5 Questions To Ask Yourself Before You Start An App Development Business
In the past few years, you’ve probably heard stories about dozens of successful mobile apps. Pokemon GO, Fortnite, PUBG Mobile, and Instagram are some famous examples that brought their creators millions of dollars. There are many giants in the app domain. However, this doesn’t mean the market is saturated. There’s still potential to make lots of money in productivity and complex novelty apps. Smart TV and Smartwatches are another up and coming trend.
Here are a few interesting facts about the opportunities inherent in the app world:
- In 2017, the average person was spending more than four hours per day on their mobile phone.
- The business demand for app advancement has steadily increased from 23% to 32% from 2014 to 2016.
From the impressive statistics above on app development, it is clear that there is room for more innovative apps.
If you’re interested in starting an app development business, you will definitely have loads of questions such as: How will people learn about it? Is it valuable? Will it make sense? From marketing to tech development, there are many aspects to consider.
Here are five of the most common questions (and answers) that most people have when starting an app development business:
1. What are the costs involved ?
If you’re starting with a specialized development team, it’s necessary to establish your business as an LLC company. You will likely have to rent a place to set up shop, license necessary software, install high tech computers, pay for utilities such as Internet and electricity fees, etc.
A typical start-up app development company will face the following expenses:
- Business license and LLC fees- approximately $1,000, varies according to the state
- Security deposit and rent- $2,000-$5,000
- Computers for an average team of 6 members- around $3,000 if purchased $150 a month if they’re leased.
- Desks with chairs range from $150 to $250 per person.
- Software licenses can cost up to $2,000 per person.
Most start-up app development companies usually begin working with 2 or 3 people and working for longer hours. This aids in minimizing many costs until the company experiences an increase in demand, at which time more people are hired.
2. How will my app development business make money?
You may operate your app development on any one of the four business models or any combination of them, as follow:
- Work For Hire: In this model, your business is hired and paid to create an app for others.
- Advertiser Supported Free Apps: Apps that are popular may collect revenues from related advertisements.
- Free To Try or Limited Version with a Premium Paid Service: In this model, you create a new app and offer it on a free trial basis for a specific duration. You may also offer a limited version of the app for trial. Visitors who opt to pay for the premium version can receive enhanced features and eliminate advertisements.
- Paid Apps: This type of app charges users for use according to the number of users, timeframe, or license fee. There are no free versions of this type of app. Such apps are typically very specialized and prized by people who will pay for them.
Regular paid app costs as low as $0.99. When selling paid apps online, one of the best approaches is to provide the modified version for free. Offer the enhanced version to those who like the free version but want more features. This is a fruitful business model.
You may think that charging $0.99 will hardly generate revenue. Think again. Imagine ten million people sign up for your free app. Of this, 10% want to pay for the enhanced version. You can potentially make $990,000. Clearly, the revenue stream is phenomenal in this business model.
3. How much should I charge my customers?
The amount you want to charge clients for developing an app is based on a pre-set fee. It entails a specific request for the work that must be completed. If the work request is open-ended, you may charge hourly rates according to the skill and experience levels of your programmers, who will be performing the legwork of the request.
Since there is a fierce global competition for this type of work, your rates may be very low or very high. This depends on where the software programmers reside. If your company serves the Australia market, a well-developed app can cost from $50,000 to $250,000 – depending largely on the complexity scale of the app.
Of course, you can always outource to overseas programmers and manage your own ‘team’: It can be anywhere from as low as $5 to a high as $75. If your app requires internationalization, you should hire freelanders to translate the software results into multiple languages for smartphones. The whole project may cost you as little as $3,000 and take up to a month to finish.
However, please bear in mind that price tags do corelate with the quality you receive. For example, one of the reasons why Boeing’s 737 Max aircraft is ‘faulty’ – resulting in deadly crashes – is related to the aircraft’s software system that’s developed by involving outsourced contractors – at $9-an-hour rate.
That said, it’s advisable for you to take the ‘hire the local pros’ approach, which would charge you more but can offer you a peace of mind.
4. Who is my target market?
If your model involves creating apps for companies, look for ones who will be able to provide a steady stream of work so that your software programmers are busy. This will enable you to pay a fair price for the work they do.
If your work model involves selling the apps you create, then you’ll have to look for customers in your target market. Naturally, if your app generates a lot of public interest, it will sell quickly and easily. On the opposite end of the spectrum, if your app is designed to resolve a critical problem, it will likely be designed for a niche market and to a smaller group of companies or people. This means the app will sell for a higher price.
5. What will be my company’s ongoing expenses?
Once your app development business is up and running, you can expect to face the following continuing expenses:
- rent payment for space you’re using
- Internet fees for the service used by the software development team
- computer maintenance fees
- monthly subscription fees for borrowing licensed software
- utilities like electricity and water
If you’re starting an app development business, keep these questions (and their answers) in mind. Like any business, it’s going to take a lot of hard work, dedication, and long hours, but the results will nevertheless be rewarding.
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