How much does it cost to build an app in 2023?
Why should value be the driver of your project budget?
Ultimately, you will only realise Return on Investment (ROI) if your app is valuable to the people using it and your business.
That is why our people and processes focus on delivering value. This focus leads us to our guiding ethos:
If people love it, then the business will love it too.
While reading the remainder of this article, please remember that value delivery is the goal, and by that, I mean a working app in the hands of the people for which it is valuable.
Cost is a decision-making tool to allow you to answer essential questions like:
Do we have a sufficient budget to build an app?
Are we going to get ROI on this app build?
Answering these or similar questions is why you are reading this article. If you want some answers, then please read on.
What roles are important and why?
Successfully building an app and deploying that on the App Stores (or delivering to your workforce) is a complicated and coordinated effort that, done well, takes experts across multiple fields.
For example, our team has Product Owners, User Experience Designers, User Interface Designers, Solution Architects, Software Developers, Software Testers and an Agile Coach. Each person plays an integral part in delivering value.
Furthermore, we have learned over 10+ years of experience that collaboration between our team members is essential to delivering value apps. Cooperation is facilitated by tried, tested, and continually improving processes. Extraordinary processes amplify an individual's ability to deliver value.
Cost comparison by day rates
Let's look at a cost comparison between contractor day rates and agency day rates. Why? Because hiring individual contractors and putting together an in-house team is one of your options.
Before we get to the figures, consider this option's risks seriously, particularly if you have yet to gain experience putting a software development team together. It's a complicated endeavour that, from personal experience, takes 5+ years of experience to achieve competency and 10+ years to gain mastery.
Another option, if you are yet to gain this experience, is to find someone who has a proven track record of delivering valuable apps and enlist their help, whether that is a talented first hire, an experienced advisor or a savvy co-founder. Or hire an app development agency with a history of delivery.
Ok, to the numbers. For this, I will use Hay's IT Contractors Rates for Brisbane (as Code Heroes is Brisbane-based) as a guide for the above-mentioned roles and compare those to our day rates here at Code Heroes.
Contractor day rates:
Product Owners $1,000
User Experience Designers $1,000
User Interface Designers $1,000
Solution Architects $1,200
Software Developers $1,000
Software Testers $1,000
Scrum Master $1,000
Our day rates at Code Heroes:
Product Owners $1,600
User Experience Designers $1,200
User Interface Designers $1,200
Solution Architects $1,600
Software Developers $1,400
Software Testers $1,200
Agile Coach $1,600
You might think, "I don't need all these roles". And you might be right. But why would I pay salaries I didn't need to get the job done? And by "get the job done", I mean delivering valuable apps to those using them.
You can cut costs by not having one or more of these roles involved in the project, but I attest that you will also deliver a less valuable app.
Cost projections
For a cost comparison, I assume you will hire all the above roles as contractors and compare that to our agency day rates.
Let's assume an initial project build time of six months, and contractors work 115 days in six months (230 days a year). This figure takes into account weekends, holiday days and public holidays.
Project Budget (6 months)
Contractor costs:
Product Owners $1,000 x 115 = $115,000
User Experience Designers $1,000 x 115 = $115,000
User Interface Designers $1,000 x 115 = $115,000
Solution Architects $1,200 x 115 = $138,000
Software Developers $1,000 x 115 = $115,000
Software Testers $960 x 115 = $110,400
Scrum Master $1,000 x 115 = $115,000
Total: $824,400
Our fees at Code Heroes:
Product Owners $1,600 x 115 = $184,000
User Experience (UX) Designers $1,200 x 115 = $138,000
User Interface (UI) Designers $1,200 x 115 = $138,000
Solution Architects $1,600 x 115 = $184,000
Software Developers $1,400 x 115 = $161,000
Software Testers $1,200 x 115 = $138,000
Agile Coach $1,600 x 115 = $184,000
Total: $1,127,000
Ok, that's interesting. It's approximately 25% more expensive to hire an App Development Agency than to hire contractors directly over the same six month period if you were to put a team together yourself.
Let's think briefly about what you get from an App Development Agency that you'll need to attain if you put a team of contractors together yourself.
App Development Agency day rates might be higher, but overall spending can be significantly less than with contractors. Agencies can utilise roles across projects. For example, contracting full-time UX/UI Designers could be over-resourcing depending on the project scope. Without prior experience, you'll have to make the hire to find out. Spoiler alert! The real-world examples below show yearly project spending from $100k to $200k, significantly less than the above figures. Lower annual expenditure on a project is due to billing on the resources expended rather than hiring full-time resources for a project.
As mentioned earlier, it takes time for a team to start performing as a cohesive unit. An App Development Agency with a proven track record of delivering should have a performant team. It'll take time for contractors to move through Forming, Storming, Norming and Performing. Transitioning through these stages could take many months, at least, and cost more than that 25% due to reduced productivity.
You'd also need to consider the effort and cost associated with putting the team of contractors together. Recruitment can be expensive and cause delays if one or more individuals do not gel with the other team members. With an App Development Agency, you should not observe any delays caused by sick leave, annual leave, or changes in employment, as team structures and processes should cover resources in these cases.
But how much will it cost to build my app?
Answering that question is difficult without knowing what app you want to build and why. To determine this, an app developer must work with you to garner the necessary detail to produce meaningful estimates, which are the basis for any costings in a proposal or quote.
The most significant risks to you are insufficient detail and misunderstandings. Either will impact the estimates and therefore costing provided to you by any App Developer you are considering. This variance makes your decision-making, based on cost, difficult due to not comparing apples to apples.
Only trust the estimates and costings if you feel the app developer understands what you want and to sufficient detail.
Also, ask about the process they follow to determine any estimates. Most notably, the people doing the work should be involved in the estimation process. Otherwise, it is a finger-in-the-air exercise. Think about your area of expertise. Are people who have never done your work good at estimating how long it would take to do the work?
Ok, ok. I get it. I still need to answer your question. And I'm sorry, but the answer is, it depends.
At this point, the best I can do is give real-world examples of projects and the fees we billed.
Real-world project budgets
Before considering a few real-world examples from our app development agency, please remember that you will only realise ROI if your app is valuable to the people using it and your business.
Given the following figures are actual figures, I'll anonymise the project while also attempting to convey the business value delivered.
Example 1
The first example is a business-critical app we rolled out across the company's workforce in 2019. When I say business-critical, I mean it. Any critical system failure would grind this national business to a halt within two weeks, possibly days.
One of the things I love about this project is that the people using the app asked, "When can we have it for real?" at the end of the User Acceptance Testing conducted before the production rollout. Rather than resisting change, this app made their lives easier. They wanted it because they saw value in it.
The app transformed how the organisation performed this critical function moving from reactive to proactive. They restructured a department moving employees to higher functions, as they no longer needed to react to the problems solved by the app developed bespoke for their business.
The solution delivered included a mobile app (iOS and Android), back-end services and integration with their existing Enterprise Resource Planning (ERP) infrastructure. The solution also codified complex business rules previously operated outside of any software solution. It takes skill and experience to capture tacit business rules and successfully translate those into working software.
The initial build took 11 months from project commencement to deployment into production after thorough testing, costing $183,000 + GST.
The business driver for this project was not cost-cutting. However, in this article, let's assume it was, and they made two employees redundant instead of repurposing them to more valuable work (which is what they did).
According to the Australian Bureau of Statistics, the Average Weekly Earnings in Australia as of May 2018 was $1,586.20 per week or $82,482.40 per year.
We deployed the solution in Dec 2018, and they realised the return on their investment in 2019. The total saving from two employees earning an average weekly wage is 2 x $82,482.40 = $164,964.80.
The total spending in 2018 is $183,000 minus the two employees' yearly wages is $18,035.20. If only assessed on a cost basis, the client realised the business value generated in the 2018 build in the 2019 calendar year for $18,035.20.
Let's look at spending over five years from 2018. From 2019 onwards, we added more features, including a desktop app for two other business units and provided support to the business and maintained the solution.
App Development Agency fees:
2018 $183,000
2019 $165,000
2020 $93,000
2021 $96,500
2022 $82,500
Total spend over five years: $620,000
Employee wages:
2018 $164,964.80
2019 $164,964.80
2020 $164,964.80
2021 $164,964.80
2022 $164,964.80
Total spend over five years: $824,824
That's a saving of $204,824 over five years!
Example 2
The second example is an app built for the Apple App Store and Google Play Store. It uses generative AI to deliver unique content to people to help them with everyday tasks.
Despite being powered by AI, this example is significantly less complex than the first, as the implementation does not involve complex business rules, integration with ERP or thorough User Acceptance Testing to ensure rollout does not disrupt business-critical operations.
However, it has seven key features that focus on delivering value to its users. And a decent proportion of the effort went into training the AI, as getting that right is core to value generation.
We started this project in December 2022 and launched it in the App Stores in April 2023. While it's still early, this app has reached the top 100 apps in 4 countries, reaching #42 in the Australian Apple App Store. We've already seen thousands of downloads, which is growing daily.
Let's look at analytics figures to understand product quality, engagement and retention.
Since launching the app to the App Stores, 100% of users on iOS and Android have enjoyed crash-free use of the app. That is, the app has never crashed ever on any device.
We have also observed average engagement time, the average amount of time people use the app in each session, is at 5 minutes and 38 seconds. Think about how you use apps. Unless it's streaming or games, you typically go in and out of an app in less than 2 minutes.
And retention, the percentage of users that return to the app after download is 15.4% at week four after download! Think about how many apps you've downloaded that you still use four weeks later.
From the first conversation to the deployment in production to the App Stores took four and a half months at the cost of $46,000 + GST.
How do I determine a budget to build my app?
To determine a budget, you'll need to spend some time, at the least, with one or more App Developers to obtain some estimates and costings.
Keep in mind that any estimates are rough estimations. Any costings should be used as a guide in answering essential questions like:
Do we have a sufficient budget to build an app?
Are we going to get ROI on this app build?
Remember, the most significant risks to you are insufficient detail and misunderstandings.
To produce estimates, an App Developer must ascertain what app you want to build and why. Ideally, this information is garnered from you via discovery workshops and follow-up question-and-answer sessions. The outcome of the App Developers' work is assets with which they can validate their understanding with you and which form a basis for those that will do the work to produce estimates.
More detailed outcomes from discovery work will lead to more accurate estimates.
Put another way, you can reduce budget risk by working closely with App Developers to minimise misunderstandings.
Why you should spend some money to reduce risk
If you are still reading, you'll understand that deploying an app to the App Stores (or your workforce) will cost at least tens of thousands of Australian dollars.
And the most significant risk you face when determining an app budget is insufficient detail and misunderstandings.
Given this, it stands to reason that you allocate a relatively small budget to a discovery project which will help you ascertain project scope, validate the market, and reduce budget risk significantly.
Get in contact to reduce risk
If you'd like to learn more about how we help clients reduce risk in the early stages of their projects, please get in touch to learn more about our Discovery Packages.