Do you want to start an app development business? If YES, here is a complete guide to starting an app development business with NO money and no experience.
Okay, so we have provided you an in-depth sample app development business plan template. We also took it further by analyzing and drafting a sample mobile app marketing plan backed up by actionable guerrilla marketing ideas for app development businesses. In this article, we will be considering all the requirements for starting an app development business. So put on your entrepreneurial hat and let’s proceed.
Since smartphones and mobile tablets became popular, software developers have been striking it big. A lot of app developers have been lucky enough to become highly successful from developing just one innovative app. The industry is a very attractive one with a lot of future prospects especially since more electronic devices are expected to go smart in the nearest future.
The app development business involves creating mobile applications for smartphone users. The applications can be downloaded from the various mobile app stores like Google Playstore for Android and iOS for iPhone users. The business also involves script and code writing and mobile app development for external clients.
Starting an App Development Business – A Complete Guide
- Industry Overview
The number of smartphone users in the world is constantly increasing and this has led to more apps being created. In the Apple app store alone, there are over 2 million apps while the Google Playstore hosts more than 2.2 million apps.
A report by ComSciore revealed that the worldwide mobile app revenue in 2016 was around $58 billion US dollars and in 2015 around $45 billion US dollars was generated as revenue in the industry. The revenue is expected to increase to around $77billion dollars in 2017.
Another report published by IBISWorld revealed that the app development industry in the United States generated $9.7 billion US dollars with an estimated annual profit of around $302.2 million US dollars. The report also revealed that the growth rate in the industry between 2009 and 2016 was around 49.5% with about 195,000 business operators in the industry. An annual growth rate of 28.9% is also predicted through the next five years.
Facts and Figures
The following facts and figures are relevant to the United States app development industry:
- According to Statistics, there are more than 4.7 billion smartphone users in the world while a survey conducted by Pew Research Center revealed that the United States has one of the highest concentrations of smartphone users in the world with around 72% of mobile phone users in the country being smartphone users.
- The Top two smartphone vendors in the United States market are Apple (57.37%) and Samsung (10.36%).
- 37% of all website visits in the United States come from mobile phone users.
- Mobile Phone users in the United States use an average of 2.5GB of data monthly and most of the data is spent on accessing various apps on their smartphone and mobile devices.
- 18% of Americans make use of apps for mobile payments.
- Mobile commerce sales grew by 38.7% in 2016.
- Cost per install for mobile apps also grew by 38% in 2016
The United States app development industry is a fast growing one. The app economy is expected to double up by 2020 even though the market is already very big.
Consumers in the market are no longer limited to smartphone users. Most businesses have now realized the need for a mobile app for their businesses and this has led to a growing trend of business owners creating individual apps for their businesses. App development is currently a hot and lucrative business opportunity especially for futuristic investors who are looking for a business with minimal barriers to entry.
Why You Should Start an App Development Business
The demand in the market is high, start-up costs are really low and the profit margins are unlimited especially if you are able to develop excellent apps for your clients. This is a perfect business to start as it can open up a lot of opportunities for you.
Apart from the fact that there is a steady rise in the number of mobile phone users, app development is the future. In the next few years, electronic gadgets like refrigerators, kitchen gadgets, home security devices and other basic electronic devices are expected to go smart. This means that most of these electronic gadgets that Americans use daily would have their own apps. You can make a lot of money from creating apps for the companies that manufacture these gadgets.
Another benefit of starting this business is that the overhead costs are relatively low. You don’t even need an office; you can meet with your clients in their own offices, a local café or any other decent meeting point. You can also start your app development business as a part-time business whether as a student or while working on another job.
Starting an App Development Business – Market Feasibility Research
- Demographics and Psychographics
It is important to know and understand who your audience is in the app development business. This would help you understand which services to offer and how to satisfy your clients.
According to a report by VentureBeat, 75% of mobile app users are female while 25% are male. Most of the app users are aged between 18 and 24 years as this age group dominates the market by 46%. 30% of users were found to be between 25 and 34 years old, 6% were aged 14-17, 12% were between the ages of 35 and 44, 2% between 45 and 54 while only 2% were aged over 55 years.
The estimated income of mobile app users in the United States were also revealed to be as follows- 10% earn below $25,000, 30% earn $25,000- $50,000, 40% earn $50,000-$70,000, 5% earn between $75,000 and $100,000 while only 15% earn over $100,000.
60% of users were found to be educated up to Grad school level, 30% were college graduates and 10% had no college education. The report also revealed that 45% of users have no kids, 35% have kids who are less than 6 years old, 13% have kids aged 6-11 years, while 7% have kids who are between 11 and 17 years old.
Another Product and Services Segmentation report by IBISWorld revealed that 11.1% of apps used in the United States are tools and productivity apps, 4.8% are lifestyle apps, 2.9% are social apps, 53.9% are game apps, 14.1% are entertainment apps and 13.2% make up for other category of apps.
List of Niche Ideas Within the United States App Development Industry
This is one of the businesses with an unending list of niche ideas that you can tap into. In fact, you can create apps for almost anything. Some popular niche ideas within the industry include:
- Games App
- Social Media Apps
- Communication Apps
- Online Media Streaming Apps
- Online Shopping Apps
- Developing Apps for local businesses
- Art and Design Apps
- Auto and Vehicle Apps
- Beauty, Fashion and Makeup Apps
- Books and Educational Apps
- Business, Personal Finance and Accounting Apps
- Dating Apps
- Events, food and drink Apps
- Health and Fitness Apps
- Homes and Lifestyle Apps
- Health Apps
- Parenting Apps
- Travel and Weather Apps
- Photo and Video Editing Apps
The Level of Competition in the App Development Industry
The app development industry is a new and growing one and it is only normal that there would be a lot of competition in the industry. According to a study by VisionMobile, there are over 2.9 million app developers in the world, maintaining more than 2 million apps. That is a whole lot of competition but app store revenue statistics revealed that revenues in the industry are over $60 billion every year. This means that even though there is a lot of competition in the industry, there is still a lot of money to be made.
The ability to come up with innovative app ideas is the secret ingredient that new entrants into the industry can use to gain competitive advantage. Everyone relies on ideas in this industry because most of those who have made it big were people who were able to come up with innovative and interesting app ideas with clever monetization strategies.
List of 20 Well Known Brands in the App Development Industry
There are a lot of top app development companies in the United States of America who have cleverly mastered the art of building and marketing award-winning and user-friendly apps. Some of the most popular ones include:
- Blue Fountain Media (New York, USA)
- ScienceSoft (Texas, USA)
- Blue Label Labs (New York, USA)
- Fueled (New York, USA)
- Code Brew Labs (New York, USA)
- Willow Tree Inc. (New York, USA)
- Open Xcell (New York, USA)
- Fuzz (New York, USA)
- Blue Whale Apps (Florida,USA)
- Dom and Tom (New York, USA)
- Appster (California, USA)
- 2CO Corporation (Nashua, USA)
- SWARM (New York, USA)
- Reinvently (California USA)
- Mojotech (Rhode Island, USA)
- Weez Labs Inc (California , USA)
- ArcTouch (California, USA)
- IntellectSoft (California, USA)
- Y Media Labs (California, USA)
- Citrubits (California, USA)
In 2012, the global app development industry was only worth $53billion US dollars, but in 2016, the figures had risen to $143 billion US dollars. The industry witnessed a powerful upheaval and it has become the fastest growing area in the entire mobile value chain. Mobile apps are gradually shaping the way Americans live and work.
In the United States alone, about 627,000 jobs have been created by the iOS app store and job growth in the android app development sub-sector of the market is believed to be around 110% between 2012 and 2016.
The industry continues to grow on a daily basis and there is no end in sight to this growth. Forrester Statistics published a report that revealed that the number of companies and businesses that consider mobile apps as a necessary catalyst for the growth of their businesses are increasing, this means that in the nearest future, it is expected that almost every business owner would need a mobile app for their businesses just the same way websites have become an important tool for business growth.
The number of Newspaper and Magazine publishers that are also expected to take the app development route are also expected to double up in the next few years as having an app for their publications is relatively cheaper than the production and overhead costs of maintaining a newspaper or magazine publication.
In order to adequately prepare for the future, new investors are advised to tap into current and future trends in the industry like cross-platform and cross-device app development, internet of Things (iOT) applications, enterprise app development, cloud computing and mobile security apps as these are expected to take over the industry in the nearest future.
Should You Start Your App Development Business From the Scratch or Buy an Existing Business or Franchise?
You don’t necessarily have to buy a franchise in this business but you can consider app flipping. This means that you can buy an existing app and then tweak it a little bit for onward sales or monetization. A number of big players in this industry are known for building their businesses on app flipping. This way, you can start your app development business even if you don’t know anything about writing code or creating apps.
If you have extensive knowledge of how to write codes and create apps, it is much more advisable to start your business from the scratch since the barriers to entry in the industry and startup costs are moderately low.
Potential Threats and Challenges of Starting a Mobile App Development Business
Challenges and threats are inevitable when entering into the app development industry. One of the greatest challenges is how to deal with an overcrowded market. New apps are created every day and it takes a lot of hard work and initiative to get your own app ahead of the rest and reach your target market.
Depending on the type of app you are trying to create, you may need between $2,000 and $200,000 to create your own app and developers find it challenging to raise the necessary funding for their businesses.
Marketing is also challenging because it is very easy for your app to get lost amongst the millions of apps in the market if you do not use the right strategies to market your business. You would also need a solid marketing strategy to get business owners to hire you to develop apps for their businesses.
Another challenge you may face is how to monetize your apps. Most app users prefer free apps over paid ones so you would need a clever monetization strategy to be able to profit from your business. The best way to deal with these challenges is to be adequately informed about them and then come up with a solid marketing plan for your mobile apps business.
In the later part of this article, you would find a number of smart marketing ideas that you can employ for your business.
Starting an App Development Business – Legal Requirements
There are some important legal considerations that could arise when trying to create a mobile app development business and the first ones are regarding the best legal structure for the business.
As a small starter, you can set up your business as a sole proprietorship as this is really cheap and the formalities are minimal but as your business grows, you may need limited liability protection especially from creditors and judgments. Setting up your business as a limited liability company would also make it easier for you to get investors for your business.
Insurance Policies Needed for App Development Business in the United States
App developers also have to deal with a lot of risks especially cyber security risks hence it is extremely important for you to have the necessary insurance protection for your business. Some of the basic insurance policies you may need for this business include:
- General Liability Insurance: This covers for legal bills and medical costs should a client decide to sue your business for a personal injury or loss sustained during the course of doing business with you.
- Errors and Omissions Insurance: Should a client decide to sue you for breach of contract or not keeping to your end of the business bargain, errors and omissions insurance would cover for the legal and liability costs.
- Cyber Liability Insurance: If one of the apps you created gets hacked and the client decides to hold you responsible, you can get sued for that and you may have to deal with a lot of legal bills as a result of that. Cyber liability insurance would help to take care of that.
- Commercial Property Insurance: This covers your business premises and properties against damages.
- Workers Compensation Insurance: Workers compensation insurance helps to cover medical expenses and other legal bills should any of your workers sustain injuries in the course of discharging their duties.
- Fidelity Bond: You would also need fidelity bond insurance. Should any of the coders working on a project decide to go rogue and use their knowledge to steal from a client’s business, fidelity bond insurance would cover for legal expenses and damages if the company decides to sue.
Intellectual Property Protection
You have to protect your designs, unpublished source codes, your graphics and the overall look and feel of your app. It is easy to get your ideas and inventions stolen in this line of business so ensure that you file for intellectual property protection. You should also have your employees including coders and freelancers sign non-disclosure agreements to protect your business secret.
Professional Certification Requirements
The most important skill you need in this business is software development skills and knowledge as well as adequate knowledge of programming. You also need to know how to use the various app development platforms.
There are a number of professional certification programs that can help you acquire some of the basic skills and knowledge that you need but it is not necessary for you to have a professional certification to start this business in the US.
Legal Documents Required to Start an App Development Business in the US
Some of the legal documents you would need for this business include:
- Business Plan
- Non-Disclosure Agreement
- Employment Agreement
- Memorandum of Understanding
- Business Registration and Incorporation Documents
- Tax compliance documents
- Copyright and Trademark Protection Documents
- App End User License Agreement
- Insurance Policy Documents
Financing Your App Development Business
Raising money for app development business is a challenge because most financial institutions might not be willing to invest in an app business without proof that you have customers who would be willing to purchase your app. If you are finding it challenging to raise the required funds for your app development business, you can consider any of the following funding options:
- Angel or Seed Funding: There are a category of investors who specialize in investing in viable business ideas or concepts. If you are able to showcase a prototype which would serve as proof that your business idea is viable, you can get them to invest in your app development business.
- App Contests: There are a number of sponsored contests that offer money to winners to fund their app development businesses. You can consider competing in such contests especially if you have a fantastic app idea capable of changing lives.
- Small Business Loans: If you are able to show proof that your app idea can bring about a positive change and you can back your business plan with extensive market research and due diligence reports, you may be able to get funding from financial institutions like SBA or Wells Fargo Business Line for your app development business.
- Bootstrapping: Another tough but viable way to raise money for your app development business is to commit some funds from your monthly earnings to a savings account for a number of months. If you are committed to the savings plan, you would be able to get all the funds you need for the business in no time.
Choosing a Suitable Location for Your App Development Business in the United States
There are no serious location requirements for this nature of business especially since it is a web-based business. You can locate your business anywhere but it helps if you can have easy access to business owners for easy marketing otherwise, you can start this business from your bedroom or college dormitory if you like.
Starting an App Development Business – Technical and Manpower Requirements
You don’t need a lot to start this business because as mentioned earlier, you can start this business from the comfort of your home. However, some of the basic tools you may need for setting up this business include facility rent and security deposits, computers with monitors, software licenses, desks, chairs, and internet subscriptions.
As for manpower requirements, you may need to hire coders, content developers, graphic artists, marketers and web security experts for the business. However, you can easily get freelancers to handle all of these services for you if you can’t afford to hire full time workers for the business as a small starter.
Starting an App Development Business – Marketing Plan
A lot of questions need to be answered when developing a marketing model for your app development business. Some of the questions that need to be answered include:
- How to get your app to rank tops in apps market so that it can be easily discovered
- How to ensure that your app is well monetized for profit
- How to find business owners who are willing to pay for creation of apps for their businesses
Some effective marketing strategies for your business include:
- Social Media Marketing: Regardless of the size of your mobile app development business, you need to make use of social media for brand awareness. It helps more people learn about your apps, app launching dates, reviews from other users and it also helps you find business owners to who would be willing to employ your services.
- Affiliate Marketers and Ad Networks: Another effective marketing strategy you can use for marketing your apps is to engage the services of freelancers and ad networks. They can effectively boost your ratings in app stores and increase the visibility of your apps so you can reach your target audience easily.
- Reward Loyal Users: You can retain your app users and get them to download new apps that you may create in the future when you offer them rewards for using your apps. This might be in the form of a service or doing things that would make them feel really special.
- Employ Marketing Officers: To reach business and private clients easily, it helps to engage the services of marketers or marketing companies.
The app development business industry in the US is a growing one that you can easily tap into. The overhead costs are comparatively low and the revenue and profit potentials are high. It is easily one of the best businesses anyone can start within the decade.