As part of the planning for creating my own app, I ran some numbers on what it would take to get an app out. I’ve had the round number of $10,000 in my head as the amount I needed, but I was interested to test that against a realistic estimate. Here is a table of potential costs to start an app company:
As you can see, the total quite accidentally came out to almost exactly $10K! If I were fund-raising I would ask for more than that, so as to have some wiggle room in case costs exceed my numbers, as they most likely would. I planned for a little extra in the area of software, but extra expenses could come up from a variety of sources.
The budget assumes several things:
- All work will be done at home.
- Each person has their own computer that they bring to the mix.
- There are no salaries until there is some income.
- Beta testing is performed by a third party.
- Programming, preliminary design testing, art design, marketing, etc., (mentioned in my previous post) will be done by a partner or myself.
As a result, this budget does not include office space, computers, company cars, business lunches, on-line Objective-C training, etc., etc. This is a bare-bones budget and does not take into account any “special costs” that may be associated with a particular app idea. For example, an app that interfaced with an external hardware component would need prototypes of that hardware. Also, if there were technology to be licensed in, that would have to be accounted for. On the other hand, there might be places where some money could be saved. Development for the iPad only would eliminate the cost of two iPods, and two iPhones and their associated telephone plans, which would be a fairly substantial savings given the cost of an ATT data plan. Or perhaps we do our own beta testing; or we decide that we need only one software application to create wireframe models of our app. There are a number of ways the actual budget might differ from this one. Overall, however, this is a realistic but minimal budget for developing an app. Of course, you could spend more – in an interview with Jeff Smith of the highly successful Smule app company (in App Savvy by Ken Yarmosh), he talks about spending $500,000 on an app idea that was killed before it ever reached the App Store! At this stage, one can only dream of that kind of budget.
We don’t need $500,000, but what about $12-15,000? Where is the money for Limulus Systems going to come from? You’ll see – I’ve got some ideas for fund-raising, but I’ll save them for a future post.