Budget Planning for App Development: Stages, Tips, and Hidden Threats

Whenever we discuss a new app development project with our partners, the matter of the development budget always comes up during our conversation. Any business about to launch a new project would like to know the expected costs, of course. Naturally, each application is unique, however, there are a number of basic components of an app development budget that should be always planned.

We have decided to share our methodology for the app development budget estimation, so that you get a better idea of what is included in the application development's total cost.

The preparation of the development budget should be included in the project planning process. Building a correct budget serves multiple purposes:

  • Estimating the total cost required to complete the project
  • Deciding whether to attract any external investments, and if so, how much
  • Estimating the time needed to deliver the scope of the project
  • Prioritizing the app features

Starting the development process without a proper budget is like starting a construction project without a plan. Once you have a budget, you can better estimate and schedule the project development activities. For example, after calculating the budget, you may see that it will be more feasible to build an MVP first, and then proceed to the full scope of the application. The budget may also show that you should include only certain features in the initial release, and leave the rest for the updates.

Budgeting basics

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It may not be obvious, but the budget does not only consider the money or costs. When you are calculating the budget for creating an app, you should take into account two more factors that are just as important as money: the scope of the project and the time required to deliver it. At the end of the day, these factors directly influence your budget, as they determine the resources you need to complete the project.

Project scope and how it can influence the budget

The scope is the starting point in both project planning and budget calculation. By defining the scope, the project team translates the requirements of the final product into a set of features that are to be implemented. This is when we work with our partners very closely, breaking the project specification into logical chunks of functionality and separate features and making sure we miss nothing.

Once the general scope of the project is prepared, you can estimate, on the one hand, the time needed to deliver each feature and, on the other hand, the hardware and software resources required for it. This estimation gives us the grounds to calculate the cost of hours that the project will take and the cost of resources – software licenses, if necessary, additional hardware, cloud resources, and so on.

Defining the project scope allows you to put together the rough estimate of the budget by preparing the app development cost breakdown. With the rough estimate, you can immediately see whether the project budget meets your expectations. If it does, you can move on. Otherwise, turn to Plan B.

Your Plan B may be either attracting some additional investment from venture capitalists, through crowdfunding, or by starting with an MVP. In the latter case, you are going to need a prototype of the product that has just the main features. An MVP is your tool to test the market and to validate your product idea. Needless to say, building an MVP is going to consume much less budget than the full application.

Of course, it may happen that your central feature is the most cost-intensive, and even if you start with an MVP, you will definitely need to include it. In this case, creating the MVP may also be quite expensive, however, it will still help to shape future development.

We recommend working with the project team on the MVP scope. The professional developers and project managers can suggest the best way to introduce your product to the market with the minimum scope of features. Moreover, an MVP can serve as the basis for a more accurate calculation of the complete project as it can help to adjust the scope.

Project time planning

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Time is money, and when you are calculating the budget of a software development project, this phrase takes on a literal meaning. The implementation of the scope that you have defined will take a certain amount of time to complete, which breaks down into man-hours. Depending on the necessary skills your project requires, you can calculate the cost of each feature by applying the hourly rate for the developer.

To estimate the time, list the features together with the approximate number of hours needed to create each of them. Try not to be too optimistic. Planning too little time may cause a deadline breach and a block for other team members. At this stage, involve the developers who are going to work on the product to determine the time that is required.

If you are working according to the Agile methodology, plan your development in two-week increments called “sprints." Each sprint should end with the delivery of a complete feature that can be demonstrated. Make sure you add time for testing and fixing bugs.

Finally, plan for emergencies. No matter how smartly you schedule, people may go on a sick-leave, have a family situation, or quit the job. There may be unforeseen difficulties in the development that halt the process. Thus, make sure you add some time for emergencies, too.

With a complete project plan, you will already see the outline of your budget. Of course, no two applications are alike, but if, for example, you are planning a mobile app development budget, the total time required to develop the app will be about 18 weeks. This estimation includes the potential for different components of the project to take a longer or shorter amount of time to complete. By multiplying the number of hours by the time it takes to complete each skill, you will be able to calculate the mobile app development budget in terms of the cost for a team.

Budget for different app types

Of course, the type of the application you are developing also has its influence on the cost. While there are usually the features that are common for most applications, such as login or push notifications, the core functionality is different. It is the core functions that are the most time- and cost-consuming.

We’ve talked to DA-14 CEO, Dmitriy Sushko, to discuss average price tags for particular projects. So, let’s look at some of the most common app types to see how much they may cost.

  • Social networking apps. The basic functionality includes creating a profile, making connections, sharing the content, search, and messaging. However, depending on the purpose of the app and the target audience, you can include all kinds of other features. Some of the features you could include are quite hi-tech, such as chatbots, augmented reality, audio and video streaming, and geolocation. All these functions require additional development time, special tools, and platforms. Thus, the range of cost for a social development app will be rather wide – from $100,000 to $500,000 for web app development and $50,000 – $200,000 for React Native mobile app development.
  • E-commerce apps. In this type of app, the largest difference in cost is the result of whether or not you decide to use one of the available platforms, such as Shopify or Magento, or build a custom application. Both approaches have their pros and cons, however, both provide the basic e-commerce functionality – user registration, product catalog, search, and payment. You can expand the functionality with features such as advanced search, integration of various payment engines, loyalty programs, and live chat. The final scope will define your app development budget. Your budget will likely need to be in the range of $200,000 – $1,000,000 for custom web application and $100,000 – $500,000 for a mobile solution built with React Native.
  • On-demand service apps and marketplace apps. Here, you can also opt for a platform solution or custom development. In this case, you will get a unique app, however, be prepared for a much higher cost. The basic marketplace functionality usually consists of a login feature, a search engine, and payment options. However, you can enhance the search by adding various filters, autocompletion, the ability to upload images for sellers, the commenting feature, and include geolocation for service apps. The total cost for this type of app will start at $70,000 and go up to $1,500,000 for web application development. The mobile marketplace will cost anywhere from $50,000 to $500,000.
  • VR-based apps. This is an example of a technology-intense application that can serve various purposes – from virtual tours or shops to games and trainings. The budget of such application depends on the VR effects that are used. You can use videos or computer graphics, include 3D models, provide multi-user access, or develop the app for a hi-end hardware. All of these factors are going to influence the cost directly, placing your total budget in the range of $20,000 – $100,000.

Budgeting with confidence

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The money matters can be the biggest pain of a project, however, that only happens to projects that are poorly-budgeted. When the budget is done properly, you will progress with your solution development without any unexpected obstacles. If you are starting on a tight budget, create an MVP to avoid large spending and validate your product. At the same time, use the MVP and the analytics it yields to secure external financing.

In any case, review the budget regularly together with your development partner. No matter how carefully you plan, there will be deviations, and you need to factor them in. A professional development company will always suggest the solutions that allow you to reduce costs while sticking to the initial feature scope. You may want to use these cost-saving ideas during project development if you need to change something en route. This is where the Agile methodology is going to help tremendously, as it is particularly focused on the adaptability to change.

Preparing a solid budget is probably as important as building the project itself. The budget lays the foundation on which the project will grow. With a proper budget, that includes all necessary items, both you and your development partner will be able to work with confidence and can expect a successful delivery. If you have an app development project in mind, our managers will gladly work with you to prepare the budget estimation and build the basic scope. Contact us, and we will make it happen!

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