Budgeting and planning for your first digital product

Whether it’s a new mobile, IoT or web3 product, the one question I’m asked almost always is: How much will it cost to build?

I get this question often from entrepreneurs who know their business but don’t have experience creating software. Since there’s a different answer for nearly every situation, I have a few key points that are always helpful for business leaders considering a digital product for the first time.

Be clear about your budget bracket

There are five main points you should consider when developing a digital product. The first, and most important, is to establish how much you can afford to spend.

Then, you can reframe the issue into how much of a working, functional digital product can be built with that budget and how long it will take to do that.

If you’re a non-technical entrepreneur and don’t know where to start, you can consider some typical ballpark ranges. The budgets and timeframes for new end-user software products tend to fall into one of several categories.

Start by determining how much you can spend to develop the product.

Many variables impact these product development costs. Expenses can change significantly depending on the extent to which pre-built components or middleware can be used, how stringent the security or compliance requirements are and the variety of users or use cases the product needs to support.

Establishing your bracket will anchor conversations with your financial and internal stakeholders, and help guide your selection of the right software development partner if you decide to outsource.

Budget prioritizing the business outcome you need

Of equal importance is the question of what your project needs to achieve. Be clear with your development partner on the goals for the project. For example, it could be:

• A prototype to demonstrate to investors who might invest capital.
• A proof of concept to gain commitments from potential customers.
• A minimum viable product (MVP) that can be tested by customers for feedback.
• A production-level product capable of scaling your user base.

We worked with an engineering consulting company that had a software-driven idea for its human resource management business. Their owner wasn’t a software expert, and the company had limited seed funds. We shaped a project plan that included research, architectural diagrams, sample screenshots and a realistic budget for building the product.

The deliverable was a professional PowerPoint presentation that helped the company secure funding to create the first full version of the SaaS platform. For under $50,000, the entrepreneur was able to achieve his goals without having to review a single line of code.

You should be the one to delineate the priorities of the project. Don’t ask your developer to create your budget from a blank slate; rather, ask how far or how quickly your vision of the product vision can be realized for the amount you can afford.

Functional software can always be built with a reasonable budget. Agile development methods make it easier to achieve a successful outcome no matter how constrained your resources. What varies is the degree of functionality, infrastructure or flash that can be built at any given level.

Even with the smallest budgets, if you’re clear on what is most important, a seasoned team can build the right software. If you must start small, more functionality can be added later as the product matures, you gather user feedback and additional budget becomes available.

Be careful you don’t frame your budget through the lens of development hours. It’s almost impossible to predict how much usable and marketable functionality you’ll get per block of engineering time. The number of hours spent to build a product can be a useful unit of measurement, but it falls short of telling what you will get for your investment.

Manage your budget to achieve your business objectives.

Be the guiding light for the tech experts

Transforming your vision into functioning software requires a strong process for converting the general idea into detailed requirements.

Don’t expect to be a master at knowing and communicating the details right away, particularly when it’s your first digital product. Although you don’t need to learn to code, you should strive to understand how design, technology and development interact. As you learn, expect your decisions about features to evolve.

Your role is to remain focused on your customer, the value you provide to them and how software-driven customer interactions will fuel your business. Look to your product development team to provide the technical expertise you need. Your biggest job is being the guiding light for the product’s mission and its essential attributes.

First-time digital products developed with savvy tech and a clear vision can stand out in a world crowded with websites, mobile apps and Internet of Things (IoT) gadgets. Your technical management experience will grow as you progress from your first product, but always aim for the gold standard.

The only way to ensure your software meets the highest-quality standards is to collaborate with your development team while pushing them to work the details.

Intrigue users with a party trick

Try to include something novel — a party trick — into your product. It doesn’t need to be complicated, but it should be memorable. The best party tricks hint at the big idea that is fundamental to your offering.

For instance, we were building the MVP of an enterprise supply chain platform. The company’s vision for the complete software product was expansive, and explaining it succinctly was a challenge. Its core value was to help diverse stakeholders collaborate across complex supply chains.

In this case, our party trick was a simple feature that let users send messages to each other within the platform, even when the recipient worked within an entirely different part of the supply chain. This feature embodied the idea of cross-company collaboration, gained positive feedback from prospects and opened the door to dialog about how the entire platform could benefit them.

Several new deals were signed as a result of the MVP providing the “aha!” moment those customers needed. The complete messaging system took years to develop, but the party trick helped convey the product’s idea early and helped win over hearts and minds.

Plan for post-launch costs

Once the product has been developed and launched, keeping it up and running will require ongoing resources, specifically for hosting and technical support.

For hosting, your software will most likely be deployed with a cloud service provider such as Amazon Web Services, Microsoft Azure or Google Cloud Platform. These providers allow developers to assemble, configure and deploy virtual storage, processing power and integrations in a matter of minutes. Cloud hosting eliminates many administrative burdens and operational risks.

But you’ll still need to have your own technical support in case new bugs pop up driven by changes to browsers, operating systems, middleware software and the like.

While budgeting, keep in mind that both cloud services and technical support are provided on a pay-as-you-use-it basis. Those expenses may be a fraction of the development cost, but must be included in your budget. Expect to pay less than $1,000 per month if you’re an early-stage company or operating a standalone product.

Processing and storage-intensive systems can cost even more. Be sure your up-front design is mindful of your hosting needs, as badly designed software can incur thousands of dollars in unnecessary cloud fees.

Don’t be overwhelmed by all the variable costs cloud providers might present, as most of these are purely optional. For example, you can pay to have your cloud infrastructure automatically scale to handle demand peaks for your product. That is a nice feature, but it can lead to surprising bills for features that aren’t really required early in a product’s life.

On the other hand, not having certain services can hamper your product and frustrate your users. All major cloud services provide tools and advice, including potential bundling options, to help you determine the optimal balance between their services and your costs.

Developing your first digital product can be daunting. But you can do it even if you don’t have a technical background. The first step is to establish a budget. From there, things will begin to fall into place. Design your dream, recruit great technical experts, stay focused and allocate your time and money to the core value your product will deliver.