How to Calculate Custom Software Development Cost

Dallin Nelson

March 10, 2021 · 5 minutes

Wondering about how to calculate custom software development cost? Building an app can be a pricey undertaking, so the best way to plan for your upcoming expense is to have a ballpark idea of how much you will spend.

But how are these costs calculated? Every developer is different, and each project has unique requirements that affect timelines and hours billed. Is there any way to reliably plan a budget for a project before starting?

While pricing may not be an exact science, there are a few guidelines that you may find helpful. Let’s talk more about how to calculate custom software development costs.

Nail Down the Details First

A group of developers scoping out a project timelineThe most expensive line item on your project will be the changes you make throughout the course of development. Don’t worry—this is normal—but it’s important to recognize that any increased costs will probably be caused by you, not your developer.

In a perfect world, you would have everything nailed down before signing any contracts. Everything from determining scope to a consistent color scheme would be perfectly laid out before your developer lifts a finger, but that probably won’t happen.

Still, your best bet at keeping costs manageable and predictable is to have a thorough plan in place. This means defining as much of your app planned out and ready to go as possible.

Costs You Can Expect

Developing custom software takes a lot more than just sharing your idea with a developer and waiting for them to bring it to life. The phases of software development include planning, programming, testing, and launch, with plenty of other hurdles to clear along the way.

By hiring an experienced developer, you can feel more confident about the accuracy of their plan for your project. If you work with a younger team, it’s up to you to set clear expectations.

The cost of your software is measured in hours spent developing it. You can be billed anywhere between $50-200 an hour. Since only the simplest apps require less than 40-50 hours of work, plan to spend at least $7,500-10,000 to launch your software.

Could your software cost less? Sure, but it’s all in how well you plan for the work ahead.

Specialists Required for Your Project

Each team member brings important skills to the table, and those skills cost money to employ. Successful software is the perfect storm of clear expectations, smart professionals, and teamwork. Without every piece in place, there will be problems.

Why do we make a point of mentioning this? Because some people try to cut costs by reducing staff or skipping important tasks. Don’t be one of those people.

For example, because quality assurance developers are tasked with testing software for errors, project bottlenecks are often caused by their good work. When they do their job right, more errors will be detected—not fewer.

This can be upsetting for project managers, and while it’s natural to be mortified at project dollars being spent on roadblocks, don’t make the mistake of skipping the crucial task of testing.

QA testers aren’t the only unsung heroes of software development. Back-end programmers spend dozens of hours creating and connecting database tables that, if left out of your software, would cause all kinds of errors.

User experience (UX/UI) designers also have an important role in ensuring the usability of your software. “Isn’t that something I can just do myself?” Yes, but it would take you months longer and cost thousands upon thousands in revisions. Experienced professionals cost more upfront, but they spare you from making rookie mistakes. That’s worth the money.

To send the point home, software development requires personnel whose importance may not make sense to you right away. Don’t mistake this for intuition—you’re not being fleeced. Just stick to the process and see things through.

Define What Is Acceptable to You

A group of coders at a tableNeither you nor your developer will be happy without clear expectations. You won’t be happy because the software will turn out differently than you want, and the developer will be frustrated that you were unsatisfied with their work.

When calculating custom software development costs, knowing acceptability criteria is important. What do you expect to have by the time the software launches? Which of those criteria is negotiable? Which aren’t?

With this info in hand, you and your developer can have a frank conversation about realistic deadlines and costs. Experienced developers will have a better idea of how long tasks will take, giving you a clearer picture of what costs to expect.

Front-end and back-end development are the most time-consuming tasks. Expect 20 hours billed at the bare minimum, probably at around $150 per hour ($3,000 total).

Next comes testing, which usually takes another 10 hours. Figure another 3-5 hours or so for fixes and revisions, too.

Hopefully, once the software is tested and ready for launch, you are happy with the result. Making any changes at this point—especially big ones—can drastically increase the overall cost. If at all possible, avoid making changes this late in the game.

Paying for a Successful Launch

Two women sitting at a deskCongrats! Your software is ready to spread its wings and leave the nest. If the software is for internal use only, you’re just about finished. However, if it’s an app meant for the public, you need a marketing plan that includes an advertising budget.

An app is an expensive investment, and the best way to get your money back is for lots of people to download it. For that to happen, you need advertising.

As you can imagine, marketing and advertising can be as expensive as you want. This is why it’s always preferable to work with veterans of software development, especially if you’ve never launched software before.

Experienced software studios will have a marketing plan in place as part of your contract, or at least they should. This will include some cursory research about who’s buying your software and how to best reach them.

With some buyer personas, you can fund your advertising account and start a campaign. Obviously, the more you spend on ads, the more response there will be to your software. Good marketing keeps you from needlessly dumping money on ad channels that won’t yield as much of a benefit.

Plan to spend anywhere from $500-5,000 a month on ads, and launch your campaign as soon as possible. Don’t worry about flashy graphics or high-tech messaging—just settle on a functional slogan and stay consistent. Consistency is the most effective ad campaign.

Spend Where It Counts

If there’s one takeaway from this blog, it should be to spend money purposefully. You won’t have to nickel and dime your way to a launch if you pay for the right personnel and services.

Do whatever you can to flesh out your idea, then bring it to a developer who’s experienced in building the type of software you want.

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About Dallin Nelson

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