There’s an app for everything, or so they say. Some complement a service, like online banking apps, while others are the foundation of a company’s business.
With the sector predicted to be worth $366.34 billion in 2027, it’s no wonder there are always companies looking to commission their own apps.
Software development businesses with technical knowledge of mobile platforms are perfectly suited to benefit from the market, then – but it’s important to nail down the basics of running and growing a successful business first.
However confident you are with code, if you haven’t got your cashflow under control, or fail to comply with HMRC regulations, you’ll quickly run out of steam.
This blog is designed to help you avoid the pitfalls.
Company structure
New business owners often take on a lot of the work by themselves in the early days of the company.
Creative businesses are especially likely to start out this way because it’s usually the joy of making something new that inspires people to start a business – not the thrill of administering payroll or doing bookkeeping. (That’s our turf.)
That one-person approach is fine if you possess the know-how and can handle the volume of work. But it can hamper growth. Taking on a team of specialists will help get each client’s app down the processing line faster, and allow you to take on more work.
If you’re already developing apps, you don’t need me to tell you what that team looks like, but if this is an area you’re looking to move into with your agency or studio, here’s a quick overview based on what I’ve learned from my clients in this sector.
First, you will need a designer with strong creative skills to build the model of your app, focusing on user interface and user experience (UX). They also work with specialist tools to devise app navigation mechanics and create wireframes.
A designer’s role can be shared by a team consisting of a strategist, navigation planner, visual designer and content planner if you’re looking to streamline this part of the process.
You should then have the project be passed to your Android and/or iOS development team who use programmes like Java and Xcode to turn the app concept into a real application.
Quality assurance engineers can then test the first (beta) version of the app to verify how it functions and whether everything actually works as intended. They should also certify the app has been built according to your client’s specifications.
Weaving the process together should be a project manager who ensures communication is maintained between teams, deadlines are met and the client’s needs are being met at each stage of the project.
People sometimes skimp on project management – can’t developers organise their own work? But it’s amazing how much more efficiently things operate with someone dedicated to this task.
A hard-driving sales and marketing team, along with a strong online presence, is also essential. This is how you’ll find new clients.
Pricing models
Next comes the issue of payment for your services. There are lots of different ways to approach this.
First, you could charge an agency-wide hourly rate, which is the simplest pricing model, especially useful for startup app development companies.
Beware, however, that this model has a built-in tension: you’ve got a strong incentive to spend more time on each project, while your client has an equally strong motive to quibble over every charge – and to push for things to move more quickly.
It can also lead clients to judge you against competitors – and not always fairly. “I’ve seen this bloke online who charges £75 an hour,” they might say, not taking into account the quality of the work or skill of the development team.
Alternatively, you could charge a fixed-fee payable on completion of a project – perfect for more experienced developers who can accurately predict how long it will take to finish a project, or newer ones with a less busy schedule.
This is certainly a good way for smaller app development companies to grow, as it lends itself towards making stronger relationships with clients, who then may refer others to you.
Finally, there is also value-based pricing, which aligns the goals of your company and of your clients. Payment is based on the end product and its effectiveness, rather than time or any pre-agreed limits to the project.
In other words, you’re selling results. For example, if the app sells more units through app stores, or converts more users from free to paid users, you might get a bigger payday in the end.
This is definitely an interesting model for more established companies to consider as it relies on a proven track record and trust between agency and client.
Tax relief
R&D tax relief is perhaps the obvious tax relief that will be relevant to an app development business. As per HMRC, this relates to projects that:
- looked for an advance in science and technology
- had to overcome uncertainty
- tried to overcome this uncertainty
- could not be easily worked out by a professional in the field.
Any new advance that falls with the R&D tax relief qualifications must also be released into the public domain to qualify.
Contrary to what some people will tell you, software can and does qualify for R&D relief so there’s absolutely no reason app developers couldn’t take advantage of this scheme.
A well-planned tax strategy is key to developing any business further. Talk to us to refine yours.