The article was updated on September 16, 2020.
What goes after a solid app idea? You have to plan, build, deploy, and finally, market a new product. That sounds like a lot for most of the startups, so entrepreneurs should start thinking about the budget and means of financing. But don’t worry too much – good ideas will always find a way to materialize.
Because the app market is growing, people are ready to invest more money in worthwhile startups – you only need to be sure that you are moving in the right direction. With that being said, we would like to help you get on the right track.
Starting from conducting market research up to software development – we are going to reveal the hidden truths about building an app on a budget.
There were 3.2 billion smartphone users in 2019; in 2020, this number is expected to reach 3.5 billion – and all these people use mobile apps day after day. Can you offer something new and valuable for them? This is where you can start.
Inspiration from existing products
It is very hard to come up with brand new app ideas when there are so many potential market competitors. Which examples inspire you the most? Maybe, there are several ideas that you want to put into one. Looking through the app store is highly recommended and is what helps drive healthy competition.
Many great app ideas are hiding in plain sight – you just have to be able to spot them. Brainstorming allows for the gathering of random ideas from several people at once. Most of these ideas may sound silly, but shouldn’t be a reason to stop, as some of them just might be a diamond in the rough.
Facing everyday problems
Often, great business ideas are not about the money – they are about solving a common problem. Think about the chores you have to do every day or about your working routine. What would you like to change or make it easier? This way of thinking might bring about the idea that serves as the foundation of your app, and as such, should be followed with market research.
Research social media platforms
What is trending right now? What are people currently talking about? You do not even have to go outside to figure that out. Just take a couple of hours to look through your social media accounts: people share their frustrations and problems there. Targeting these frustrations and problems that many people are experiencing is a good place to start.
Looking at the smartphone from a different perspective
Some years ago, a mobile phone was just a means of communication. Look what we have now: a scanner, flashlight, calculator, camera, recorder, etc. This list can go on and on. How would you like to continue it? Maybe, a startup app idea has been right in the palm of your hands for all this time and you didn’t even notice.
Check out where investors put their money
In particular, you should be interested in so-called business (or startup) accelerators. These are organizations that give brand new companies an opportunity to grow by providing access to investments and business knowledge.
Popular accelerators usually share their thoughts and experiences in their blogs, and you can check them out to find popular niches for investments.
Now it looks like you know what idea you are going to bring to the market. This is only the beginning of the journey. It is often a bit rocky, but it can be smooth if you follow these steps.
1. Market research
Make sure that there is demand for your app. Before going any further, we want you to answer the following questions:
- What problem does your app solve?
- Does the market really need it?
- Are you sure you can find the target audience for you app?
- Is it the right time to launch your product? Maybe you’re ahead of your time and the market is not yet ready for it.
- What are your key market competitors?
The goal of market research is to determine what value you can offer to your prospective users. By the way, someone may have already implemented your brilliant idea. Your target is to find a unique advantage that will differentiate your product from your competitors.
Researching the competitors
Even if you did it already, we strongly recommend looking at your competitors a little closer. The full list can be long, but you do not need to focus on each and every market player – three or four of the strongest companies can serve as good guides.
Eventually, you will know more about your direct and indirect competitors. However, focusing only the main ones is enough to get a feel for the validity of your idea in the early stages.
You can start surveying your family, friends and colleagues. Listen to what they have to say about your idea. Oftentimes their opinion will help you stay on the right track. However, it’s necessary to reach out to a wider audience and to speak with total strangers. You want to find people who don’t know you personally and who are willing to give an honest opinion.
In fact, you’ll never know whether your app will be accepted by the target audience until they start using it. You can gather feedback from the market and assess market demand by creating an MVP or prototype version of your application (see further below).
2. Raising capital
Product definition and visual prototype
Visual prototype is a great way to present your idea to investors in a professional manner, while keeping costs low. Working with many startups, here at Eastern Peak we have a special offer for startups to help them define their product, create UI/UX design and visual prototype and be ready to pitch investors in order to secure budget for an MVP development. You may find more information about this offering here.
With a full outline of what it takes to develop each and every feature, you can make smarter decisions on how your MVP will look like to ensure it meets your business goals and budgets.
Developing an MVP
You will need to validate your business idea when approaching potential investors, which is our next step.
Sources for funding
You have an idea for an app, you’ve performed thorough market research and have created a business plan as well as an MVP.
Luckily there are dozens of options to finance a brand-new business. You can choose the type of funding that is right for you. If it won’t work out then you just need move on to another one and try your luck there. Here is a list of the most proven methods:
- Private investors. One of the most popular ways for raising startup capital is finding a private investor (also called an Angel Investor or a Venture Capitalist). Angel investors and Venture Capitalists offer different business engagement models but the idea is the same – invest in your project in return for a share. Business Angels are more preferable source of funding at an early stage (seed stage). There are many online platforms that will help you find a private investor, such as AngelList or Gust;
- Crowdfunding. Simply put, crowdfunding allows you to raise capital by asking a large group of people via social media and crowdfunding platforms to contribute a small amount of money. Crowdfunding is the most vulnerable to idea theft because it requires entrepreneurs to share ideas with the public. However, it is the most popular and the easiest way to get funded especially for small businesses. Sharing business ideas with the public allows to quickly test the market and gather customer feedback.Here you will find a list of the top 10 crowdfunding sites.
- Grants and loans from private foundations and government agencies. For example, the U.S. Small Business Administration (SBA) provides microloans up to $50,000 for small businesses. If you’re not a USA citizen try to find a similar financial institution in your country which is backed by the Government;
- Bank loan. Usually banks are the first place that entrepreneurs turn to when thinking about funding, but it’s very difficult to get approved and in most cases they are turned down. Plus, even if you get a loan it is very hard to secure it. A loan from a bank involves the usual process of sharing the business plan and the estimated budget;
- Friends or family. Borrowing from friends and family may not be a good idea because it may ruin your relationship with them in the case of failure. However, according to research, 36% of funding for startups comes from family and friends.
Small notice: You may be tempted to ask your investor to sign an NDA (Non Disclosure Agreement). We must warn you that most investors don’t like signing NDAs and in most cases they won’t. Asking to sign an NDA may actually damage your reputation and credibility. But don’t worry about it. Read this post by Alexander Jarvis, a Chief Operating Officer at Taiger, where he explains in detail why signing NDA with your potential investor is a bad idea and you shouldn’t do it.
3. App development
Now is the time to start developing an initial version of the application with a limited set of functionalities based on the MVP created earlier. Create an app just for one popular platform (iOS or Android), get it on the market as soon as possible and see how the market accepts that prototype version.
Read more about:
If the prototype version gains recognition by the target audience and survives in the market then keep going. Start gradually adding other features with each development cycle. This methodology is called Agile.
By using iterative and incremental development strategies you can be sure that, in the unfortunate case that your project fails, it will fail at an early stage of development and at minimum costs.
Learn more about Agile software development in our previous articles:
Development is the most responsive stage of your startup endeavor, and it is where the majority of funds will be spent, so don’t save on it. Everything else can be sacrificed, but not the development! You need to find experienced professionals. A bad user interface design and poor performance can just bury once and for all your brilliant idea. It can potentially be the nail in the coffin.
4. Managing resources: is it possible to reduce costs without losing quality?
Keep track of your resources to avoid a situation where you just run out of money. This is actually the most common reason for startup failures.
The best way to significantly reduce costs without losing quality is to resort to outsourcing.
What roles can be outsourced at early startup stages?
You should outsource tactical roles, but not strategical ones. Strategical these are roles carried out by the startup’s COs, product managers etc., the decision-making people.
Tactical – they are your employees such as developers, designers, testers and project managers. They perform necessary tasks for you but aren’t responsible for the overall strategy.
Well-established outsourcing companies offer fully staffed and dedicated teams of developers. There are many other benefits of outsourcing besides saving money. Here at Eastern Peak you can choose from a full range of engagement models and recruit a remote team of developers that will best suit your business needs.
When choosing an outsourcing provider you should know:
5. Marketing campaign
In order to get initial traction, a good marketing campaign should start as early as possible. The early stages of development doesn’t require a lot of money, and you can do it on your own. Advertise your product whenever and wherever you can: social media and content marketing, Google/FB ads, emails, creating a landing page for your product, teaming up with other startups, launching parties, etc. Engage the customers, get their feedback and use it to modify your product.
One thing you must keep in mind is that scalable development of your product also means a scalable marketing campaign. Be prepared for gradual growth and expansion of your business. You should start investing heavily in marketing only after your business has firmly established itself and starts getting serious traction.
6. Check your progress with mobile app metrics
Finally, you should know how successful you are and what users think about your application. Quantitative metrics will give you an objective result, so you should know which metrics are most important.
Here you work with the two simplest but still crucial metrics:
- New users: how many people downloaded the app in a given day,
- Total users: the total number of app downloads.
Let’s say a user downloaded an app. If they like your application, they will most likely continue using it. In other words, you managed to retain a user. The longer consumers use the app, the more loyal they become.
Retention is the percent of users who return to the app after opening it for the first time:
the number of users who did not delete an app during a given period of time / the total number of downloads during the same period of time x 100%
This metric is calculated for different periods:
- 1 day;
- 1 week;
- 1 month;
- Rolling retention: users who first used the app on a certain date and still use it now.
Retention shows, basically, the number of users who have your app downloaded on their smartphones and have not deleted it. Active user metrics show how many unique users open the app during a given period (a day, week, or month).
The higher this metric is, the higher the retention rate can rise in the future. Plus, users who open your app daily are your loyal customers that ensure your business success.
And finally, you should know if your monetization strategy actually works. These indicators are simple but still important for future decision making.
- Gross: the total sum of payments received from users.
- Revenue: the gross minus commission.
- Paying users: how many users made payments.
- Paying share: paying users divided by the total number of app users.
- Transactions: the number of transactions for a certain period.
- Transactions by user: transactions divided by the number of paying users.
- ARPU (Average Revenue Per Paying User): the total revenue divided by the number of paying users.
- LTV (Lifetime Value): gross divided by the number of users (how much money one user brings to the app while using it).
These numbers together give you insight into how well your application performs and meets the users’ request. If you notice some negative tendencies in metrics, you can quickly react and make changes in the set of features or elements of the UX/UI design.
Have a great idea for an app? Following these steps will help you take that idea and transform it into something beneficial and profitable. Eastern Peak is here to support you every step of the way!