Building an app can create a direct pipeline to a broad customer base and ready cash flow. If your app goes viral, you could find yourself financially successful before you know what hit you. But most apps fail, and even the ones that succeed take work. Knowing how to start an app business can help you clear the hurdles to success.
Starting at $97 billion in 2014, annual global app revenues topped $461 billion in 2019. App earnings are projected to approach $1 trillion by 2023. The market wants apps, and that demand can build your opportunity for running a profitable app business. Here’s how to start your app, monetize it, and find your path to push it to devices worldwide.
Benefits of Starting an App Business
Over 75% of the world’s population has at least one mobile phone, and 90% of mobile time is spent on mobile apps. It’s no wonder annual app downloads are rising, from 178.1 million in 2017 to a projected 258.2 million by 2022.
This large, growing, and increasingly lucrative market keeps expanding. App user penetration of 29% in 2020 is expected to break 35% by 2024. App revenues are also growing, as more users are willing to pay for access, in-app purchases, and premium features.
Mobile app development demand is growing as well and shows no signs of slowing. By developing an app, you’ve also created — and now own — a potentially valuable piece of intellectual property. It’s no wonder starting an app business has created so many millionaires.
How to Start an App Business Checklist
Starting an app development company and building your app takes time. You’ll need design and development expertise, time management skills, and an understanding of your specific app market.
You can keep startup costs low, but it’s important to capitalize your startup until the app brings in steady revenue. About 25% of app developers generate over $5,000 per month. As you develop your app, pay extra attention to how you’ll monetize it.
To turn your app business dream into reality, follow this checklist of startup steps.
1. Create an App Business Plan
Your app’s company’s business plan is your roadmap to go from concept to release. Writing a business plan doesn’t have to be complex. A few pages can be all you need to keep your app business strategy focused and consistent.
Who are the target users for your app? Do some digging to identify and understand the market. People use apps for productivity, connection, entertainment, and more. What will your app do for them? How will it do it better than anyone else? Develop your unique selling proposition (USP) to get a grasp of how your app stands out.
Who’s on your team? Building your new app may require hiring talented coders, user experience/user interface (UX/UI) staff, copywriters, app designers, or marketing professionals. Those may be contract laborers working piecemeal or full-timers depending on your budget. You may also consider working with partners who co-own the app business.
How will you build buzz and demand for your app? From a company website and vibrant social media presences to media attention and app conferences, the more visible your app and company, the more you may be able to drive app adoption and revenue growth.
What is your minimum viable product (MVP)? Don’t keep your app under wraps until it’s perfect. Determine the minimum features you need for production, and get your app into the world. From there you can listen to user feedback, fix problems, and improve feature sets — but your app has to be out there before you can fix it, improve it, and grow your customer and revenue base.
2. Choose a Business Structure
When starting your mobile app business, the right business structure can be a key part of your success. While a sole proprietorship can be the easiest way to start, its liability and taxation pitfalls can be a poor match for an app company.
If you want to go into business with one or more partners, establishing an LLC helps you structure your app company with multiple owners, with shares divided in a way they all agree to. The app LLC can also shield your personal assets from liability in the event of legal action, a benefit over sole proprietorships. Structuring your app business as an LLC instead of a sole proprietorship may lower your taxes and taxable income, too.
3. Determine Your App Company’s Development and Business Costs
One 2017 survey found a minimum app development cost of $5,000–10,000. The typical cost range for a quality app is $60,000–$230,000, or higher, depending on scale and complexity. Estimating startup costs is crucial to knowing how much money you need to get your app off the ground. Here are other factors to consider:
- Employee wages and/or fees for outsourced independent contractors. Programmers and designers can be in-country or off-shored.
- Development process and development team
- Pre-release quality assurance testing
- Office space and utilities
- Technical equipment like computers, smartphones, etc.
- Administrative fees, insurance, business registration, and licensing fees
- Google Play and Apple App Store fees, including percentages taken of app sales
- Website hosting and storage
You can build a quality app for under $100,000, and potentially below $50,000. But if your company will build enterprise-level apps, expect costs to top $140,000. In fact, $267,000–$360,000 is a common range for complex apps with multiple features.
How can you fund your app business’s startup costs?
Your app business plan can be integral to helping you fund your startup costs. Here are some funding sources to consider:
- Bootstrapping: Savings, retirement/investment accounts, and other personal reserves could fund your app. Check up on potential penalties or other drawbacks before tapping these funds.
- SBA loans and other government available resources: Federal loans from the U.S. Small Business Administration (SBA) can fund your startup costs. You may also find an investor through a small business investment company (SBIC) licensed by the SBA.
- Commercial loans: You’ll need a solid business plan to get a bank loan, with proof your plan will yield returns.
- Venture capital and other private investment: To interest investors, you’ll often need to offer them a stake in the company. Negotiate carefully.
4. Name Your Business
What’s a good app business name? RichestSoft. Koombea. ChopDawg. Tintash. Dom & Tom. The names of top app companies don’t follow a set formula, but they do reflect the values and brands of the people who make these app companies excel.
As you and your business partners decide how to name your LLC, make sure the name you choose is available for government registrations and licensing, domain names, and social media accounts.
5. Register Your App Business and Open Financial Accounts
Once your app business registrations are complete, get underway on opening business checking accounts, app store accounts, and other financial accounts you’ll need for your business, such as PayPal or business credit cards.
You’ll also need to apply for a dedicated employer identification number (EIN) for your LLC. Also get the licenses your state or locality requires. Consider chatting with a local insurance agent about business and liability insurance you may need to protect yourself if things go sour.
6. Market Your App Business
In the buildup to your app’s launch, don’t overlook a sound app marketing plan. While you build your app, work on generating buzz and developing your marketing strategy.
- Implement a social media strategy. Share screenshots, articles, and other content that showcases your app and why people will love it.
- Harness the power of video. Consider demo and explainer videos that help people get familiar with your app and what it can do for them.
Build a company website that spotlights your app and shares details about your app company, vision, and how people can get in touch.
Examples of App Businesses to Start
From tools to travel, health to finance, profitable apps can take many forms, such as:
- Augmented reality for interior design
- Health, wellness, and telemedicine
- Meal planners and food trackers
- Business bots
- Map apps
- Video streaming apps
- Communications tools
- Customer relationship tools
Start Your App Business
Whatever your app idea, designing it is only the first step. You also need a successful app business model. Create your app development business plan, build a solid team, and implement an engaging marketing strategy. Cover these important steps, and you could be on your way to building the next killer app.
App Business FAQs
- How long will it take to build and release my app?
Your timeline depends on factors like the app’s complexity and your team’s resources. Typical time frames can range from 1–3 months to over 10 months.
- Should I build my app for Apple, Android, or both?
Apple’s iPhone iOS (and for iPad, iPadOS) and Google’s Android comprise the world’s dominant app ecosystems. Apple’s App Store revenue topped $46 billion in 2018, far above the Google Play Store’s $24.8 billion. However, Android app revenue is growing faster. Unless you have a strong business case for focusing on only one platform, consider developing for both.
- How will my app make money?
Your app can generate revenue through different monetization models. Here are 7 to consider:
1. Paid app: No free version.
2. Freemium: Free to download and access basic features, with one-time or subscription pricing for premium access.
3. Subscription: Ongoing paid access to all features.
4. In-app purchases: While the customer is using the app, they can purchase add-ons, upgrades, and other expanded features.
5. Crowdfunding: Gain social proof and startup revenue through one-time or ongoing online crowdfunding campaigns.
6. Sponsorship: Instead of displaying ads, sponsoring companies provide financial backing, rewards, and other engagement to put their brand in front of their app’s user base.
7. Advertising: Ads display inside of the app interface.
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