Building a Minimum Viable Product (MVP) is crucial for businesses of all sizes, as it allows them to test their ideas in the market with minimal risks and resources.
That said, developing an MVP can be a complex process that requires careful planning, research, and execution. That's why the costs of creating an MVP can vary widely depending on various factors, such as the product's features, functionalities, and complexity.
So how much does an MVP cost and what factors influence it? And why is it even important to build an MVP in the first place?
This article answers those very questions and more.
Let’s dive in.
MVP means creating a product with the minimum features required to solve a customer's problem and test its market viability. The goal of an MVP is to validate a product idea, gather feedback from early adopters, and upgrade it based on that feedback.
For example, let's say a startup wants to create a new social media platform that connects dog owners.
Instead of building and launching a fully-featured social media platform, the startup might create an MVP that allows users to create a profile, post photos of their dogs, connect with other dog owners of the same breed, and get initial feedback about the app’s functionality.
It can then improve the platform and add new features based on the feedback about the MVP.
The terms MVP, Proof of Concept (PoC), and prototype are often used interchangeably.
But these three terms differ in meaning.
A PoC demonstrates that a product or technology can work in theory. It is used to show an idea's feasibility or validate a concept. PoCs are typically created in the early stages of the SaaS development lifecycle to test whether the idea is worth investing in.
A prototype, on the other hand, is a preliminary version of a product that is used to test and validate design concepts. It is more developed than a PoC and includes basic functionality and user interface elements.
Lastly, an MVP is a product's first functional version released to the market. It includes only the essential features and functionality required to solve a specific problem or address a particular need.
The table below lists some ways in which a prototype, PoC, and MVP differ from each other:
PoC - Prototype - MVP
Definition - Just a concept that helps verify an idea’s potential. - Visual representation of the initial concept. - A usable version of the concept with the basic features
Motive for building - To decide if the concept has business value and what framework and technology stack to use for the project. - To get the UI in place to improve user experience. - Let users use the app's minimal version and get feedback from users.
Uses - Helps with internal checking of assumptions - Helps check the UX design part. - Helps get feedback from the customers and investors based on the minimum version of the product
Release - Not launched for used - Not launched for the public - Released for use by the end customers
You might feel like MVP is just a very basic app version, so there's no need to consider the costs.
However, not considering the MVP cost can be your biggest mistake.
Although you are creating a product with just the basic features, building an MVP can be costly. So if you don't consider its costs, it can lead to budget overruns and even project failure.
Imagine this; you start building an MVP and spend up all your budget mid-development, leaving you with nothing to continue with your project.
In this scenario, it’s quite likely that your app's time to market will increase and even lead to project failure.
Hence, it is essential to consider a cost estimate before developing an MVP.
How much you will have to spend on an MVP depends on your specific requirements. And since every MVP is different, there is no way to estimate the exact costs.
However, based on the number of features you want, the developers you hire, the time required for MVP development, and other factors, you can get an approximate cost range.
Building and launching an MVP usually costs anywhere between $25,000 to $120,000, based on numerous factors, which we’ll cover below in more detail.
So this can be your starting point.
From here, you can consider the following factors and narrow the range to get estimated costs for your MVP.
The type of application you are building will significantly impact MVP development cost.
To give you an example, an app that is simple and does not require heavy graphic designing will be cheaper than one that requires rich graphic designing.
Additionally, the number of features you want to add will also impact the time and resources required to build the MVP, influencing MVP cost. Features are necessary to make your MVP functional and user-friendly. In turn, you can gather feedback based on the experience users have using your MVP.
That said, not every feature holds the same significance.
For instance, when building an MVP for a social media platform, features to upload media and send text messages are necessary, but features like album creation and filters can be added at a later stage.
This means you will have to prioritize some features over others because, without prioritization, you might end up overspending on features that are not an absolute requirement in the MVP.
Some of these feature prioritization models include the following:
Considering UI/UX design is the next step toward estimating the cost of your MVP.
This is a critical MVP cost component because you don't want the design to negatively impact user experience before you even launch the final product in the market.
UI/UX design is responsible for creating an easy-to-navigate interface, which means it must be intuitive and responsive across various platforms. Hence, you must hire the best app design agency to attract as many early adopters as possible.
Besides paying the designers, the complexity of the design, the number of design iterations, user research, and platform-specific requirements will also drive the MVP cost.
The size, experience, and type of your development team are some of the most critical factors to determine MVP cost. For your product development team to be as productive and effective as possible, you need to clearly understand what you want your app to accomplish, as well as its scope and complexity.
Only once you do that can you make an informed decision about hiring a team.
The size and experience of your development team are directly proportional to the MVP cost. The greater the number of employees and their level of experience, the more you’re likely to pay them. And, while the size is something you can control, you would not want to compromise with the expertise.
For example, consider you want to build an MVP during your SaaS application development for a custom software. In this scenario, you can reduce to hiring two or three custom software developers instead of many. However, if you hire many developers who lack the required expertise, your MVP is likely to fail.
Coming to the type of development team, you have four options to choose from:
An in-house team consists of developers who are already your employees and work exclusively for you.
This means that an in-house team will be highly dedicated, as it will be solely focused on your projects and goals.
An in-house team can offer numerous other benefits.
To begin with, you will have complete control over the MVP development. This control even extends to project management, decision-making processes, and prioritization of tasks, allowing for a more tailored approach to development.
Furthermore, having an in-house team is great for knowledge retention. As your employees, team members accumulate valuable domain-specific knowledge and insights, which they can leverage to improve existing projects, enhance future developments, and provide ongoing support and maintenance for the software they create.
However, building and managing an in-house team can be costly initially. It will certainly give you an excellent ROI in the long run, but this may still not be viable for startups with limited budgets.
Freelancers are independent contractors who work on a project-by-project basis. They are often hired to fill a specific skill gap or to complete a project within a tight deadline.
Thanks to the continuous rise in freelance gigs, which is now a $1.3 trillion economy, you can easily find expert MVP developers for your project.
Freelancers can be more affordable than in-house teams. The downside here, however, is that they may not be as invested in the project's success. Moreover, there are also chances that a freelancer may opt out of your project at any time, leaving you hanging in the middle.
Outsourcing MVP development means hiring a third-party vendor to develop the MVP.
This can be an excellent option to build an MVP at an affordable cost because you will get access to skilled professionals without employing them full-time and paying them monthly salaries.
Additionally, since the vendor will have an expert development team in place, the chances of coding errors will likely be as minimal as working with an in-house team, saving you money on testing.
Not to mention, the vendor you pick will be more motivated than a freelancer to complete your project within the budget and on time to maintain a good market reputation in the market. So, whether you want to build a web or mobile app, outsourcing the project is definitely a viable option.
However, when selecting a vendor for your project, you must consider various factors, such as aligning values, work portfolios, reviews, etc.
Location is another important factor that can affect your MVP cost.
If many similar companies compete for customers in your target market and/or geographic location, then expect higher MVP costs because demand will be high and competition fierce.
On the other hand, if the competition is low and your target audience is very specific, the MVP could cost less than expected due to lower demand levels overall.
Say startup A wants to launch an on-demand laundry service in New York City. The market there is highly populated and competitive, with many existing laundry services. In this case, the startup will have to invest more in its SaaS MVP development, such as:
Startup B, on the other hand, wants to launch a niche skincare line targeting people with eczema in rural areas of the Midwest. This market is very specific and relatively underserved, with fewer competitors and less demand overall.
Because of this, Startup B may not need to invest as much in its MVP development to attract customers and may be able to keep its costs lower.
The location will also influence the salary you pay to the product development, testing, marketing, and sales teams. Consider the example of developers. According to data from Thinkful, the average web developer's salary is $88,064 in Utah and $86,304 in Texas.
But when you switch to Connecticut or Rhode Island, the average salary is only $55,212 and $52,985, respectively. This shows a huge salary difference that can drive the MVP costs.
The tech stack involves the programming languages, development frameworks, libraries, and tools required to build a software application.
Typically, the tech stack you choose will depend on the type of application you are building. For example, if you want to create an app for mobile devices, you need to use the Android or iOS platforms and their respective programming languages, like Kotlin or Swift, respectively.
Now let's look at how this affects MVP cost:
You will only need to make contracts if you hire a freelancer or outsource MVP development. If you have an in-house team, there's no need to worry about the contract.
There are two types of contracts:
The amount of market research required for an MVP depends on the size of your target market.
If you are building a product only for local users, then minimal market research may be enough. This is because the scope of the target market will be limited to one geographical location.
However, suppose you're creating an MVP for a larger audience, like everyone using social media. In that case, you will want to spend more time conducting surveys and focus groups with potential users before starting development work on your product.
This will help ensure that once launched, the MVP meets all the needs of its intended users without any major flaws or bugs in its design or functionality.
If you plan on expanding your MVP into a full-fledged product, scalability needs will be crucial. If you don't know your scalability needs, then it's possible that the cost of building an MVP will be higher than necessary because it won’t be created with expansion in mind.
For example, suppose one of your primary goals is to get more users on board and make money off them later.
In that case, you may consider building an MVP app or platform instead of simply launching an HTML website that doesn't perform well under load or has little interactivity beyond its initial purpose.
Compliance requirements can be a very important factor in determining the MVP cost.
There are many areas where compliance comes into play, but here are some of the most common:
If you are leveraging or storing users’ data in your MVP, you must take measures to secure it. You will also need to comply with different regulations that governments and international organizations set around using customer data. All of these will increase the MVP cost.
Not abiding by these compliances can also leave you open to a data breach and, in turn, lead to financial losses. Per IBM's Cost of a Data Breach 2022 report, the average cost of a breach is $4.35 million. Moreover, you may also face legal and reputational damages if you don't abide by the regulations.
Even after your MVP development is finished, there are associated costs you need to consider when planning your budget.
Following are some post-development factors driving MVP costs:
Your MVP is great, but your target audience will hear about and use it if you market it appropriately. That's why companies like Nike, Pepsi, Coca-Cola, and other household brands spend thousands of dollars on marketing.
You can expect the marketing costs to be anywhere around $10,000. But besides the cost alone, you will also need an expert marketing team to advertise your MVP and attract users to try your product.
Sale is a major factor in determining your MVP cost. The more sales you make, the more finance you have to adapt to clients' needs and scale your MVP. And although marketing will help make sales easier, you will still need an excellent sales team to increase your revenue.
Per data from Salary.com, you can expect to pay anywhere between $51,348 and $69,954 annually to a sales representative.
While maintenance costs are often overlooked, they are an important part of your MVP budget. A good developer will build your product and keep it running smoothly for years to come.
The monthly maintenance cost includes all costs associated with keeping your software updated and secure, including:
Like the MVP, the maintenance costs will vary widely based on the application. You can consider it around 20% of the MVP costs. So, for example, if you have built a SaaS mobile app MVP at $23,000, the maintenance costs can be around $4,500-$4,700.
As mentioned above, the MVP costs can range from $25,000 to $120,000, divided differently across the MVP’s development phases.
Let's break down how much each phase may cost you:
The product discovery phase is the initial stage of a product development process, where a team or a company identifies and defines a potential SaaS idea or a new feature.
This phase aims to determine whether the proposed product or feature is viable, desirable, and feasible to develop and bring to market.
During the product discovery phase, the project management and development teams usually conduct user research to understand the needs and pain points of the target users. They also conduct market analysis to identify market trends and technical feasibility analysis to determine if the product is technically possible to develop and scale.
Based on the insights and data gathered the team can refine the product idea and create a clear product vision, strategy, and roadmap for the next phases of the development process.
The prototyping phase involves creating multiple product versions to evaluate their design, functionality, and usability.
This process allows the development team to identify and fix any issues or challenges that may arise during the development process. The prototypes can be physical or digital, depending on the nature of the product and its intended use.
In the design phase, the development team uses the feedback and insights gathered during the prototyping phase to refine the product design, including its appearance, usability, and user experience. The team ensures the product is visually appealing, easy to use, and meets the target audience's needs.
The design phase also involves various activities related to the MVP’s visual appearance, such as creating wireframes, user interface (UI) and user experience (UX) design, graphic design, and branding.
The design and development teams collaborate with designers, engineers, and stakeholders to ensure the design aligns with the product vision, customer needs, and technical feasibility.
This phase involves building the MVP you will launch in the market to gather feedback and develop your final product.
Since this requires you to create a roadmap, prioritize features, decide on a technology stack, write the code, and test the code, this is where the biggest chunk of money typically goes.
Select a reliable technology stack that your development team is familiar working with. This will ensure MVP efficiency, as there will be fewer bugs in the code.
The MVP development phase involves coding, testing, and refining the product until it meets the desired specifications and requirements. The development team collaborates with designers, product managers, and stakeholders to ensure that the product aligns with the vision and business goals.
The quality assurance and optimization phase ensures that the product meets the desired quality standards, works as intended, and provides an optimal user experience.
This phase involves testing the product rigorously to identify and fix any issues or bugs that may impact the product's performance, stability, security, or usability.
The MVP is a core component of the lean startup methodology. It's a new way to develop and test products, especially custom software, and to accelerate the time needed to get them on the market.
But accelerating time to market is just one of the many benefits; there are many more, including:
Now that you have learned everything about MVP costs and the factors driving it, here are some successful MVP examples:
The first thing you need to know here is that Amazon started as a simple online bookstore, not the retail giant it is today.
Amazon's MVP, a web app MVP, was the original version of their online bookstore. The MVP had a basic website design with minimal features, such as the ability to search for books, read book reviews, and purchase books online.
The MVP was created by Jeff Bezos, who envisioned creating an online bookstore that could offer a wider selection of books than traditional brick-and-mortar stores. The initial plan was to start with a basic website and gradually improve it over time based on customer feedback.
The MVP had several key features that allowed it to quickly gain traction with customers. One of the most important features was its vast selection of books, which was made possible by partnerships with book distributors and publishers. Customers could also leave reviews of books, which helped to build trust.
Another key feature of the MVP was its user-friendly interface. The website was designed to be simple and intuitive, with a clear navigation system.
Uber's MVP was launched in 2010 by Garrett Camp, who convinced Travis Kalanick to build a prototype. It was called UberCab back then, and the MVP was launched when UberCab had only three cars.
The MVP was simple but was able to attract funding of $1.25 million. The company started working slowly in the right direction and never stopped since then. The MVP only connected passengers with available drivers. Based on the MVP feedback, the company then added new features like GPS, a rating system, cashless payment, etc., to the application.
Airbnb's MVP was launched in 2008 by co-founders Brian Chesky and Joe Gebbia.
At the time, renting out your home or apartment to strangers was a relatively new concept, and Airbnb's initial MVP was designed to test whether there was a market for this type of service.
The MVP consisted of a simple website that allowed people to list their spare rooms or apartments for rent and a basic payment system that allowed guests to book and pay for their stay.
The site was launched when some attendees of a design conference in San Francisco were struggling to find affordable accommodation. Brian and Joe saw this opportunity and built the MVP.
If you're considering developing an MVP in 2023, it's important to understand the factors that will impact its cost.
These factors include the complexity of the product, the development team's experience, the technologies utilized, etc., as mentioned in this article.
At MakeITSimple, we understand that every project is unique, and we work closely with our clients to provide accurate estimates that meet their budget and development goals.
Contact us for a free consultation, and let's discuss how we can help you bring your MVP to life while staying within budget.
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