When looking for dependable partners to work with, referrals are key. For any software startup, the first order of business is to identify who you can depend on. In the same way you find a reliable mechanic, dentist, or investment manager, it is important to seek recommendations from people you already trust in order to find the right development partner.
The second order of business for a startup is to estimate the cost of a tech build project. However, this can prove to be a challenge as it is difficult to determine exact costs prior to the build. Therefore, it is not uncommon for most first time entrepreneurs to underestimate the complexity of pricing an idea that is still evolving.
It is no longer the norm for a client to walk into our offices with a solidified product specification that details every function and interaction. Nowadays, startups don’t want to lock the spec down, preferring to stay agile and keep learning and adapting their ideas as they get user feedback. With the markets rapidly changing and the speed of innovations increasing, entrepreneurs are rarely ever ‘finished’ with their projects; rather, with each product issue, they are only releasing their latest version. In the same sense, it may be more helpful to view software development as a direction rather than a destination. Most startups know which direction they want their product headed even if they don’t know what the end result will be.
Unlike architects in construction who have blueprints to reference when building a house, software developers unfortunately have to start from scratch. The field of mobile and web app development is still a groundbreaking arena with fairly new terrain to navigate. Therefore, working out the price for developing the first product can be a challenging process.
So how do software development companies figure out what to charge?
Here are the most common approaches to pricing an app build:
- Fixed Price
In this scenario, the budget, time, and scope of the project are all defined. The risk for the client is that there is very little, if any, flexibility to make changes to the scope of the project or extend deadlines for the product release. This can prove to be quite a hindrance to a client who wants to remain reactive to market changes and to stakeholders invested in a product.
We find that the biggest risk, however, falls on the developer. Even though a client and developer may agree to a contract with no flexibility in scope, there is still a good chance for the client to introduce new changes along the build process. Therefore, it is common for developers to give a higher quote in an effort to both protect themselves and the project from any unknown factors that may arise.
Overall, the Fixed Price scenario creates an environment that forces everyone to look out for their own best interests. We believe the Fixed Price approach puts you in conflict, rather than in partnership, with your development team.
- Time and Materials
With the Time and Materials approach, the budget, time, and scope of the project are all flexible. This scenario is best suited for an entrepreneur who has multiple ongoing software builds or who has experience managing software development projects. This approach gives the client elasticity in growing and shrinking the development team into what exactly they need. The greatest benefit, but also risk, in this approach is the factor of time.
An advantage to having flexible time is that it benefits both the client and developer. The client can set expectations for their stakeholders without making any concrete deadlines, and the developer can deliver a quality product with any new changes and feature improvements the client requests. However, flexible time can also be a hindrance to the client’s budget because they do not know how scope changes will impact development.
- Defined Budget, Flexible Scope
In our opinion, this strategy offers the best combination of flexibility and control over a software build. In this model, the time and budget are always fixed. The benefits to this approach are that the client can have confidence in the dates they have set, which creates a flexible environment for collaboration between both the client and dev team to produce tangible results. With this strategy, the client and the dev team can manage their time and budget accordingly, and both parties can be flexible with the project scope.
We begin this approach by meeting with our clients to get a foundational understanding of the goals and vision for their product. Our team then works with them to decide on a sensible budget for their project. In this process, we keep the scope of the entire project flexible while only defining the budget and timeline. After building software for over a decade, we know that change is inevitable. As we start the development process, any changes in scope along the way will be examined to determine potential impacts/risks it can have on our client’s budget and timeline. If at any point a change in scope exceeds your budget limitations, we carefully review the product timeline and costs by making the necessary adjustments to prevent a price increase. We do this by either reducing complex features or moving less-important features to be released at a later date.
Whether you are starting from scratch or already have an existing platform, this approach can cultivate a healthy partnership between the client and dev team.
Here at Band of Coders we have developed a few different pricing options to help startups:
Another good way to get more clarity and assess your potential software development partner is to engage in a our Inception Phase. This allows everyone to better understand the true scope of the project and determine the fit between a client and software development firm.
At Band of Coders, our Inception Phase is delivered within two to three weeks. This short initial engagement helps our team of senior technologists provide an accurate estimate of the first 90 days, an assessment of all needed materials, and a roadmap of how to get there. We find that this method makes everyone more prepared for the process and creates a more effective relationship between the client and developer.
90 Day Minimum Viable Product (MVP)
For anyone looking to build a new app idea, we recommend using the defined budget, flexible scope approach, over an initial 90 day period. The reduced timeframe helps the entrepreneur focus on building the most important aspects of their product first. This in turn, helps the client get their product into the market quickly; thereby, enabling them to get faster feedback. It also gives the investor confidence in the entrepreneur’s ability to execute. The 90 Day MVP gets clients into a healthy rhythm of planning, building, and then testing their ideas.
This method is an effective way to make sure the client gets their quality product delivered on time.
On Going Project Build
For those who are beyond the MVP stage, we can work with you to determine the optimum roadmap for your next phase.
With the on going project build, we meet weekly to share the project effort of our team and the features completed. As the project progresses, we review the financial health of the product and discuss how much of the budget has been used.
Once again, defined budget and flexible scope gives the entrepreneur flexibility to add to and mold projects along the development process. We actively monitor and manage the budget and give the client all the necessary information to feel comfortable with scope changes and the possible financial impacts. The end result is a product that is responsive to user feedback and is easy to manage.