How To Budget Software Development And Reduce App Development Costs   

Picture of Dyachenko Anastasia
Dyachenko Anastasia
CEO at Cadabra Studio. UX expert and business consultant
software design pricing

When you plan to launch your new business and build software, you want to combine quality and low cost. To be honest, everyone wants to save their budget as much as possible. But not everyone wants to fail, agree? That is why it is vital to know all pitfalls and steps of software development budgeting.

Before you start reading this article, we want you to know that it is possible to build robust software and reduce the costs of creating an app. Read and find all the useful information right below.

Software development budgeting involves many processes and stages, including careful planning, estimation, and allocation of resources. To determine the exact app development cost, you need to dive into a strategic process that requires considering various factors such as development time, team size, tech stack, and potential risks. By understanding the intricacies of budgeting, you can make informed decisions that align with your business goals and financial limitations.

In this article, we will guide you through the essential steps of software development budgeting and determining the app development costs in particular. We will also provide you with practical tips and insights along the way and explore strategies to optimize costs without compromising the quality of your software. 

So, whether you’re a startup founder or an established business looking for guidance in the mobile app development process, feel free to join us on this journey.

How To Plan Software Development Budget

Concept Design by Cadabra Studio

The development of your website or mobile application cannot start with the development process itself. A long planning road precedes the development stage. Thus, let’s not beat around the bush and check some practical steps to plan the app development budget. 

Estimate Your Project Value

Apart from the average cost to create an app, it is required to understand the project’s value for potential users. Will people use it? Or will your software be another clone of multiple existing apps? Also, you should have at least approximate expectations of revenue generated by new software. These plans will help you start the road in the right direction. 

Whether it is a logistic app development or enterprise CRM, you need to consider the following factors for accurate project value estimation:

  • Unique Selling Proposition (USP). Identify what sets your product apart from competitors. Determine the unique features or special experiences that make your software valuable and attractive to potential users. All of this affects the app development cost.
  • Target Audience. Understanding your target audience’s needs, preferences, and pain points is critical. Market research and user feedback help ensure your app addresses end users’ specific requirements and needs.
  • Market Potential. Assess the market demand and competition within your app’s niche. This can dramatically change the app development process. You have to know if there is a gap in the market that your product can fill or if there is potential to disrupt existing solutions.
  • Revenue Sources. Determining the potential revenue sources for your product also affects the mobile app development process and its costs. This could be in-app purchases, subscriptions, advertising, partnerships, etc. 

By estimating the project value and considering these key factors, you can align your software or mobile app development costs with the expected returns, making strategic and conscious decisions to maximize its success.

Delve Into Historical Data

It is unlikely that your project will be unique and first on the market. However, if it is, skip this point. If not, you must analyze the market and competitors you are going to beat. Historical data means the data of competitors’ success and mistakes. When you know more about the product of competitors, you will estimate your budget more accurately. And detailed analysis helps you reveal all pitfalls.

What does it mean? Here are some options for using historical data in your favor.

  1. Competitor Research. Know your main competitors and study their products or services in detail. This process includes analyzing their features, pricing models, user feedback, brand awareness, and overall market positioning. How this affects your app development cost? You get insights into what works well in the industry and what areas can be improved.
  2. SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) analysis of your competitors. This is an essential part of the first stage of any software or mobile app development. You need to evaluate competitors’ product strengths and weaknesses to understand areas where you can differentiate and offer better value to potential users. This is all about your potential opportunities in the market that you can leverage and be aware of potential threats to your own app’s success.
  3. Mistakes. Examine your competitors’ mistakes and learn from them. Identify common pitfalls, user complaints, bottlenecks, etc. By understanding the mistakes made by others, you can avoid similar pitfalls in your mobile app development journey.

Historical data and conducting a comprehensive analysis of your competitors critical for gaining valuable insights to create your app development budget. This knowledge will help you make informed decisions, identify unique selling points, and ensure your software stands out in the market.

Conduct Risk Analysis

The risk analysis will be necessary to avoid problems during the deployment and release stage. We strongly recommend you identify potential risks that will lead to app failure and higher costs for app development, and you need to do it at the beginning of a software life cycle.

You can also hire a risk assessment manager who will analyze your idea backward and forwards. Yes, it will require additional costs, but you will consider all potential risks,

and such specialists bring significant advantages by reducing your app development cost.

You can hire a team of developers and specify that you need to include a risk assessment manager. This specialist can thoroughly analyze your project from both backward and forward perspectives, bringing a wealth of experience in identifying potential risks, devising effective mitigation strategies, and developing contingency plans. Their insights and expertise will help you consider all potential risks in mobile app development, allowing you to ensure a more secure and successful process.

By conducting a comprehensive risk analysis, you can proactively address potential risks, mitigate potential failures, and minimize unexpected costs. This early-stage analysis and preparation will contribute to a smoother development process, reducing the likelihood of setbacks and ensuring the successful deployment of your app. This way, you can make your app development budget smaller without losing quality.

Also, below we will speak about factors that affect the development cost. 

Request For Detailed Estimate

Once you have completed all the stages above and gathered detailed requirements for your future software, you need to hire a software development company like Cadabra Studio to provide you with application development costs. Our specialists will pay rapt attention to each detail.

By requesting a detailed estimate from a trusted software development company, you can clearly understand the financial investment required for your app development project, which is especially important for banking and fintech development.

Such an approach can reduce the app development cost as it offers advantages in terms of cost efficiency and access to a broader talent pool. Outsourcing to reputable companies in countries known for their software development expertise can often lead to high-quality results at a more competitive price point. When considering outsourcing options, ensure you research and select a reliable partner with a proven track record to maximize the benefits of outsourcing your app development project.

Additionally, it is essential to consider the value provided by experienced professionals who can bring technical expertise and industry insights and align the mobile app development cost with your vision. This will allow you to plan your budget accurately and allocate resources efficiently, setting the stage for a successful and cost-effective software development experience.

Concept Design by Cadabra Studio

Remember that the final cost will depend not only on your app’s complexity but also on the development team’s location. Think about software development outsourcing (see more details in the next section). A detailed estimate will show precisely how much money you will need to invest in the development. 

Why is this important?

  • Adding a “safety cushion” to your budget is crucial to accommodate unforeseen circumstances or unexpected requirements that may arise during the development process. The tech industry has a dynamic nature, so you have to add some safety assets to the app development cost. 
  • New development tools, features, or market trends may enhance your app’s functionality or user experience. While these opportunities can bring value, they may require additional resources beyond the original estimate. 
  • By setting aside a portion of your budget as a “safety cushion” to include in app development costs, you can proactively address such situations and have the financial flexibility to overcome unexpected challenges without compromising the overall project.
  • It mitigates the risk of budget overruns and allows you to seize opportunities for improvement during the development process, adapt to changes, incorporate valuable suggestions, etc., without compromising the app’s quality.
  • It helps ensure that your mobile app development journey remains on track, delivering a successful and high-quality end product that meets user expectations.

Add A “Safety Cushion” To Your Estimate

Although the software development process can be thoroughly planned, you should always be prepared for additional expenses. That is why you need to allocate funding for 50% of the initial estimate.

The matter is that the world of development tools is rapidly changing, and developers can offer you to integrate a new feature that will improve your app. But it will exceed the budget limit. Thus, additional money savings as a “safety cushion” will be preferable.

Launch An MVP

Finally, take your time, and create a minimum viable product first. There is an article about MVP importance and why you need to release a product with must-have features only. But, simply put, an MVP will help you test an app idea and gather feedback from first users. Quality comes first, remember? 

Launching a minimum viable product is a strategic approach that allows you to validate your app idea, assess market demand, gather valuable insights from real users, and form a precise app development budget. 

By focusing on essential features, you can deliver a functional and user-friendly version of your app that addresses the core needs of your target audience. This enables you to test the market and gain actionable feedback, essential for deciding how much your product will cost and for making informed decisions for future development iterations.

If the app will attract users and they will like it, you can upgrade it. If it fails, you won’t lose so much money for MVP development as it could happen with a large app full of features. Your goal is to provide users with what they want. 

In general, defining the project scope and objectives is critical in defining app development costs. You need to create a clear outline of the features, functionalities, and goals you want your app to achieve. All of this help estimate the resources, time, and costs required for development accurately. 

Additionally, conducting market research and analyzing competitors can provide valuable insights into industry trends. With this information, you can meet specific user expectations, create pricing strategies, and make informed decisions about budget allocation. By setting clear project goals and understanding the market landscape, you can lay a strong foundation for effective app development, each step of which meets your business vision.

Get a detailed estimate of your project right now! Contact Cadabra Studio and share all details with our business development manager. 

How To Reduce App Development Budget Without Losing Quality

You have all the necessary steps how to plan the budget for your software at hand. But what about the ways to reduce app costs? If you need cheap app development, it won’t be an optimal solution since a cheap app is almost always equal to a bad app. But anyway the cost may be much lower, and there are some tips for you to consider.

  • Teams involved. It is necessary to speak a little about the participants of any software project. There are two teams — the client’s team and the contractor’s team. In our case, your team includes you as the owner and other team members you may need. The contractor team is Cadabra Studio’s team, if you hire us for the development, consisting of a project manager, UI/UX designers, web/mobile developers, QA engineers, and business analysts. But the team composition may be changed depending on the project requirements.

  • Build a plan. The more detailed information you provide, the more precise your estimate will be, and all details will be taken into account. If you don’t know how to build an app business plan, look through our article about plan creation. And mind that described plan fits web app development as well. 

    However, if it is difficult for you to gather all your app requirements, our business analyst will be at your disposal. You can read more in the article about business analyst roles and responsibilities.

  • Remove additional features. If the detailed estimate is too high, adhere to the “launch an MVP” rule from our previous section. Remove all those features your app may function without. Even an app with basic features but an intriguing idea may capture the attention of users.

  • Outsource your app development. This is the primary tip for cost reduction you need to be aware of. Outsourcing of the development to offshore regions can help you reduce a substantial amount of money. At the same time, the quality level of the development team will remain high. Based on this, if you outsource app development, the cost can be much lower. 

    Hurry up to read the article about offshore software development services, and you will find out more about regions where you can hire developers at affordable rates. Cadabra Studio is an outsourcing company that values its reputation and knows how to cooperate with clients.

  • Don’t forget about quality assurance. QA engineers must test your app thoroughly to detect all bugs so that developers can fix them immediately. The total absence of bugs and defects in your app will let you avoid unexpected expenses in the future.

  • Communicate with a team. You must hold meetings with the development team after each sprint. Sprint is a development stage that has a set deadline. They are used in Agile methodology, which many development companies apply in their practice (Cadabra Studio is not an exception). So permanent meetings will be useful for both parties — developers will understand your goal better, and you will obtain the project you wanted.

  • Testing at early stages. Another tip to follow is to test your app at the prototyping stage. Early testing will be valuable to gather feedback from beta testers and take them all into account. If you test an app after the official release, and users won’t like it, you will lose a lot of money, and the software modification will be more expensive.

  • Don’t complicate with a design. Software design shouldn’t be complicated — a lot of animations and cartoon graphics don’t guarantee your app’s popularity, but it will be expensive. Our UI/UX designers know how to create an eye-catching design but keep it simple. Low-cost app development is possible with a straightforward but thought-out design. 

  • Hire a full-stack team. You should hire a company that provides the development on a turnkey basis from scratch, and it has all the necessary experts in staff. First, it will be a cheaper option to cooperate with one team. Second, it will be difficult for different teams to communicate appropriately, and it may be the reason for a low-quality result. This approach not only saves time but also ensures a cohesive and efficient development process, ultimately contributing to cost optimization for the app development budget without compromising quality.

  • Allocate enough time. Haste makes waste. Your project cannot be created within a short period. Let developers pay enough time to the development of your app to ensure that everything is implemented correctly. Allowing sufficient time for thorough mobile app development and testing helps identify and resolve bugs before the product is launched, reducing the need for costly post-launch modifications. You can ensure a smoother and more cost-effective development by prioritizing a realistic timeline and providing developers with the necessary resources.

  • Consider ongoing maintenance and updates. Speaking about the app development cost, you can not expect a one-time investment because this process is ongoing. It’s important to factor in the money associated with continuous maintenance, updates, and support after the app is launched. Regular updates are necessary to address bugs, security vulnerabilities, and evolving user needs. By planning for these ongoing expenses from the beginning and including them in your app development budget, you can avoid unexpected financial burdens down the line and ensure the longevity and success of your app.

    Do not forget that reducing app development costs should not come at the expense of quality or long-term success. By following these tips and working with an experienced and reliable development team like Cadabra Studio, you can navigate the budgeting process effectively, optimize costs where possible, and deliver a high-quality app that meets the needs of your target audience.

How much time does it take to build your project? Contact Cadabra Studio to get accurate deadlines and plan your schedule.

Choose The Best-Fitting Contract Model

Concept Design by Cadabra Studio

Another point you should take into consideration is the contract type you choose. Each type of contract has its particularities, and you should know more about them to make a final decision according to your requirements. 

Fixed Price 

This contract type implies that your project has strict deadlines and that the budget is agreed upon beforehand. You won’t need to pay additional money unless you want to add more features. It is an excellent option to plan your budget, but the development team ceases to be flexible.

Benefits of the fixed price model:

  • Budget predictability. You can plan your budget accordingly and avoid any unexpected financial surprises.
  • Scope control. The scope of work is agreed upon upfront, which helps manage expectations and deliver a product that meets the requirements.
  • Clear deadlines. This provides a clear timeline for the delivery of the final product.
  • Minimal involvement is required. You can focus on other aspects of your business while the development team takes care of the project.

Let’s consider some pitfalls that affect the app development cost. We have already discussed limited team flexibility: this model offers little room for changes or modifications once the project starts. Any additional features or requirements outside the initial scope may lead to additional costs and delays.

There are also other pitfalls:

  • Lack of adaptability. Adapting to new trends or incorporating changes may require renegotiating the contract or incurring additional costs.
  • Less collaboration. The client’s involvement may be reduced to providing requirements and awaiting the final product. 
  • Risk of miscommunication. Since the project details and expectations are agreed upon at the beginning, any miscommunication or misunderstanding of requirements can lead to an unsatisfactory end product.
  • Inflexible timelines. Strict deadlines can be a disadvantage if the project faces unforeseen challenges or requires additional time for thorough development and testing.

Especially when it comes to large-scale apps, a fixed price model can play a dirty trick in a rapidly changing IT world. Your app won’t be topical anymore since the market will require a brand new approach. That is why the popularity of a fixed price model loses momentum.

Time And Material

Unlike the fixed price contract, the time and material model doesn’t demand to set strict deadlines. The development process is divided into iterations, and after the implementation of each feature, you will test an app and discuss it with a team. 

Let’s take a look at the main benefits of the time and materials model:

  • Flexibility. It offers great flexibility in terms of project scope and requirements. As the development process is divided into iterations, you can make changes and adjustments along the way. This allows for better adaptability to market trends and customer feedback.
  • Transparency. The client has full visibility into the development process and the app development cost. Transparency enables better control over the project and ensures you get value for your investment.
  • Agile Development. This model is well-suited for Agile development methodologies. The iterative approach allows for faster development cycles and the ability to respond quickly to changing requirements or market conditions.

But here are some pitfalls as well. First of all, you can face uncertain expenses as the development is based on hourly rates; the total cost can increase if there are unexpected delays or additional features requested during the development process. 

The lack of fixed deadlines can lead to delays in project completion if there is not enough discipline and structure in managing the development process. It requires effective project management and clear communication to ensure that milestones and deliverables are met within a reasonable timeframe.

Also, without proper control and monitoring, there is a risk of scope creep, where additional features or changes are continuously added to the project without sufficient justification. This can impact the timeline and budget if not managed effectively.

You will have all information about the estimate, but you will pay for each stage once completed. And the final cost may be higher than if you would opt for a fixed price. But if you think that the app has enough functionality for the release — you can stop the development. Today this model becomes popular as opposed to the fixed price contract.

Dedicated Team 

As it is clear from its name, you hire a team that includes developers, designers, QA engineers, business analysts, etc. You control their work ultimately, and deadlines, scope, and workload is up to you. This model can be the most expensive, but it also depends on project requirements. 

Here are some key dedicated team benefits:

  • Full control and flexibility. This model gives the client complete control over the development team and project. You can shape the team according to your specific requirements, scaling it up or down as needed. Such flexibility allows you to adapt to changing development needs and ensures outsourcing partner is aligned with your business goals.
  • Extensive expertise and narrow specialization. When you hire a dedicated team, you have access to a diverse range of skilled professionals who specialize in different areas of software development. At the same time, you can include some experts with narrow expertise for your product’s specific needs. Moreover, team expertise can greatly enhance your project’s quality and improve the development process’s overall efficiency. You can benefit from their knowledge in handling complex business strategies and large-scale app development.
  • Effective communication and transparency. You get transparent communication and collaboration as all the tools and schedules are clearly decided from the very beginning. You have direct control over the team and can establish convenient communication channels and maintain constant contact with the team members. This facilitates smooth coordination, feedback sharing, etc.

The only pitfall here is the price. The dedicated team may be more expensive than other ways of collaboration because of the developers’ wide expertise and flexibility. Overall, this model offers control, flexibility, and access to specialized expertise for large-scale and complex projects. It is very convenient for any industry, especially for fintech and IoT development.

Besides, you need to be wholly involved in management and communication processes, but this model is for you if you want to control every detail. And you should choose a dedicated team model if you plan to build a large-scale app with a complex business strategy. 

Key Factors That Affect The Software Development Cost

Finally, it is worth mentioning that some aspects may negatively impact the final cost of your app. And it is essential to know them all so that you can be prepared for pitfalls. Yes, you will find some of the points we have already mentioned above, but we think it would be better to structure these factors in a separate section once again. 

  • App size and type. Large apps require more development time, and it leads to higher expenses accordingly. Remember that you need to start with MVP development and launch a product with a limited number of features to test its viability. Also, the cost of development depends on the type — be it a native mobile app, gaming app, cross-platform apps, etc.

  • Platforms. Well, it is an apparent reason for higher costs — the more platforms you create an app for, the more expensive the development will be. As you build an MVP, it is recommended to use one platform for a start (iOS or Android). But if you want a website, you don’t need to worry about the number of platforms.

  • Team’s location. Let us remind you that the region where you hire developers will directly impact the final cost (negatively or positively). When you outsource software development to regions with lower rates, you save a lot of money. 

  • Design complexity. Complicated design creation will take a lot of time, and it will be expensive, but an MVP product doesn’t need a fascinating design. It just should be built wisely and be adapted to the software’s particularities and goals. 

  • Maintenance/marketing. When the app is released, don’t forget that it will be necessary to update it, add new features, etc. Besides, it is required to invest funds in marketing strategy to promote the product, and it will also require additional expenses.

  • User acquisition and retention. This may look similar to marketing, but you should consider it an independent factor. Acquiring new users and retaining them is crucial for your app. The app development cost includes some amount of money for user acquisition campaigns and advertising, so it can definitely impact your overall budget. Implementing features to enhance user retention (for example, loyalty programs or personalized experiences) may require additional resources to the app development cost.
  • Data security and compliance. Ensuring your product’s security and compliance, especially when you are dealing with sensitive user data, is crucial. Robust security measures, complying with relevant regulations and standards, and conducting regular security audits can add to the app development cost but are essential for maintaining trust and protecting your and your client’s data.
  • Third-party services integration. Your app development budget should contain the resources for integration with third-party services or APIs, such as payment gateways, social media platforms, mapping services, AI and ML tools, analytics and BI, etc. The complexity of integrating these services and any associated licensing or usage fees should be considered in your budget planning.
  • Scalability and opportunities for future growth. Every business owner wants their product to have significant growth, and scalability is critical for the future. So it is important to consider the app development cost with scalability opportunities in mind. Building a flexible architecture from the start may require additional investment but can save costs in the long run when expanding your user base or adding new functionality.
  • Legal considerations. Protecting your intellectual property and ensuring compliance with licenses is essential. Seeking legal advice, filing for patents or trademarks, or obtaining necessary licenses may incur additional expenses that should be accounted for in your app development budget.

Of course, each project is unique, and the factors mentioned above may vary in their impact on the app development cost depending on your specific requirements and circumstances. It’s important to thoroughly evaluate and plan for these factors to ensure a stable and cost-effective development process.

Wrapping Up 

In conclusion, we may note that startup costs for app development may be totally different. Everything depends on your expectations, on the budget you are ready to allocate, and software requirements. But there is always an option to reduce your budget, exceptionally when you performed thorough planning following the steps above.

It’s important to remember that the app development cost can vary significantly based on different factors. This could be the complexity of your app, the features you want to include, the platforms you target, design features and details, third-party integrations, etc. 

All of these play a critical role in determining the overall cost. By carefully evaluating your requirements and prioritizing your features, you can make informed decisions that align with your app development cost limitations.

Furthermore, it’s worth mentioning that the product development process is not just about one investment. Ongoing maintenance and updates, as well as marketing efforts to promote it, should also be factored into your budget. Setting aside resources for these post-launch activities ensures that your app remains relevant and competitive in the ever-evolving digital landscape.

As you can see, following a systematic approach to budgeting and defining the precise app development cost, considering cost-saving measures such as outsourcing, and focusing on developing an MVP, help effectively manage your assets and resources. Remember, it’s crucial to balance your budget limitations and your vision for a high-quality app to bring your app idea to life while keeping costs under control.

Anyway, everyone has their job to do. And all development-related processes must be delegated to professionals like Cadabra Studio. We will apply our skills to provide you with a high-quality result. Contact us — troubleshooting is our middle name. 

Frequently Asked Questions

The cost of medical app development depends on several factors like your needs, set of features, technology stack, and so on. Though our business analytics make sure to not spend an unnecessary penny.

To make a mobile app screen, you need to create a user flow diagram for each screen, draw wireframes, select design templates, and colors, create layouts, and create an animated prototype.

We usually take our clients through the following steps:

  1. Planning and Research; 
  2. Prototyping;
  3. Design;
  4. Development;
  5. Testing;
  6. Release;
  7. Maintenance.

You will participate in every stage of the development process and get regular updates.

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