HOW MUCH DOES IT COST TO MAKE AN APP? Part 3

Non-obvious and hidden costs

Usually when the one starts any project/company/initiative etc. he/she doesn’t calculate in mind multiple factors that indirectly can be presented as money, or, sometimes, can’t be measured in $ by its nature. 

So this post is about WHAT DOES IT COST TO MAKE AN APP? And we will discuss such things as:

  • Time to recruit or assemble the team

  • Application maintenance cost

  • Control VS Expertise

  • Staff retention and replacement cost

  • Change request management

  • Taxes

  • Warranty

  • Office maintenance costs

  • Business trips

  • Speed of decision making

  • Part-time expertise

All these factors are presented in a money-bounded table in the end of the next post. 

Team recruitment and assembling

It’s been calculated that the cost of closing one engineering position equals to 2.5-3 monthly salaries for this position. This amount was calculated from the talent acquisition cost, risks of replacement and project losses due to an unfilled position. Now let’s imagine that to start a project you need a “healthy minimum”  - 1 UI/UX designer, 1 project/product manager, 1 front-end developer, 1 back-end developer, 1 QA engineer. 15 monthly salaries!!! In Western Europe, it equals to approximately 80 000 USD. And that’s even before you actually start a project - just time, money, risks, nerves, and time once again. Just because it’s close to impossible to fulfill all 5 positions simultaneously. 

Application maintenance cost

After the release, the journey just begins! Each product requires maintenance, scaling, hotfixes, regular bug fixes, code refactoring. Plus let’s don’t forget about support of the latest versions of OSs, and investing in performance and stability. And supporting new versions of the app third-party services. And new features. In short - after release is ready to spend 20-30% of the budget on maintenance. Let’s say 5% each month. 

Control VS Expertise

Just catch the difference. With an in-house team you have high chances to do the right things. With an outsource expert team you have high chances to do the things in a right way. Better combine. The core, business team defines what to do - and then entrust the implementation to professionals. Otherwise, you have 2 options. With the in-house team, you’ll go slower. With the only remote team, you’ll go fast, but there’s a risk, that some things can be remade because of miscommunication. Let’s take it as + 10% time of the app development.

Staff retention and replacement

What do we mean with retention - team buildings, corporate culture, and bonuses, salaries of HR department employees, events, conferences, education, etc. That’s approximately X2 to salaries of HR department employees. In the best case. If we take 1 HR for 15 engineers - we can calculate that monthly for a team of five it’s +0.75 person to an invoice. 

Replacement - 3 salaries of a respective position. Let’s say once in 3 months. +0.25 engineer to the invoice monthly. Total +1 to the team, but before other company costs. 

This is one of the most stressful parts of entrepreneurship - find and keep the people. The question is who will pay with time, psychological energy and money for this. 

Change requests management

What percentage of projects has a clear specification and frozen scope of work before the start? Around 15%, because clients like when everything is simplified. Known scope, known budget, known deadline, predictable delivery. 

What percentage of this 15 % has no change requests during the development process? 15%! 15%, Carl! Because tomorrow we’ll be smarter than today. Because of the market changes. Because investors come and leave, competitors everywhere, coronavirus, bitcoin course, Dow-Jones index and 1000 more reason to make a change request.

So be ready to use the “unknown risks” budget, and even double it. It is +10% to the budget.

The rest of the factors are described in the next blog post.