How Much Will it Really Cost to Develop my SaaS Product?

Naturally, this is a question that concerns many entrepreneurs looking to launch their products, however, it’s a lot like asking how much it costs to build a house. The answer: it depends. Are you looking to build a small forest cottage or a 4000 sqm celebrity villa?

NY 2020

Therefore, the best way to approach this question is not by asking for a direct quote, but rather by working with the company you choose to outsource development to ask how and why they arrived at the price they did. By contrast, when you focus on price first, most companies do not take you seriously and know that you are only focused on the bottom line more than the quality of work. In order, to start out on the right foot, take the following into consideration:

Be Prepared
Having a clear concept of your project is key. Prepare as much information as you can and try to consider how your project presents from the perspective of the outsourcing company. This will ensure smoother communication and help the development team put together the right specificities and thus an accurate quote.

The reality is that even after having quite well-prepared specs, various companies will understand you differently. One will propose to deliver software that works well and another one will focus more on its ability to handle millions of users simultaneously. So be ready for a thread of communication and clarifying meetings.

Cost Formula
Generally speaking the Cost = Time required X Rate (per hour, per day, per month) + anything else that may be required (stock images, libraries, other software). This is also known as the T&M (Time and Materials) model and in the end, all the pricing models are based on this one more or less. To break it down even further:

a) The time required depends on a number of factors and is really hard to calculate. Whatever number you will get is just a rough estimate based on the information you provided (which is one more reason to be as specific as possible.) Depending on the project size and scope of work the actual cost can exceed by 30–40% or sometimes even twice.

b) The rate depends on the experience level of the team, calculation methods, etc. It depends on the location too. So consider the market of the country you work with.

How do I calculate the cost myself?
Doing a quick calculation is a solid idea. This will also give you a leg to stand on when you come to a price agreement since you will have already done your own research.

Simply divide your project into smaller parts and ask for an estimation again. For example, if you want to develop a Dropbox, you can divide it as follows:

1. The core idea, i.e. file syncing on multiple devices
2. Web dashboard
3. Desktop software
4. Mobile apps

Another option is to ask for a breakdown per functionality. This will help you understand which parts are the most time consuming and, if required, remove or modify them.

Another option is to use tools like this for a rough cost estimation

Use an MVP as a Launchpad
Starting from a minimum viable product (MVP) is a good idea to keep the initial cost low. In this case, you are also more likely to get a realistic estimate. Keep in mind that MVPs also allow for better maneuverability, meaning you can easily make the changes you need to as you go along without much hassle.

Be Open About Your Budget

If you have a budget limit let the companies know upfront, so that they can focus on what can actually be accomplished within your price range. This will give the company the opportunity to explain what they believe should be the development priorities. Even if you don’t end up collaborating, their professional opinion is always something you can have in mind as you go forward.

Sprint planning

Getting the correct price is a really tricky task. Both you and the company will need to work hard to be on the same page. Spending more time on this than you initially anticipated is natural. Stay patient, be open, and trust the process.