Over the past six years, Applico has built over 300 apps, and I’ve learned a lot about how to find the perfect app developer at the right price. The primary driver of price is the cost of labor. For example, hiring offshore developers will be exponentially cheaper than hiring domestic developers, and an established firm will cost you more than a freelance hire.
Because there are so many different variables, the price for a mobile app could range anywhere from $5,000 to $500,000. The average price range will typically be somewhere between $100,000 and $300,000, and the entire development process takes about 12-20 weeks. It’s obviously a hefty investment, both in time and money. So in order to optimize your financial resources, here are the five key factors to consider when determining the appropriate mobile app development budget.
Your Priorities
It’s important that you be honest with yourself and your priorities. Finding a development firm to make a great quality app very quickly and with an inexpensive budget is a red flag. You get what you pay for. If it seems to be good to be true, then it probably is.
Let’s assume you want a quality app, which leaves you to choose between a larger budget with a shorter development timeline or a smaller budget with a longer timeline. My preferred development timeframe is no longer than 12 weeks. Your total timeline will be longer because you also need time upfront for design and product definition. If you want to use offshore resources and decrease the price, you should assume an additional 6-12 weeks will be added to your development timeline.
In-House vs. Offshore
You are hiring a developer because they know how to execute and execute well. The only way they will build a core competency in programming software is if they have resources in-house. Unfortunately, it’s pretty easy for a firm to say “Of course! All of our developers are in-house,” when that’s often not the case.
Ask who the specific team members would be on the project, and ask to see what past apps they have worked on. You can also request to talk to the resources and evaluate their communication skills. Although offshore development is significantly cheaper, hiring in-house engineers will make a big difference during your design phase; it will save you time and money down the road by bringing technical knowledge into the product planning.
Some firms will say all their resources are on-shore, when in reality, they may have their design resources locally and their development offshore. This is an easy way for developers to charge on-shore rates for development and get huge profit margins. By doing the appropriate due diligence on the actual team members, you can weed these firms out.
A hybrid approach can work in situations where competent, on-shore engineering teams can work on the most important parts of a project while using cheaper, third party resources for the more menial tasks. However, without a true engineering team on-shore, this approach won’t work. Technical project or product managers alone aren’t sufficient.
Waterfall vs. Agile
Waterfall development and agile development are the two most prominent methods to app development, but they’re vastly different. Waterfall development depends on having a clear documentation process laid out upfront, before the development process begins, and closely following that process. With agile development, there’s hardly any documentation before starting development. Developers work in one- or two-week sprints and figure out code as they go.
“Iterative development” is what we call a hybrid approach. There is some documentation upfront, like wireframes and mockups for key screens and functionality. But details and certain aspects are left to be figured out by the team during development.
With waterfall development, there’s little flexibility, but you know exactly what you’re getting and how much it will cost. Plus, with meticulous record-keeping of a structured project, it’s easier to improve the process in the future. But waterfall development can be difficult since it’s hard to know every single detail and nuance from the very beginning, especially for a larger or more complex project. The timeline here will inevitably be longer.
In general, the industry is moving toward agile development. The lack of initial structure can often make the project more expensive than initially planned, but it allows for far more flexibility to adjust the product and account for feedback and changes. With agile development, you can have incremental releases at the end of each development cycle, so you’re more likely to reach your launch date and get to the market faster.
Fixed Fee vs. Time and Materials
In a waterfall structure, you could set up a fixed fee for the work. You could spend X on design and documentation and then receive a fixed fee to develop your app for Y. However, it is inevitable that you are going to want to change something. Enter work orders. Are work orders billed at the same rates? How many of their projects have work orders? How much is the original contract versus the cost with work orders?
In an agile or iterative structure, you can be billed for the amount of work effort performed. The firm will provide you an estimate of the rates that you’ll be billed. If billed hourly, check to see if they have time tracking software and and if you’ll have access to review it. And if it comes to an invoice dispute, see if there is a process in place to handle the situation.
While a fixed fee structure may seem to limit your risk the most, I would suggest using caution. Your “locked in” price can be deceiving when you account for the total cost including future work orders. The ultimate goal is to get a great product that will accomplish your business objective, but the quality and caliber of a developer who works in a fixed fee structure can sometimes be compromised.
Estimate Creation
What’s the process of estimate creation?
Who made the estimate? Does that person have a thorough understanding of what you are trying to make? Have you talked to that person? Have they worked on similar apps and used similar technologies? If the technologies are foreign to them, it is easy for them to misestimate. Consider how actual costs have compared to initial estimates historically so you can better avoid any misestimation. To be safe, assume your developer will go 20 percent over budget. I hate to say it, but that’s the state of the industry.
Paying close attention to these five factors will help you get a better idea of what your app development budget will look like. The right app development won’t be cheap, but it’ll be well worth the cost.
A version of this post originally appeared on the author’s blog.
Alex Moazed is the Founder & CEO of Applico, the trusted advisor to disruptive tech companies with clients like Google & Highland Capital’s portfolio companies.
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