Business Process

What to know about the cost of custom app development

January 10, 2024
What to know about the cost of custom app development

This article was originally published in Forbes Technology Council.

We hear a lot of ideas for apps at MichiganLabs. People from large enterprises and small startups, located all over the world, call us to explore their mobile and web-based application ideas, and one of the first questions they ask is: How much is this app going to cost?

The planning stage

Recently, we received a call from a prospective client, whose company is headquartered in New York City and listed on the NYSE. I’ll call him Dan for the sake of privacy. Dan hoped to create a custom application that could integrate with his company’s back-end enterprise resource planning (ERP) system.

When we first meet with prospective clients, we focus on three topics:

  1. The app’s intended purpose.
  2. The problems it could solve for users.
  3. The client’s desired timeline.

Dan shared that the intended purpose of his app was to improve his company’s customer experience and make the ordering process easier and more streamlined. He believed that if the process was easier for his customers, his company could drive more business.

As we asked Dan what problems the app would solve for his customers, he shared that they:

  • Need to access real-time information about inventory and prioritized recommendations.
  • Are on the go, needing both iOS and Android applications.
  • Need to receive push notifications for relevant updates and alerts.
  • Need to be able to select one of multiple languages.

Finally, Dan explained he had about six to eight months to release the minimum viable product (MVP) in the App Store and Google Play Store before a large customer conference they were hosting.

Then came the question: “So, how much will this app cost my company?”

A three-phase approach

Building an app is similar to building a custom home, in terms of timeline and cost. Both scenarios are an investment.

But the good news is that custom app developers have likely solved similar pain points before for other clients. Most software development companies, like ours, have a fine-tuned, three-phase approach:

1. Product Strategy

Typically spanning three to four weeks, this phase is spent defining your product and prioritizing any application integrations and features. This may involve creating detailed user experience and development plans and a budget estimate for the remaining work. This strategic groundwork usually requires about 90 billable hours and a budget of less than $20,000. It equips you to confidently approach your company decision-makers for project approval.

2. Product Design

This is usually a six- to eight-week phase during which your digital product is outlined. It may involve creating higher-fidelity user experience design screens to show you what the app could potentially look like. It may also include aligning the app with your company’s brand standards and UX best practices. Similar to how a custom home would have an architecture planning phase, the product design phase depicts what the app will look like.

3. Product Development

Generally encompassing six to eight months, this is where your app comes to life. Because the focus is on custom software development, this stage looks different for every client. For Dan’s example, we might design a new admin interface with functions like a content management system (CMS). This would make it easy to modify app content and offer strong analytics and reporting features. We would also integrate with his existing ERP systems. In the analogy of building a home, this phase is comparable to the construction stage.

The investment required

Dan, for example, decided to allocate $650,000 for the project and used the product strategy phase to clarify the return on investment (ROI). With analytics in place, he tracked the net new revenue generated by the digital product and observed improvements in customer retention. He secured budget approval by demonstrating that every dollar invested in software development would yield $900 in unrealized revenue for his company while decreasing customer attrition.

As you can see, the journey of creating a custom application requires an intricate and tailored approach. Similar to constructing a custom home, the process for successful app development involves meticulous planning, design and development phases—each crucial to the final product.

As you consider the level of investment you’re willing and able to make in a digital product, consider asking yourself a few questions:

  • How do I increase customer engagement and interaction?
  • How do I boost sales through mobile or digital platforms?
  • How do I improve brand visibility and recognition?
  • How do I provide value-added services to customers to differentiate us?
  • How do I streamline internal business processes?

Whether for startups or established corporations, the journey from concept to creation is a collaborative, dynamic and ultimately rewarding venture, offering tangible benefits and strategic advantages in an increasingly competitive market.

Mark Johnson
Mark Johnson
Co-founder & Managing Partner

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