What Is the Cost to Build a Tech Startup?


Would you like to create your own application, build a website, or make something new with help of technology? Of course, this is a good intention and, in case you are a developer, you can do it yourself. But what if you don’t know how to code and all you have is a brilliant idea?

Well, you probably need a bunch of people who have the right skills and are willing to help you. Find out how to choose the right people to work with and build your start-up: How to Find an App Developer for Your Project

If you don’t have money, you need to find some funding and use these earnings to elaborate on your idea and create the prototype.

Find out how to get funding: Health IT Startup Funding: Here’s How to Attract the Investment

In case you have the money, perhaps the only thing to do is to assemble a team and bring your idea to life. It sounds simple, but in today's world, custom development is comparable to art, which is usually quite expensive. Moreover, in today's economy, you have some limits on your budget.

The answer here is to monetize your idea and do it quickly. Read the article about monetization models for healthcare app to find out more. Anyway, don’t forget that you act in the time, cost, and quality paradigm.

How to navigate the custom development market

Let’s suppose you have a budget. What can you afford with it?

In the world of modern development, we use the word MVP which reads like a minimum viable product. An MVP is a sort of a simple version of a product that customers can use and fill their needs. And if they can cover their needs, that means it's time to make money for the service provided. MVP is built step by step and in an agile way - new functionality appears incrementally, small piece after another. It helps move and manage the project in the same direction and avoid stupid mistakes in the beginning.

It sounds more rational, but still, we have a question about project forecasting and evaluation, including timing and budget.

You can always try to investigate and compare your idea with something that already exists on the market. Thus you can make a rough estimation and understand the total costs for the upcoming project. However, information about money is usually under control. Sometimes reaching valid data regarding the budget is difficult because of NDA or some other restrictions.

From our past experiences (Anadea has dozens of successful examples) sometimes it takes less sometimes more, but the rule of thumb says that almost all MVPs can be created within 2-3 months. This is really general but gives you a rough estimate and understanding of calculations. While you understand approximate dates you can make some calculations.

Breaking down the app startup cost

Having these numbers, the last thing to do is to form a team and multiply it by the rate of a particular specialist and you will have the totals.

Here is an example. Let’s say you decide to create an application for divers. The minimum team composition will be:

  • Front-end developer who will be responsible for interface creation;
  • Back-end developer who will set up all internal logic and make sure that everything works smoothly;
  • QA tester will properly check the application and help developers eliminate bugs;
  • Designer — a person who, with their lovely design, makes the user fall in love with your app.

Suppose they have the next rates:

  • Front-end - $55 per hour;
  • Back-end - $55 per hour;
  • QA - $45 per hour;
  • Designer - $50 per hour.

Let’s do some quick math and suppose that you work according to the classical principle - 5 days a week with 8 hours per day. It means that cost:

  • Front-end: 55x8x5 = $2.200 per week;
  • Back-end: 55x8x5 = $2.200 per week;
  • QA: 45x8x5 = $1.800 per week;
  • Designer: 50x8x5 = $2.000 per week.

Thus, in the range of 2-3 months, it will take from $65,600 to $106,000.

Ways to optimize your custom software project budget

These numbers may seem huge, however, they are true. Still, there are some ways how the budget can be cut by 2x or even 3.5 times.

Engage a business analyst. A business analyst or BA is the person who builds the bridge between your business and the software development team. One elicits business requirements, helps to decide on features, describes how features must be developed, communicates with stakeholders, ensuring you get exactly what you want. One of their goals is to reduce costs. BA takes preventative action. By having a carefully crafted plan prior to the start of development, developers have a clear understanding of what product they need to develop. The job of a business analyst is like a map for a traveler. Don't forget to take your map with you!

Another solution, of course, is to properly calculate the specialist's working hours. In our best example, we consider the designer's job to last as long as the whole development. In practice, though, that is not entirely true. Usually, the design phase is limited and it takes about 2-4 weeks to create an MVP. During this period, original design concepts are prepared. Once the design has been confirmed, a designer polishes and adds details. So it's not a full-time job after the first couple of weeks. (In each case, the situation may differ, we consider a hypothetical general example.)

A similar situation with QA engineers. Theoretically, while the development is in process, the tester can work part-time. Nevertheless, testing should not be ignored. Testing is a process in which haste is not our ally.

Last but not least, don’t hesitate to send us your request despite your budget. All big adventures begin with small little steps. Even if your budget is strict, let’s have a conversation. Don’t hide potentially big projects.

And don’t forget to negotiate. You always can split the total budget and don’t pay the full amount of money immediately and do it partially. So move smart!

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