Why do you need an MVP in the first place?
It is a good question, to begin with! If you are an owner of an early-stage startup, having a Minimum Viable Product before embarking on a full-scale development will ultimately save you money and increase the chances for your project to survive and become a success. According to Failory, only 1 of 10 startups actually achieve their goals, and having an MVP is a key element of this success.
With MVP, you will be able to understand whether your product is what the market requires at the moment and make quick changes in the product or in the direction of your business. If the product is proven to be desirable by potential customers, you will achieve a faster time to market and will be able to build a full product based on your MVP.
What to include in your MVP?
Before moving on to any calculations, you need to figure out what features to include in your MVP. It is important to strike a perfect balance and avoid overbuilding or making your product too generic. In the first scenario, you will waste your time and money on unnecessary functionality, and in the second one, the product will not do the job properly.
Always remember, that MVP is not a complete product, and you have limited time to deliver the core functionality that allows you to receive market feedback while your idea is still fresh. How to prioritize what features you need? It makes sense to conduct a scoping session, with the help of professionals, or by yourself. During this session, you should focus on user stories — fairly detailed presentations of functionality and features for the end-users. Each user story should include a development time estimate, which allows you to calculate the approximate time expenses for the entire project. The most important thing is to focus on features that reflect the essence of the project, and not nice-to-have or secondary features.
Download our report
We have provided information on the cost of launching an MVP for three projects of varying levels of complexity, enabling you to compare what each project entails.
Select your approach to forming a team
Every case is unique, as well as the number of available resources. There are three principal approaches to forming your core team. Let’s discuss each of them!
In-house development team
With this approach, you will need to hire full-time employees for your organization and possibly open your own office. The first challenge is the availability of experts in your region, you can simply be limited in options. If you manage to assemble a team this way, all legal work, payroll, and taxes will be on you, or you will need to hire additional experts for this task. With an office with full-time employees, you need to plan long-term, and have a plan-B, in case you change the development direction, the scope of your project or simply need to make a pause in development to raise another round.
In terms of costs, this is probably the most expensive option if we talk about MVP size projects. To calculate the approximate cost of the project you need to add recruiting costs, salaries, taxes, office rent, hardware, and software expenses and multiply it by the number of months you plan to run your project for.
At first glance, it might seem a bad choice for building an MVP, however, if you have a big organization and have long-term plans for software development, you can consider assembling an in-house team. Probably, the biggest benefit of this approach is the highest amount of control over your team — you have full control of what each expert is doing, be able to communicate on the spot, and adjust development direction as you see fit.
This approach can work if you have a technically proficient co-founder that can take the role of a tech lead and system architect (at least on a high level) and manage the work of remote experts.
The most important thing to remember here is to know what you need to build before contacting freelance developers. You need to have a full list of features, maybe some mockups or prototypes, and a little research on possible technologies that might be used in your case to save time and budget. The work of a single developer on an MVP is in the $15-$150 per hour range.
Partnering up with a development agency
Development agencies already have all required experts, including system architects, software developers, QA engineers, designers, project and product managers. Usually, they offer Fixed Price and Time & Material models. First for projects with detailed specifications and scope, and the second one is for the projects where the scope might change. Agencies will spare you from any recruitment and management hassle, offering you the right team of experts for the job. The cost of a dedicated team can range from a few thousand USD per month for small offshore teams, to tens of thousands of USD for bigger teams or teams located in the USA or Western Europe. Some MVPs take from 1-2 months, but some technologically challenging projects can take 6 months or more, which may be beyond what we see as an "MVP".
Factors that affect MVP final development cost
The development approach
No code/low code tools
This approach is great for non-technical people because you will get the basic functionality without the necessity to code. You will have access to a large variety of tools that are not expensive and easily replaceable. The biggest drawback, however, is the fact that the more integrations you do, the more expensive and clumsy the solution becomes. Scalability with this approach is limited and questionable because at a certain point of improvement it could make more sense to go with a pre-made or a custom solution. You may hit a certain point, where you develop a feature not according to users’ needs, but rather according to the limitations of your platform.
Still, this approach can work for simple projects with clear scope and requirements. For example, simple content websites, landing pages, apps with basic user interaction, functionality, and data collection.
Pre-made solutions and CMS
These are the solutions designed to solve common problems for businesses and aimed at saving time for developers and budget for businesses. The keyword here is ‘common’ because pre-made solutions are limited in functionality by a platform and will not support your unique business flow. Additionally, they are often controlled only through API and need additional time to customize, and you may need to pay for each additional feature separately.
The advantages include a quick and easy start, possible integration with other solutions, and the ability to adapt to your business needs to a certain extent.
As far as price goes, a pre-made solution can be free or include license costs. Plugins and extensions can also be free or include a certain fee, usually, it’s a mix of both. Also, add in the costs for setting up, developing the unique functionality and customizations. In some cases, you will also need to pay for hosting and infrastructure separately.
The final price tag still can be considered low. This approach is great for a typical project without a unique flow, that does not require heavy customization.
This is the most expensive approach but allows you to build a scalable, tailor-made solution for your situation, that fits your business like a glove. When you create a custom MVP and remain with the same team and technology for a full-scale product, you won’t lose any money on this transition and will retain scalability. You will also be able to integrate with any existing solutions without limitations that no code tools and pre-made solutions have.
A high price tag is reasoned by expenses on hiring a proficient team of experts and their time and effort, as well as expenses on hosting, infrastructure, possible integration of third-party services, or modules.
Correlation between the complexity and costs
If you know that you need to build a complex project, keep in mind that it will be much harder to achieve with no code and pre-made approaches. At least, you will require an additional team of experts to solve complex and non-trivial tasks. Not every MVP can be built using the basic tools, because the core idea might be unique. So, if you know that your project will be complex and unique, try to calculate how much additional costs you will incur on no code or pre-made solution, or maybe it will make sense to start with a custom one.
Elements of a project cost
In the next sections, we will focus on the custom solution approach, because it is the hardest to estimate and requires an evaluation of multiple factors.
Preparing requirements, conducting research, searching for solutions, prototyping, and feasibility study
A major part of this work can be done by founders if they have a desire and expertise to take on some of these activities. A development agency will usually need 30-120 hours for small and medium-sized projects to cover this list of activities.
UI/UX design and branding
The creation of basic elements, such as logos, color schemes, mood boards, grids, or fonts can take anything starting from 30 hours. If we are talking about a complete design of all key pages, including product and platform pages, the design may take 100-150 hours. In 2022, it seems mandatory to develop multiple layouts for desktop computers, tablets, and mobile devices, so be prepared to add up to 50% of design costs to achieve this goal. You can save on this cost if you opt-in for a ready-made template or theme if that's an option for your platform. There are more tips on saving costs for the MVP development at the end of this article.
This is the most expensive and time-consuming stage of the process. While every case is unique, it is impossible to calculate the exact estimate that will fit each and every project. You know your MVP better than we do, so here is the table with popular features and the details on their implementation to give you an idea:
A project manager is a role that is responsible for the implementation of plans and managing the development teams, supporting the project from ideation to completion. The person taking over this role is often involved in planning as well, to be in touch with any changes in the project. Project manager role usually takes on 20-25% of the total development effort and is a crucial part of the entire process.
Quality Assurance and Testing
A fine-tuned quality assurance process ensures that the final code is clean, meets the specifications, complies with applicable regulations, and without any errors that can cause disruptions. Manual QA testing usually requires 15-20% of the total development hours. If you decide to use automated QA as well, which can be required in some projects, the development cost will increase more significantly.
It is important to start a QA process early on. The QA team should be aware of business logic on requirements-gathering and design stages, to be able to plan different test scenarios when the first versions of the product will be ready.
Project deployment and setting up infrastructure
Once again, it is impossible to estimate an approximate time for each specific scenario, as the complexity of infrastructure and number of instances may vary. However, this phase can take a number of hours starting from 30, for a simple setup. Here are some examples of popular pre-made solutions for comparison:
- A WordPress website with a pre-made theme can take anything in 40-100 hours range to set up
- E-commerce website on Magento or similar platform can take 100-150 hours with the inclusion of popular plugins
- Setting up a marketplace leveraging the popular solutions can take 100-200 hours
Hourly rates of IT experts
As of the first quarter of 2022, the approximate hourly rates of IT experts depending on a region are:
While selecting the region for outsourcing, keep in mind time zone and cultural differences, which can play a major role in your collaboration!
What you can do to reduce the final cost of the MVP?
Based on our experience, there are some tips that can help you reduce the final cost of your project. The most effective include:
- The first way to decrease expenses is rigorous preparation and detailed requirements. Here at Visual Craft, we are offering a discovery phase for our clients, during which we make decisions on key functionality solutions. A proper discovery phase reduces expenses on any changes of functionality in the future because you will know exactly what you want, and you will follow that direction. So, if you have the opportunity, partner up with an experienced software development company and at least get a consultation on conducting an effective discovery phase
- You can combine pre-made and custom solutions in various ways. Yes, you may need a unique business flow and approach, but still, there are multiple solutions on the market that can cover typical features and functionality
- As mentioned previously, a proficient Project Manager can make a big difference. Having a skilled expert at this position will allow you to have the most effective processes during the development of your MVP. Additionally, if your Project Manager is in charge of a seasoned team with a proven track record in similar projects and a complete understanding of product design, as well as potential product challenges, you have more chances to avoid unnecessary expenses on errors during the development process. Yes, there are still will be some roadblocks and challenges, but a professional team will know how to deal with them without waste of the budget
- Your MVP should include only critically important functionality, that illustrates the core idea of the project, letting you receive user feedback and validate your project. The development and automatization of other not crucial, but complex components can be done during the next phases of the project
- The usage of an offshore outsourcing team can significantly reduce expenses during the development process. We are living in the post-COVID-19 world, so most organizations are learning to work remotely anyway, so having a team from another continent could be just as convenient as working with expensive experts in your region
- Use flexible technologies that allow implementing new requirements without a need for expensive migrations to new technologies. No matter how good the planning was, there is still a big chance for changes during the development process. Make sure to keep your tech stack as flexible and as up-to-date as possible.
The price for MVP may vary dramatically, from $10,000 for work from a team of freelancers on a small project to over $100,000 for a complex project done by an onshore software development company. To make sure you made the right choice and decided to go with the most suitable approach, make sure to contact an experienced software developer for a consultation, even when you go with building an MVP by yourself!
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