Development Cost Expectations for Launching a Technology Startup
Starting a technology business is more capital intensive than most might be led to believe. While it is true that a business can be started with as little as a free Wordpress website, most business ideas have a unique product ideas that go beyond the functionality that a basic content management system (CMS) like Wordpress can provide. Due to these functionality requirements, free or low-cost app/website building options are not feasible to succeed and the only option entrepreneurs have is to build a capital and resource intense custom solution. From my experience, most entrepreneurs I speak with that do not have a technology background do not realize the capital barrier when turning their idea into a reality and face an immediate uphill battle when attempting to launch their product. For this reason, I decided to outline development cost expectations for starting a technology business so inexperienced tech entrepreneurs can plan ahead and improve their probability of success.
When starting a technology business, web development will almost certainly be the biggest expense you will face. Some entrepreneurs will have the luxury of being well funded from the start and can support early stage salaries and development costs, but most entrepreneurs will have to build the product themselves or hire freelancers to get the first version and future versions into production. If you fit into the non-technical category and will be hiring third party resources to build the product, then expect to pay anywhere between the price of a used car ($10,000) to a luxury sports car ($60,000) for your first version. This range will definitely create some shell shock, but from my experience working at agencies, this was a pretty common range depending on product requirements.
Going beyond initial costs, you need to consider the cost to make updates to your product and the services that will power your business. That first version won’t last long after you understand your customer and the behaviors of your traffic. Changes will be needed and that means more reliance on contractors to make them adding to the costs. In addition, ongoing costs like servers, email provider, chat provider are layered on top of the developer costs, which in some cases could double the initial estimates I provided.
I have had the fortunate to know these costs before starting my business and developed a well rounded startup skill set from previous side projects and job experience that has allowed me to handle all areas of my business from web development to marketing and sales. If this were not the case, I would have most likely held off on starting unless I had a technical co-founder or a substantial amount of capital.
You might feel a bit discouraged after reading how much it might take to turn your tech company dream into a reality and I really hope that is not the case. The purpose of my article was to inform people on how expensive software development is and to keep this in mind when planning out the capital needed to see your dream come to life. There are alternatives to outsourcing the development like the route I had taken to do it myself, but these options take patience and time to bring a product to fruition. Everyone’s capital situation and path to becoming a creator is different, but be smart, do your research and understand that expectations will be much different than reality.