The cost of maintaining an app business is a turn-off to many potential investors … but I have good news; there is a way.
The primary costs will be your developers. Without these, you have no app business.
Your app business will require a full-time developer, and we highly recommend this person is in-house, or at the very least, dedicated to your project and available at all times. This will make all the difference to your growth.
In a previous article, How Much Does It Cost To Build An App, I wrote about the difference between Basic – Intermediate – Premium. The same rules apply where developers are concerned. I will never employ a basic-level developer, although I will consider an intermediate-level developer for ‘addons’, which is a subject for another article. It is critical you have a premium developer on your team. These can be difficult to source, and come with a price tag of between 50–120k p/a.
- Consider using TOPTAL—a freelance website with the best of the best developers.
- Consider inviting your developer into a shareholding; if your project is amazing, your developer will be able to see its potential and recognize this as a great move, as he/she will benefit from significant returns down the line.
The best apps are those that are innovated. What you think is a great idea now will need ongoing tweaking. If you remain stagnant, then so will your app business; you must always be thinking, adapting, moving, shaking. For this to happen, you need an innovator in your business. Due to the sheer nature of the position, you would be best placed having this person on your board of directors or shareholders. This is another of your significant costs—50-120k p/a is a sensible starting point.
WAIT… before you think this is too expensive, there is great news! Expert Apps has a solution, but before we get to that let’s carry on with ongoing costs for those that do wish to know.
Having a co-founder can make all the difference to your business. Find someone who complements your skills. There is little point in having someone with the same skill set as you, so try and find someone you can bounce ideas off and who can add value to your business in another way. The costs for this person will vary, but can be anything from £30,000–£110,000 per year; however, this figure can be drastically reduced if the co-founder has a healthy shareholding.
Maybe you have the skills to step into one of the roles listed above—but do not underestimate your need to earn. If you are not earning from your project, then you will feel demotivated and will be in a very difficult position to give it your all. If all you take from your business is the amount you need to live, then you must do it. Contrary to popular belief, this also sends a very important signal to investors, as it tells them you are serious; you are giving this your all and you recognise the need to take care of the business leader.
It doesn’t stop there; unfortunately, the costs keep rising. This is precisely why Expert Apps exists, as we are enabling individuals and businesses to become part of the ever-growing app world, without all the headaches and overheads, by licensing our technology.
This is a minefield, but I am going to start by saying do not make the mistake of pumping tens of thousands a month into marketing your product BEFORE you have fully tested it…and when I say testing I don’t mean switching it on and checking it works. It’s not a light bulb. This is a product that needs to be viewed from 365 degrees. What I mean by this is that different devices, people, personas etc. will all have a different experience. That, and a little bit more. I cannot stress enough the importance of minimum marketing budgets. Realistically you will need at least £20,000 per year as a starting point. Once you are on top of your app metrics and have learnt your average customer value and cost per acquisition, then it’s time to increase that budget. It is not uncommon to spend in excess of £50,000 per year before you start seeing any returns.
LICENCE YOUR APP FROM EXPERT APPS – We will hold your hand.
If you think you are going to host a successful app for a few pounds per month you have another think coming. Yes, you can cut corners, get a cheap hosting solution and make do—until you have problems and then need to pay server administrators, which can cost £150–£300 per hour to resolve the problems. (I learnt the hard way.) I have tried many server solutions, and I even had my own servers in a data centre at one point. The servers cost in excess of £5,000 each, with ongoing costs of £500 per month minimum. I since upgraded the solution, using a multinational company giving me the ability to upgrade servers with a click of a button. In the first year alone, the cost of this was £20,000, which continues to rise as the apps grow and we have more active users.
App costs rise as your business becomes more successful; but be warned: profits tend to follow afterwards. With Expert Apps, your buy-in price is fixed, with no rising costs. We take a share of profits and are happy to wait.
You will need to licence a lot of software: for the purposes of design, development (i.e. the full Adobe suite), and CRM to manage your contacts and prospects. Then there’s app analytics, and you will also need licences for images you use. We always suggest allowing £2,500–£5,000, although this cost will rise. Within our first year we came across software we would have loved to licence, but the fees were in excess of £60,000 p/an each, and this was simply not in the budget.
Legals and trademarks
There are many documents that you must get in place which protect you and your users. You should budget £5,000–£15,000 in the first year, but as time goes on, this will significantly increase. After year one we hired the best lawyers in our city; this increased our legal bills, but massively reduced our liabilities.
Do not dismiss the importance of project management. Quality will go down the pan without it.
As your app and app business evolves, so will the demands on project management. It is critical to your success that you have mapped out a schedule of events and that everyone in the team understands who is working on what, and when the tasks will be completed. If a project overruns, so does the budget, and it is the responsibility of the project manager to ensure that the team completes tasks on time and that they have the resources required to complete their tasks.
If a project overruns so does the budget
A project manager will be responsible for the SWOT analysis of the project and/or the company—so, the Strengths, Weaknesses, Opportunities and Threats. The project manager will ensure that these are communicated to relevant members of the team so that any barriers can be solved, or problems prevented.
It is easy to get swept up in the building and innovating and get lost in the dream. I know—I did it. Thankfully, my mentors picked me up on this and helped us to introduce a powerful structure which consists of weekly, monthly and quarterly planning meetings.
I may write an article on app project management in the future, so if you feel this would help you, please do comment below. In the meantime, let’s look at a summary of other areas within a project manager’s role:
- Project scope, features, and functionality
- Keeping up to speed with on platforms and devices, legal requirements and updates
- App screens within the app, quality, and quantity
- The app database structure
- Third-party integrations, such as Facebook, Twitter, and LinkedIn
You are in the app business now, so it’s time to upgrade your systems. As an ex-Windows user, I strongly advise investing in MacBooks. Yes, that’s right, you have just added £5,000–£10,000 to the budget! Some will say you can make do, and to some extent, when you’re just getting started, a simple working laptop may be a workable solution, but my articles are aimed at those who wish to build an app business, or have an app that forms a significant part of their existing business, and not at those who just have an app.
Is this essential? I would say a resounding ‘yes’. In fact, I think if I had not invested heavily in mentors then I would not be writing this article. The great news is we run a support mentorship program for all our app licence holders. Not only will you benefit from our support, but you will regularly meet and network with other licence holders too. If you do choose to go it alone, we highly recommend you seek a business strategy coach, a positive mindset coach and an app mentor. You will find £24-55k per annum is a realistic expectation of fees.
How many times a day does your phone tell you that you must update it? Often when this happens there is a connected requirement for you to update your code. How many devices are released each year? Often these require subtle tweaks. The great news is if you have invested in a developer as explained above, or if you have licenced an app from Expert Apps, then you won’t have to worry about this as these costs are covered. However, if you’re thinking of employing an agency to manage your project, just consider that this will significantly increase your fee.
Make sure you secure adequate insurance. You need to be covered from top to toe! As an additional piece of advice, I highly recommend you add cyber protection to your policy… and as it took me a long time to find a provider, I will share with you my source:
When you attend one of our Discovery Days, you will see why licencing an app is a much more viable option than shouldering the above costs and responsibilities yourself.