android vs. iOS Development Costs
If average costs for developers based on hourly rates are used as an indication, costs for Android development seem to be slightly higher. Yet there are many instances where developers charge the same hourly rate for development of an app for either operating system. Ken Yarmosh of Savvy Apps is among the industry insiders who asserts that creating an Android app costs more. Even so, the Android versions of many successful apps available for mass use (e.g., Uber, Twitter, Facebook) actually cost less to develop.
The reason why there is a general feeling that Android apps are more expensive to develop than iOS versions of the same apps is because of the total amount of time involved with the development process. The actual steps involved are essentially the same and priced at the same rates, but Android devices are available in more screen sizes than Apple devices. Therefore, it could take 2–3 times as much time to create Android apps for that operating system’s different screen sizes. For startups looking to minimize expenses, it’s can be more cost-effective to start with an iOS app before adding an Android version.
The relationship an entrepreneur will have with a developer will have an effect on costs and help determine how somehow is hired for the project. For instance, if all that’s needed is a one-time design of a basic app, it makes more sense to go to a website where freelancers offer their services to see who’s available. It’s also easier to compare rates this way and get an assortment of quotes. However, if a mobile app is going to be complex and need regular attention, or if an app company’s founder plans to roll out more products and make adjustments to existing apps over time, it can be more cost-effective to team with a development agency or assemble an in-house team to accommodate these needs. It’s just as important to team with a marketing firm that can effectively promote a mobile app startup, but there needs to be a viable product ready for use first.