Tag Archives: small business

Is your App Idea Financially Viable?

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In our last post, we discussed how to define your competitive advantages as you begin your #appreneur journey. Once you have sized up your competition, it is now time to determine if your app idea is financially viable.

If you want to rear financial blessings, you have to sow financially. – Joel Osteen

How Much will it Cost to Develop My App?

The cost to develop an app will depend on the number of screens and complexity of the app, who you choose to develop the app, and how detailed your specification is before getting an estimate.  If you develop the app yourself, the costs will be smaller because there will be no subcontractor costs. However, I recommend you outsource the development so that you can spend your valuable time on pre-launch marketing and planning.

The first step in this process is to create a prototype of what your app might look like. There are some great prototyping tools available, I use Balsamiq Mockups. The cost of this software is minimal (one time fee of $79) and you can use it for all your upcoming apps if you are successful. Using Balsamiq, you can create each screen of your application, here is an example of the ones I put together:

Balsamiq Mockup

Balsamiq Mockup

By crafting your app ideas into a design, it forces you to flesh out the look and feel of each screen needed for a subcontractor to perform work.  Once you have the prototype done, create a specifications document that a subcontractor can create an estimate from.  In my specifications document, I like to include descriptive text that identifies what to do when any button is touched on the screen, what messages to display, etc.  By defining this level of detail, the subcontractor can provide a much better estimate because there are less unknowns.

In future blogs, I will discuss the specifications document in more detail (what to include and exclude), where to find subcontractors, what legal documents you should have in place when working with subcontractors, and how to pick a good subcontractor.

Assuming you have created a good prototype and specifications document, the cost of the development of your app will depend on the number of screens and complexity of your app. Based on my own experience, here are some very general guidelines, the prices are for a single platform (Apple iPhone, Apple iPad, Android device, etc.):

  • Small app (Less than 5 screens and little complexity) – $1,500 to $3,000
  • Medium app (Less than 10 screens and medium complexity) – $3,000 to $6,000.
  • Larger app (10+ screens and medium to harder complexity) – $6,000 to $15,000.

I also suggest that you ask the subcontractor to write the software in a way that allows them to re-use the code when targeting a different platform (Apple iPhone, Apple iPad, Android device, etc.). Also, ask the subcontractor for a ballpark estimate for creating a version in the other platforms once the first platform is done. By investing in a single platform first, it allows you to test the waters to determine if you want to sink additional money into the next platform. Once you recoup your costs on a specific platform, move on to another platform.

Other Costs to Consider

In addition to app development, here are some other costs to consider:

  • Registering your Business – You will need a business name and want to register it your state or province. The cost of setting up a LLC (Limited Liability Company) is about $125.
  • D-U-N-S number – It is also smart to get a Dunn and Bradstreet number for your business. This prevents you from having to use your social security number when working with vendors, you can use your D-U-N-S number instead. If you do this, allow 30 days to get it for free. If you want it expedited, it can cost as much as $299.
  • Website – You will want to create a website for your app that allows you to talk about the features of the app and allow them to purchase. By having a website, you will also get indexed by Google, driving more sales of your product. If you know HTML, I suggest writing your own website. Start off by purchasing a website template from somewhere like Template Monster, they are generally less than $50. You can then simply change the template with your site details. If you are not comfortable creating your own website, you can outsource this just as you do the app development. The cost of this will probably run you about $1,000 or less, especially if you ask them to use the template you purchased.
  • Website  Hosting – You will also want to purchase a domain for your app (for example, I purchased www.aMemoryJog.com) and you will need a company to host the site.  I purchased mine from Go Daddy, you should be able to purchase the domain and hosting for about $65 per year.
  • Google Ads – Once your website is up and running, you can purchase Google Ads to drive business to your site. This is totally optional but can increase your sales. You have to analyze the sales it brings to determine if it is worth it. In my past experience, it is, but every scenario is different. I normally budget $100 per month for Google Ads. Of course, do not do this until your app is in available for sale.
  • Apple App Developer (iTunes Connect) – To sell your app in the Apple App Store, you must sign up for iTunes Connect. This allows you to submit your app to Apple for review and once approved, they will post it in the app store. The cost for this is $99 per year. Apple will keep 30% of the sales from your app, and you will get 70%.
  • Google Play Developer – Similar to iTunes Connect, if you plan to create your app for Android devices, you will need a developer account for Google Play. The cost is $25 per year and like Apple, they keep 30% of your sales.
  • Email Marketing – If you plan to do any email marketing, you will need a product to send emails out automatically on your behalf. For example, when someone signs up for a trial of our web edition of aMemoryJog, it sends an email to the new subscriber welcoming them to the trial. Then every few days, it sends other emails explaining how the product works and how to purchase once their trial expires. This automated engine eliminates a lot of busy work of having to send these emails manually. Since I am a programmer by trade, I wrote the software to do this for my product. But you can purchase a tool to do this for your product. Tools like MailChimp are free to start with, allowing you to send up to 12,000 emails to 2,000 subscribers at no cost. After you exceed that, it could cost you from $40 to $100 a month, depending on the number of contacts you have and the number of emails you send.
  • Contact Management Tools – Once you begin marketing to app reviewers, you will want software to keep track of who you have communicated with and who needs to be sent an email about your app. You can get a contact manager for free until you collect a certain number of contacts. I use Zoho CRM, it is free for 5,000 contacts or less and only $20 per month once you exceed that.

Related article: How to Build a Product Website for your App

Estimating Your Revenue

This is the tricky part. About the best you can do is to try to determine the revenue of your competitors and then estimate yours based on a percentage of that. I discussed this in a prior blog. But I have to tell you from experience, it is a crap shoot.  You really won’t know your revenue until the product is in production. I always try to estimate very conservatively and hope to outpace my estimates. For example, you might look at the competitor with the least number of downloads and estimate that you can capture half that number of downloads.

The best way to estimate your revenue is to estimate your monthly downloads multiplied by the cost of your app, minus the App Store commission of 30%.

Putting it all Together

Once you estimate your revenue for the year, subtract the costs, then you have your expected net profit. If you can live on that net profit, great!  If you can’t but it is at least half what you can live on, you can always create multiple apps to create a profit multiplier and still make the #appreneur life work.

Is your App Financially Viable?

Conclusion

We now have analyzed whether our app seems financially viable. If it looks promising, we should proceed. If not, we should go back to the drawing board – either think of another app idea or bail on app development in general. My next blog will be out in a couple of weeks — I will discuss how to monetize your app.

Shameless Plug

The app I am creating is slated for production in the App Store around July or August 2014. However, the web edition is already available at http://www.aMemoryJog.com. Once the app is done, it will seamlessly sync with the web version.

Download a free trial and check it out!

aMemoryJog – Web and iPhone editions

Also, if you like this blog, please share it with others to increase our following. Our twitter account is @2HourAppreneur and be sure to like my Facebook page at http://www.Facebook.com/2HourAppreneur.

Thanks for following the blog!

Defining your Apps Competitive Advantages

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In our last post, we discussed how to choose what type of app to develop as you begin your #appreneur journey. Once you have picked an app to develop, how do you research your competitors and separate your app by providing competitive features?

I have been up against tough competition all my life. I wouldn’t know how to get along without it. – Walt Disney

Do a Little Competitive Snooping

To build a better app, you need to objectively analyze the competition and understand their strengths and weaknesses. You can do that by visiting their website, downloading a free trial of the product, and in some cases, purchasing their product to see how well their paid products work.

By downloading a trial, you get to see several things. You get an inside view as to how they manage their prospects. They will send you emails during your trial, they may even call you to nudge you to buy. You can also determine how much help they provide as you are learning their product, determine how easy their product is to use, and you can see things you like and dislike about  their product.

Create a Competitive Matrix

Once you fully understand your competition’s features, create a matrix so that you can more easily see who has competitive features.  It might look similar to this for each competitor:

steve

Define your Features

Once you understand your competitors, you can define your features. Here is how we defined this for our product:

aMemoryJog allows tech savvy consumers that own a computer, phone or tablet to keep their easily forgotten information accessible at their fingertips. This includes passwords, account information, frequent flyer details, and an endless list of other critical info. The benefit is that this hard-to-remember information no longer has to be remembered – they can find it in seconds.

Features of aMemoryJog will include:

  • The ability to enter personal information separated by easy-to-set up categories and personal data attributes, and a large notes section to enter more detailed information
  • Automatic cloud backups and encryption of all stored information
  • The ability to access websites with a single click and single click copy userid / passwords
  • The ability to restore a deleted entry from the recycle bin
  • The ability to quickly find information by searching by keyword and by automatically showing recent items.
  • Localized language support for English, Spanish, French, German, Italian, Russian, Chinese and Japanese.
  • Friendly password generator that uses real words instead of hard to remember letters.

Our competitive advantages are:

  • More stylish and user friendly interface than competitors
  • Lean, value added features without feature bloat
  • Recycle bin that allows restoring of deleted items
  • Simpler import feature than our competitors (web edition)
  • Simple to use, easier data entry than our competitors, less options to configure
  • Multiple language support (English, Spanish, French, German, Italian)
  • Friendly password generator that uses real words instead of hard to remember letters.

Related article: How to Build a Product Website for your App

Conclusion

We now understand our competitor’s strengths and weaknesses and have defined our feature set to provide our own set of competitive advantages.  We are now progressing in the development of our business plan. In our next blog, we will begin to discuss the  financial viability of your app and how to forecast costs and revenue.

Shameless Plug

The app I am creating is slated for production in the App Store around July or August 2014. However, the web edition is already available at http://www.aMemoryJog.com. Once the app is done, it will seamlessly sync with the web version. Download a free trial and check it out!

Also, if you like this blog, please share it with others to increase our following. Our twitter account is @2HourAppreneur.  Thanks for following the blog!

 

What App Should I Build?

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Probably the biggest up-front decision for starting an appreneur business is deciding on what type of app to build first. When I built my last software company, I found that I needed software to track requirements, bugs, test cases, and project deliverables. At the time, very few software products did this in one tool. Sure, you could buy several tools to accomplish this but they were not tightly integrated and were pretty disparate. That triggered the idea for the product — I would create a web-based product that did all of those things and could be rented (SaaS) instead of purchased. Since I was a major client of my own software, it made all the difference as to how we continued to improve it.

Trust your instincts, and make judgements on what your heart tells you. The heart will not betray you. ― David Gemmell, Fall of Kings

Be the Customer of Your App

Keeping with my past successes, I decided I should create an app that I desperately needed and would use on a daily basis. In other words, I should build an app that I would actually be a customer of. I came up with the idea of becoming an appreneur in January 2013 and at the time, my wife and I were traveling a lot and needed a way of tracking hotel loyalty cards on my phone. That way when we went to a Holiday Inn or some other hotel, I could quickly give them my loyalty card account number and they would give us credit for the stay.

At the time, I was using a Windows program for keeping track of passwords for the different websites I use, my loyalty card account numbers, and just about anything else I needed quick access to. The Windows version worked great when I was sitting at my PC but it was not accessible when I only had my phone in my pocket.

This spurred the idea for my app. I will create an app that allows me to track passwords, loyalty card accounts, credit card accounts, and the other hundreds of things that are hard to remember yet important to track.

Does this App Exist Today?

The next thing to do was to determine if there is already an app that does what I need. After doing a few Google searches, I found that this app does exist and in fact, there are a number of competitors already doing it. Many people would stop there — it has already been done, someone beat me to the punch. But this tells me that there is already an established market, so there must be lots of people like me that need an app like this. I will not be deterred by the fact that competition already exists, I just need to find some competitive advantages that will allow me to compete well.

I personally believe that trying to create a totally unique app is much harder because you don’t have an established category or market to pull data from. It is a crapshoot as to whether the idea will be marketable. So creating a competitive app is not a bad thing.

Sizing Up the Competition

After doing multiple Google searches, it was clear that about 6 companies were capturing most of the market. Looking at iTunes, I found that there were another 15 or so companies with competitive apps but very few seemed to be selling much. How did I know that? I used http://xyo.net to determine how many mobile downloads each of the big 6 competitors were getting per month.

Note: http://xyo.net provided free analysis of app downloads when I first did this research. They have recently sold that business to https://prioridata.com and it appears that they charge for researching this data now.

It was easy to estimate the amount of revenue each of the 6 companies were making because I knew how much each app was selling for and XYO told me how many monthly downloads they were getting.  Here were the results (I won’t use the competitor names since that is confidential to my analysis):

  • Competitor 1 – They had a really good website, they had apps sold for Apple, Android, Windows, and Web. According to XYO, they were generating 236,000 downloads a month. However, since they have both a paid ($9.99) and free app, it was hard to determine how much revenue they were generating. But if we assume 20% of the downloads were paid downloads, that put their yearly revenue at $5.6 million per year.  Wow!
  • Competitor 2 – They were getting about 31,100 downloads a month and the cost of their app was $9.99, equating to a yearly revenue of $3.7 million.
  • Competitor 3 and 4 – One of these were getting about 14,050 and the other about 13,300 downloads a month at $9.99 each, equating to about $1.6 million in yearly revenue.
  • Competitor 5 – They were getting about 11,450 downloads a month at $9.99 each, equating to $1.3 million per year.
  • Competitor 6 – They priced their app less than the others ($4.99) and were driving about 2,050 downloads a month, equating to $122,754 per year.

Related article: How to Build a Product Website for your App

Conclusion

Based on this initial research, this app idea seems promising. Even if I could generate half of the revenue that the 6th competitor generates, it still meets my goal of creating an app that can produce revenue of $50,000+ per year. And if it is able to do even better, I may have a lucrative app on my hands. But to be competitive, I know I will need some competitive features that allow my app to shine over some of the others. That will be the next analysis — understanding the things each of the competitors do well and not so well so that I can capitalize on it.

This is the early stage of business plan development, I will continue upon this theme in upcoming blogs so you can see how I developed the business plan.

Shameless Plug

The app I am creating is slated for production in the App Store around July or August 2014. However, the web edition is already available at http://www.aMemoryJog.com. Once the app is done, it will seamlessly sync with the web version. Download a free trial and check it out!

ScreenShot_aMemoryJog

Also, if you like this blog, please share it with others to increase our following. Our twitter account is @2HourAppreneur.  Thanks for following the blog!

 

Build a mobile app business working 2 hours a day?

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If you have an entrepreneurial spirit and want to take a journey with me, we will discover if it is possible to build a mobile app business by working as little as 2 hours a day.  I have read several books that suggest that it is possible, if done right.  So I am on a quest to see if that’s doable and I will share what I learn with the readers of this blog. I will discuss everything I do along the way so that if it is possible, you will have a guide to follow as you attempt the same.

The reason why worry kills more people than work is that more people worry than work. – Robert Frost

About the Author

My name is Steve Miller and I am an entrepreneur. After graduating from the University of Alabama in 1984, I wanted to learn as much as I could in hopes of eventually starting my own business and retiring early — hopefully on or before I turned 50. Initially I worked at large software companies, soaking up as much knowledge as I could about software architecture, software engineering, corporate finances, management, and leadership. In 1999, I started my own software business and sold it in 2009 to a larger acquiring company. That allowed me to achieve my goal of retiring early, at 50 years old.

I have been retired now for 1.5 years and have been enjoying this time traveling the globe with my wife, spending time close to our kid’s college towns, golfing, biking, fishing, boating, and exploring new hobbies. You can learn more about me at http://www.WeBeTripping.com and follow our travel blog at http://webetripping.wordpress.com.

Why Start Another Business?

So if I am financially independent, travel a lot, and have lots of hobbies, why start another business? There are several reasons:

  1. I enjoy the challenge of building a business.
  2. Even though I have lots of hobbies, there are rainy or snowy days where boredom can creep in, so why not use that time efficiently?
  3. Being retired at 50 could leave 40 years to live off our retirement income, so any additional cushion can’t hurt.
  4. I am curious about the mobile app market and would like to discover how lucrative it might be.

What are the Parameters of the Business?

I chose to create mobile apps (iPhone, Android, etc.) because there is a low-cost entry, the market is fairly new and from what I read, it can be lucrative if done right. Sure, there are millions of apps on the market but the majority of apps only get a couple thousand downloads during their lifetime. A smaller portion of apps can generate between $50,000 to $500,000 per year, and an even smaller number of apps can generate millions per year (think Angry Birds, Words with Friends, etc).

When I started to build my business plan, I wrote down these goals of the business:

  • Should have low entry costs (less than $10,000).
  • Should not require hiring direct employees, work should be done by outsourcing the effort.
  • Should have low overhead– no office, low marketing costs and very few recurring costs.
  • Should be a virtual business that allows me to continue traveling and having fun.
  • Should allow me to work no more than 2 hours per day (10 hours per week) on average.
  • Should have an exit strategy that allows me to sell the business once specific targets are hit.
  • Should create apps that have the potential of generating $50,000+ per year per app.

What is an Appreneur and What is the Blog About?

An appreneur is simply an entrepreneur that specializes in building mobile apps. I will use this blog to document all the things I do as I build the business. That will include how I choose the type of mobile app to develop, how to research competitors, how to build a business plan, how to develop app specifications, how to choose a sub-contractor to build the app, how to market the app (pre-release and post-release), and how to analyze and tweak business results.

Will it work? Can I really build an app business working less 2 hours or less a day (on average)? Honestly, I am not sure. But I will document the process and we can determine if it will work. I will be transparent, talk about successes and failures so that you can learn from any mistakes (that I am sure to) make.

I plan to post a blog several times a month, probably less once the app is in production. If you want to get an email each time I post a blog, go to http://2hourappreneur.wordpress.com and scroll to the bottom right of the screen and enter your email address.  You can unsubscribe at any time.

Related article: How to Build a Product Website for your App