There isn’t an app for that?! If this was your reaction during your discussion with friends, then it might be the right time for you to read this complete guide to launching a mobile app tech startup.
Figuring out how to launch a tech startup that will run a mobile app is extremely complex, and made even more difficult by today’s oversaturated mobile app industry landscape – but it’s not impossible.
In this guide, we’ve outlined the process of building your tech startup step-by-step, inspired by the IdeaBuddy Story Mode designed to take you through all the development stages, from the concept to the actual execution.
Sit back, follow the steps in the guide, and by the time you’re finished, you’ll know where to start, where you want to get – and most importantly, how to get there.
What’s covered in this guide
Chapter 1: Create a business concept
- Identify the market problem that you’re solving
- What makes your mobile app different
- What will be your promotional strategy
- Which sales channels you will use
- Who will be your key partners
- Build an MVP and validate your concept
Chapter 2: Market research
- Determine the market size and growth
- Create profiles of your target customers
- Analyze your competitors
- Conduct a SWOT analysis
- Calculate your market potential
Chapter 3: Launching your tech startup
- Calculate the costs of mobile app development
- Explore your funding options
- Build your team
- Define monthly payroll costs
Chapter 4: Forecast your performance
- Create your revenue model
- Understand your direct costs
- Define your marketing budget
- Estimate other overhead costs
- Calculate the profit margin and cash flow
Chapter 1: Create a business concept
Identify the market problem that you’re solving
If you are running a tech startup and looking to develop an app, it needs to be created in such a way that it solves the problems and curbs the dissatisfaction of your client — like nothing else already available in app stores.
There are millions of apps available right now, many of them working with the same goals in mind. That doesn’t stop developers from working on new apps each day — and it shouldn’t stop you. You can either make an entirely new app or improve an existing one. By putting yourself in the shoes of your clients, you can pinpoint exactly what’s missing in the current offer and think of a better way to overcome users’ difficulties. Incorporating this into your app’s functionality is how you will stand out.
Breaking with the status quo within your specific industry will propel you to the very top. More often than not, a truly customer-centric idea will prove more important than how much money you can invest.
What makes your mobile app different?
Think about your app’s functionalities with the end goal in mind — and direct them to work cohesively towards the objective in question.
If you are building a language-learning app, for example, all the built-in components should make the user more fluent in ways that are effective, accurate, and fun. Listening, speaking, reading, and writing — the key elements of language-learning are well known, but how will you make them easier to achieve?
That is where your unique selling proposition comes in to set you apart from the competition. Your USP is a set of features that work in an original way, without the troublesome issues that come up when using the competitor’s app. In our example, it could be a gamified language learning app with point systems that use rewards to encourage users to spend more time perfecting the language in question.
Apply this line of thinking when developing your application to create a superior product with clear market potential.
What will be your promotional strategy?
The way people will learn about your app depends on the channel preferences of your target customers. Some of your options include:
- App store optimization
- Search engine optimization and marketing
- Content/email marketing
- Social media ads
- Retargeting campaigns
- Strategic partnerships
- Promotional videos
Get them where they spend the most time, preferably if their activities are relevant to your app. Niche online groups and forums and physical get-togethers are all good places to pitch.
Apart from this kind of targeting, pay attention to traditional, yet important stats such as age, occupation, devices target customers use, means of transport, education levels, and the area they live in. Pick them according to the general problem solved by your app. For example, if your app shows overcrowded roads and traffic jams in real-time, including your target customers’ devices, their means of transport, and the area where they live is a must.
Which sales channels you will use?
The app distribution mainly unfolds via app stores:
- Google Play Store
- Apple App Store
- Samsung Galaxy Apps
- Chrome Web Store
- Amazon App Store
The list goes on and on, Google Play Store and iOS App Store being the most popular choices. Companies like Huawei and LG pre-install their app stores on their phones and other devices if they have them in their offer.
Who will be your key partners?
As launching a tech startup takes a lot of work, you need to partner up with someone skillful. Even if it a simple concept, it doesn’t mean that the code behind the idea is child’s play – and doing it all on your own could unnecessarily delay the launch.
The partnership you will benefit the most from would be with someone with a specific skill set, to complement your own insights, but that person still needs to have a sufficient amount of capital at their disposal, to invest in this project.
To know what kind of help you would need, evaluate your own set of skills. Put all the knowledge you possess to use; then, the areas you might want to consider could be:
- Marketing and sales
- Business consultations
Look into their portfolios, and pick the industry-savvy people who share your vision and enthusiasm – even if it means dishing out more money than expected.
Build an MVP and validate your concept
Before you complete the full version of an app and get it ready to be distributed far and wide, scale it back and test it first!
In order to get the real picture of the concept and market viability before you launch your tech startup, you need to define and create the Minimum Viable Product (MVP). This way of testing has a far lower risk and cost than the full version; the most basic app version and the feedback it gets will direct the developers the right way.
Moreover – you get to put the product on the market more quickly, cause you don’t want your mobile app to fail after you’ve pumped thousands of dollars in its development.
To create an MVP, you need to determine:
- Ideal user model
- MVP format
- MVP functionality minimum
- Success criteria
Beta Testing is a similar way to test the initial app version. It is performed by the limited number of actual users – and the biggest advantage is direct feedback you get from the customers. The beta testing phase could only take a few weeks; in that time span, users have plenty of time to get to know all the functionalities and think of the aspects that would serve them better.
Chapter 2: Market research
Determine the market size and growth
The size of the market you plan to cover depends on the nature and theme of your app. Obviously, the strongest strategy is to design an app that can be used in every corner of the world, presuming users understand the language in which the app is written.
Strive for regional at the very least. National and international markets are a bit harder to work with, but also bring more profit in the game. Map out the geographical area you’ll serve and collect data on potential users from research agencies or public sources: age, occupation, income, gender, family size, education level, etc.
The growth rate of the niche you have picked will further indicate if you need to shift to something else or incorporate some changes. Entering a growing market is good — but ideally, your app will revolutionize the way something is done and establish an entirely new market, much like Uber did. If the market is shrinking, it may be a good idea to reconsider and shift gears. The same is true if the market has been stagnating for quite a long time — but in that scenario, maybe your app will be the disruptor that turns things around!
Create profiles of your target customers
Creating a profile for the people who will use your app is an essential part of app development since your success depends on them deciding to purchase your app.
As you sketch out your target customers and visualize the user journey, the first thing to ask yourself is, how will they benefit from acquiring your app?
Determine their pain points, those unmet needs that no competitor can fulfill. Maybe other similar apps are too expensive or complicated? Or maybe the price is right, but other apps lag all the time and never seem to be updated?
How many people associated with the app concept fit your ideal customer profile, and how much are they willing to pay for in-app purchases or the app itself? The answers to these questions will help shape your business model.
Having a very specific set of functionalities will make you stand out for sure, but sometimes that can be the very thing that puts people off. Be sure to include something extra for people outside your target audience, if they happen to stumble upon your app and download it. Include the features a lot of people deem useful, no matter if they’re not terribly original or the initial reason for downloading the app.
Analyze your competitors
Identify your competitors and sort them into one of the following categories:
- Direct competition — striving to solve the same problem as you do, possibly in a very similar manner
- Indirect competition — their apps might not resemble yours, but they provide a solution to the same problem or satisfy the same need.
Once you categorize the competition, focus on the apps that represent your direct rivals. Do proper research into the way they work and weigh out their competitive advantages in these areas:
- Prices — the price to download, the price of in-app purchases, the price of the service it offers or makes easier
- Quality — how smoothly it runs, the number of lags and bugs, the number of services it offers
- Customer service — how well complaints and questions are dealt with
- Reputation — general public opinion about the app
Go to comment sections in the app stores, various thematic articles and tech journal reviews, blogs, how-to videos and articles, and internet forums where users gather to discuss and review apps. This will help you examine other apps’ weaknesses and figure out what needs to be improved in what they offer.
Conduct a SWOT analysis
App startup cannot do without a proper SWOT analysis – otherwise, it is quite the gamble, and you may lose priceless insights.
- The app needs a small amount of memory to run smoothly
- The app works on every type of smart device
- The most important features work offline
- Works fine without in-app purchase
- The app requires updates quite often
- MVP demands the same amount of resources and work as the final version
- The budget is too low to cover the expenses of a full-scale app
- This app is the first of its kind in a certain industry
- The market is vast, and there is plenty of space for your app to fill
- Significant corporations love the idea and are ready to invest
- There is a need for this kind of app among the huge demographics
- The huge number of apps with a similar purpose already on the market
- The established industry leader is impossible to compete with
- Legal requirements within certain areas might demand huge changes
Calculate your market potential
Calculating the total addressable market
First, you need to define the demographic your app will be covering. You can use government census information, industry reports, or the Internet to find the necessary information related to demographics, population, and using various applications that relate to yours in most ways.
Then you have to estimate a percentage of the total population that downloads the apps similar to yours since all of them could be potential customers.
After that, try to find the information about the average annual download rates of the apps that have similar functionalities. Also, find the published information about the total revenue generated from the industry in the target area and divide that by the number of similar apps that work likewise.
The total revenue that you will get represents the full market potential of the niche app industry in the selected demographics.
Calculating serviceable available market
The next thing is to define the percentage of your target customers who download the apps of your competition. If your app requires a lot of expensive in-app purchases, or it’s pricey for an average consumer/client, estimate how much people out there can afford to buy it. Then, assume how much money your target customers are ready to spend on your app on an annual basis.
The calculated amount of annual revenue is telling you how much money your app could make if there is no competition.
Calculating share of the market
Here you need to add the market share of your app. You can use the figure that you calculated in the Comparison section, or you can assume it based on the best guess. We advise being conservative when making this kind of prediction.
The revenue market share is the amount of money that you can potentially make from your app per year.
Chapter 3: Launching your tech startup
Calculate the costs of mobile app development
Before you reach into your pockets to spend money on app development, make a plan that will enable you to spend wisely and still acquire everything you need — from concept to development, advertising and distribution of the app.
A good app is not cheap. Median costs to build an app can reach $171,450, and enterprise apps are even more expensive. Since these costs vary greatly depending on the type of app, list all of the necessities and look into the payments you need to make. Some of the costliest items fall under the infrastructure category of app development:
- Market survey
- Wireframes and prototype design
- App development
- Data storage
- 3rd-party integration
- Access to enterprise data
In terms of app features — search, social media and email integration, push notifications, device hardware access, ability to work offline, etc. — you’ll need to pick the most important ones to focus on according to the functionality of the app.
Note which of these are one-time payments and which ones must be paid every week, month, quarter, or once a year. Some of them might not be fixed and will depend on the currency you use. Also, keep regular updates in mind.
In addition to planning for all of the above, it’s smart to have an emergency fund on hand in case something goes wrong.
Explore your funding options
Looking for startup capital usually starts with bootstrapping — your own savings are the first to go. The more you are able to finance from your own pocket, the more rights and control of the process you have. This kind of financing does not create additional expenses in the form of interest.
Since app development is quite an expensive venture, you will most likely need to create a financing strategy that combines your savings with money acquired through one or several of the following means:
- Bank loans
- Credit cards
- Partners and “silent” partners
All of these options have their advantages, and their drawbacks can be made manageable by putting together superb business contracts that leave no place for rip-offs, complications, hidden costs, and deception.
Build your team
Doing everything by yourself is certainly the most cost-effective management strategy. But as your business starts to grow, you won’t be capable of managing everything and remembering all that needs to be done.
When you reach this point, it is time to build a good management team. This will make a huge difference, especially during times of growth and expansion. Find skilled, reliable people to fill these roles:
Chief Executive Officer (CEO) — key strategist who builds the senior team, hires, fires, and is responsible for operations. CEOs must rise above the details and be able to lead the startup in the right direction, navigate through the market, and hire the best people available.
Chief Technical Officer (CTO) — builds the product or service.
Chief Marketing Officer (CMO) — knows the industry, the market, and what’s in the heads of customers — and creates a marketing strategy accordingly. The CMO will help you position yourself on the market, develop a strong brand image, and in the end — make people want to acquire your app.
Chief Operating Officer (COO) — handles complex daily operations and does the detailed work, along with handling the measurements that show whether things are going good or bad — or are stagnating.
Chief Financial Officer (CFO) — handles the budget and financing strategies and maintains the financial stability of the startup.
Depending on your skills, you can fill some of these roles by yourself — or hire professionals to help you out.
Define monthly payroll costs
Once your management team is in place, there are additional roles to fill if you are serious about this venture. There are lots of things to think of when creating an app from scratch, so be sure to cover your bases with these teams and professionals:
- Management team (see the section above)
- Business development team
- Product developers
- Graphic designers
- Marketing team
As you will probably fulfill the role of CEO, you will keep in touch with the heads of teams and key individuals day-to-day and run the entire team with their help.
If your startup funds are slim, you will be looking to tighten the belt in any way possible. Start by bringing key individuals on board and slowly build a larger team as time goes by and profits start to seep in. Hiring only a few people you can really afford in the beginning means you will be able to give people the competitive, attractive salaries they deserve, and which will make them stay a while.
Chapter 4: Forecast your performance
Create your revenue model
Estimating the revenue streams for the app consists of predicting how many app and in-app purchases there will be during a certain amount of time — or you can calculate the average bill per user and create a revenue projection that way.
Such estimates depend heavily on the type of app, price points, and the app’s functionalities — so take the niche into consideration as you determine:
- The average revenue per purchase
- Number in-app purchases per day or week
- Monthly growth rates during the first, the second. and the third year
Select the unit sales revenue model based on these assumptions and set the price at the average bill with the number of customers served per month as sales volume. Then enter the percentage of the monthly growth rate (sales volume) for the first year of your forecast.
After you save these figures, you can copy the same card and modify the monthly growth rate for Year 2 and Year 3.
This calculation will give you the revenue projection for your first three-year period.
Understand your direct costs
Since in this case, you will be selling a service, the direct costs for app usage are usually related to the cost of acquiring new users (for example, indirect sales commission).
Additional expenses will be related to SaaS services, where payment processors take their share of the revenue you generate. Let’s say that your average revenue per customer will be $10, and that third-party payment processor will take 5% for every charge — which is $0.50.
Set your marketing budget
Who will download your app if nobody even knows it exists and what it’s good for?
Exactly nobody! So be sure to plan for a solid marketing budget for spreading awareness of your product.
Social media marketing is a great starting point — powerful, reasonably priced, and simple to execute. Hire a professional freelance marketer or pick a marketing agency to run your profiles, determine the activities, and spread the awareness. Depending on the contract you sign, they will be in charge of various marketing activities to reach as many target customers as possible.
Paid blog posts on popular webzines read by your audience, PPC, affiliate marketing — there are plenty of ways to spread the word, and marketing costs will get lower as time goes by and more people find out about the app.
Estimate other overhead costs
The overhead costs of running a mobile app tech startup won’t come from the app development itself, but from maintaining the whole startup on a monthly basis. Be sure to exclude the costs you counted in the Startup Costs section so you don’t double them, but think of such expenditures as servers, data storage, maintenance, and customer support — and the specific things that depend on the app functionalities and in-app purchases.
If you are renting an office, make sure you do include your monthly rent, utilities, and other ongoing costs as overhead.
Calculate the profit margin and cash flow
Now it’s time to look into the most important numbers — the ones that are most likely the reason you started this whole (ad)venture: profit and cash flow.
Depending on the type and complexity of the app you plan to build and launch, direct costs can get pretty expensive and hinder the initial ROI. Deduct the direct costs from total revenue, and you will know the gross profit your app can generate. To look into net profit, deduct all expenses from the gross profit.
Develop a killer strategy to engage users and earn money from downloads and in-app purchases, while maintaining a spotless reputation and solving problems quickly. This will ensure that new users keep coming, even after the initial hype calms down.
Healthy cash flow means that inflow overpowers outflow. Every money influx counts — financing, investments, customer payments… To keep your cash inflow stable, offer good deals for timely payments. Cash outflow is the opposite — and you can slow it down by setting favorable repayment terms with banks, creditors, and investors.
. . .
So, have you learned all the steps to launching your mobile app tech startup? We think so!
Now, begin by writing down your initial thoughts on the business concept, start with the market research, plan how to set up your business, and make financial projections to be able to stay on top of it all.
The IdeaBuddy Story Mode takes you through the whole process, from an idea to a profit-making business.
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