Billion Dollar Apps

Why “How much does an app cost?” is the wrong question

April 24, 2015

  • Alex Bratton

We work with some of the best and brightest business minds across the world. They have impressive credentials. They boast significant corporate accomplishments. But we frequently get asked the same question up front with a nervous prejudgement: “How much is this going to cost me?”

Wrong Question

People whose first question is asking what the budget is are asking the wrong question first. Make no mistake: “How much does an app cost?” is an important question, but when it’s the first question, it’s with a mobile-last mentality. This is when mobile is an afterthought, a reactionary response to a perceived trend, rather than an investment in a predominant medium with huge savings and revenue potential.

Asking up front for an app cost hard number is like choosing a home builder based on how many Yelp dollar signs they have. It’s important, but when it becomes the deal breaker up front, you are either too small of a company for custom mobile apps or your understanding of the power of mobile is underdeveloped.

The Right Question

The right question is, “What is our market worth?” or “What is the opportunity here?” either for operations cost savings or revenue potential. This flips the typical cost question on its head and shows a mobile-first approach. This question means we understand the power of mobile to change the way people are working.

You Need a Business Case

Once you understand the value of your market, you’re on the road to understanding the business case for mobile apps. The short of it: if you can’t articulate a business case for an app, you shouldn’t be building an app at all. This is very likely putting them in the trap of spending money on the wrong mobile app, which isn’t going to have a return. Having a return on your app is the only reason you’d be asking how much the app costs. If the app is actually expected to have a big return, the cost is not a problem.

Survey Says

There are a number of studies out there indicating app costs. Conservative estimates say custom business apps start at $50,000 to $150,000, depending on what functionality you’re looking for and which back-end systems you’re connecting to. For suites of apps and more complex apps and platforms, apps can cost as much as $1 million. It should be noted that although the initial build might cost $100,000, it will cost more over time because you have to promote it and maintain it. But as you maintain it and continue supporting it, you’re also getting more value.

Sound Scary? It’s Not.

Does the word “millions” next to “app” scare you? It shouldn’t. The $100,000 or the $1 million that you spend on building an app should be insignificant compared to the return it gets for you in 24 months or less. You really shouldn’t be spending this money unless the app is worth tens of millions or more to you.

Building an app is like building a house. There are many different ways of doing it and many different types of materials and expected outcomes. You have to have the right partner to help you work through these business model questions, a partner that understands that companies and workflows are not created alike, and neither should your apps be.

Hand Saw or Assembly Line?

It’s like this. If you’re in the chair manufacturing business, you need to build chairs. One might ask, “How much is it to buy a chair manufacturing system?” and, of course, the answer isn’t easy. What kind of chair are you building? Are you building it with a hand saw and lathe or are you building it with an automated system? Perhaps you’re building it with something in between those two extremes? If you’re using a handsaw—the cheapest way—you’ll get the job done, but does it match the scope of your goals and your workflow needs?

Apps are the same. You can spend little, and the app will do very little. Or you can spend more and you can do more. You’re spending money to generate additional capabilities and additional efficiencies. There’s no such thing as a one-size-fits-all app.

Simplicity = More Skill

Apps are deceptively simple. We see apps in the app stores that are 99 cents and they’re really easy: easy to think about them, easy to build, and easy to think about applying them in the business. However, a lot goes into developing those easy apps. We can look to Apple, who exemplifies simplicity. Simplicity requires a huge amount of work and a proper investment.

Returns—the Rule Not the Exception

Returns—even big returns—should be the rule and not the exception. You should have ROIs of six months are less. In many cases, people are seeing five to 10 times returns in a year or less.

Many people don’t believe in mobile returns in the millions and billions because they don’t have a good personal example of solid app development and mobile investment that they think is real. They’re stuck on the obvious app. They’re caught between the app concept and wondering, “How does this make me millions of dollars?”

We’ll show you. Reach out and we’ll show you examples of apps with incredible returns—no BS. Just great companies trying to solve real-world business problems and succeeding with mobile.