How to Write a Business Plan for Mobile App Development?
Depending on the specifications of your app, you have to take into account a budget of somewhere between $ 10,000 for a simple app such as a news app and $ 200,000 for a complex app that makes home automation or VoIP possible, for example. An average multi-platform app in India costs between $ 50,000 and $ 100,000. With these hefty amounts, it is important to draw up a business plan, even if you want to set up your idea small first.
The minimum properties of a business plan are:
- The type of app
- The unique points of sale (USPs)
- Market analysis
- Estimated Marketing Cost
- Estimated profit
- Marketing plan
- Expected profit and loss substantiation
- Break-even analysis
- Cash flow prediction
- 5-year plan
This article gives you a good basis to start with your business plan so that you have a better chance of success with your app. Do you want help with drawing up your business plan? Then visit the best mobile app development company where they can work on your concept idea to a well-found plan that makes your app look friendly and elegant.
Why a Business Plan for an App
It is important for you and your potential investor to know exactly why you need an app. The iOS App Store has more than 2.2 million apps and the Google Play Store already has around 3 million apps. Each app category has hundreds of almost identical apps, most of which are free to install. So what's the reason users will install your app?
Validate your business plan
The most important step in the plan is to validate your idea. Is there actual demand for your app idea? One of the cheapest ways to find out is through Facebook ads. Have a budget of $100 and test your idea on various target groups. Direct the audience to a landing page and measure the result. We also did this during the Google Startup weekend Utrecht 2016 with our Roomie concept and found out that 17,000 people were interested in a better way of finding a room.
It is important to measure the interests of the market. You can do this by using Google Trends. Your app should target a growing market. Google Trends gives you a good idea of ??this. However, when you are working on a disruptive/innovative idea (such as Uber), Google Trends will not provide you with clarity. Check out the highest-ranked apps in your app category from both paid and unpaid apps and find out what they do best. Read the reviews of these apps and see why people love this app and more importantly what's missing from this app.
Answer the following questions when analyzing a competitor:
- Why is this app successful?
- What is the rank and is it consistent?
- Why do people love this app?
- Is the user of this app a die-hard fan?
- Does this app lure the user into a quick buy?
- Does this app sort of solving the same problem?
- Am I or could I be a fan of this app?
- Is this app used more than once?
- How is this app marketed?
- What is the unfair edge this app has?
- What does the app cost and what in-app purchases are there?
This competition analysis cannot be done in a day. You have to keep an eye on the competition over a period of time in order to draw more conclusions.
- USP of the App: What is the unique selling point (USPs) of your app? This is related to the 'why' of your app but also explains why your app is better than the competition. Your USPs tell you how you approach the market, how you convey your message, and how you provide support for your app. Your USPs also tell you how your app compares to the competition.
- Personas: What does your end-user look like? In the previous phase, you investigated who your end users are. These end-users may be in multiple personas. A persona is a representation of a typical end-user of your app. For example, a persona dating app can target single people with an average income between 30-40 years old. The more detailed your personas are described, the more valuable your business plan app development has the following:
The environment in which the app is used
- Price sensitive or value sensitive
- Personal goals
- Culture influences
- Favorite apps/websites
- Loves innovation yes/no
- The more detailed you go into your end-user, the better your marketing strategy can be drawn up.
Marketing and Promotions
Depending on your target group, you can roughly choose from the following channels to ensure conversion to your app:
- Installations encouraged
- Organic installations (Through search engine optimization)
- Social Media
- Retargeting campaigns (On other websites, such as nu.nl, you only show advertisements to people who have already visited your website).
- App store optimization (Higher rank in the Apple Store / Play Store)
- Push notifications
- TV advertisements
- Mobile app ads
- Content marketing
- Public Relations
- Email marketing
- Event marketing
- Coupon/flyer marketing
These channels give you a varied return of investment (ROI) and you will have to compare these statistics with, among other things, purchase conversion if you want to draw good conclusions from this. It is also important to establish a go-to-market strategy, it will also depend on the marketing channels you have chosen. When you have drawn up this, it is time to draw up a financial plan.
Mobile app business plan finance
Apps with a lot of users often already have a lot of financial resources. Don't let this deter you from making good estimates about a number of important financial metrics.
User acquisition costs
User acquisition costs are the most critical measurement point for any business.
In the context of mobile app developers for a business plan, you have to look at the cost per installation (CPI). If you want to go even deeper, look at the costs per conversion to purchase. There are always users who install your app and then immediately throw it away. Although well-established companies have the exact CPI, you can also find out what the approximate CPI of your app is. You can look at services such as Fiksu for this. For example, to find out how much it costs to reach your target audience and get high-quality users. You include this number in your business plan.
Value in the Future.
The customer's lifetime value (LTV) is the amount of money you earn on average from a customer. This number indicates the financial feasibility of your app. Low LTV and few customers can lead to the end of your app. Various LTV calculators can be found online and as long as the entered figures can be justified, you are in the right place with regard to LTV.
Burn Rate, Cashflow, and Runway
How much money do you expect to spend per month? Includes everything from salary to freelancer costs to overheads and hosting. That is your burn rate, a cost item that you want to keep as low as possible. This section in your business plan app development should also include the runway, which can be calculated using the following formula:
- Runway = (Total cash in operation) / (Burn Rate): The runway then indicates how long you can still do before all the money is used up. It is also important to write out your cash flow. This way you find out when you can get into trouble. You will also have to do a cost/benefit analysis. In the short term, your costs will exceed the returns. For this, you have your runway as a formula. But in the long term, you naturally want to start earning from your app. Put all costs together and weigh this against the expected turnover. If you arrive at a positive number, you know that you are in the right place.
- Business model: How do you want to earn money from your app? Most apps focus on user growth first over revenue and earn later in the process. Read more about the different revenue models and the pros and cons here. You want to find out how much you can charge a user. First, you will have to look at how much your competition charges for a similar service. You can also research how much your end users are willing to pay to fix the problem.
- Profit and loss: Finally, it is important that your business plan app development contains a profit and loss budget that takes into account the necessary dependencies and figures. This must be well substantiated and written out for a minimum period of one year.
If you are in the phase where you do not yet have an app, then you should not spend too much time drawing up a business plan. When you work towards the launch of the app and bringing it to market, you find that a lot of your assumptions still need an overhaul. But if you follow this process and you draw up a basic business plan, this is a good guide in the construction of your app and you don't waste time. Are you ready to have a prototype developed or to have your app fully realized? Please contact us, we can help you from idea to maintenance.