The app market is booming, with $420.80 billion in revenue earned in 2022. As apps continue their meteoric growth, more and more entrepreneurs are looking to capitalize on this surging industry. With a compound annual growth rate (CAGR) of 8.83% from 2022 to 2028, it’s a great time for newcomers to get involved.
We’ll cover key topics like applying for an EIN, sourcing materials, developing a business plan through market research, marketing fundamentals, and obtaining appropriate business insurance. Whether you’re a coding pro or a business novice, you’ll learn pragmatic insights for getting your app off the ground.
1. Conduct App Market Research
Market research is essential to starting a new mobile app development business. Research offers insight into growing trends in the industry, your target market, and local market saturation. It may even provide a new app idea or provide tips on app store optimization.
Some details you’ll learn through market research for mobile apps include:
- Consumers rely on apps for everything from socializing to working, banking, ordering food, hailing rides, and more. Apps are used in a wide range of applications, from webcam, graphics card, and phone apps, to drone apps, and even apps for crypto mining.
- The top apps like TikTok, YouTube, and Facebook count users in the billions.
- The two dominant app stores owned by Apple and Google take a 30% cut of most in-app transactions.
- Once the hard work of development and marketing is done, apps enjoy strong profit margins and recurring revenues at scale.
- Barriers to entry in the app market have also lowered considerably in recent years thanks to no-code development platforms like AppMaster.
- New app startups can also leverage a burgeoning gig economy of specialized freelancers offering affordable development, design, and marketing services.
The iOS apps market’s spectacular growth, vast size, high consumer engagement, and increasing accessibility for startups converge to offer a tremendously promising opportunity for new businesses. The runway for continued expansion in users and revenues makes now an ideal time to capitalize.
2. Analyze the Competition
Thorough competitive analysis is crucial when launching an app startup. A key first step is identifying direct competitors, and apps solving the same core consumer needs. The Apple App Store and Google Play Store allow browsing by app category, like Android apps and iOS apps. This reveals category leaders.
Download competitor apps to understand their functionality, UI/UX, monetization strategy, and user reviews/ratings. Google searching the app name plus “number of downloads” or “revenue” may uncover usage stats from industry reports.
Also, research apps addressing peripheral needs that could expand into your target area. And explore whether non-app companies like brick-and-mortar might adapt their online presence to compete with an app solving similar needs.
With your competitive set identified, benchmark across many factors:
- Core features and functionality
- Technology stack and integration capabilities
- Privacy policies and data security
- Business model and pricing
- Marketing and user acquisition strategies
- Funding raised and investor backing
- Social media and community engagement
- App Store rating and reviews
This analysis illuminates product gaps, areas to differentiate, and competitive weaknesses to exploit. It also informs realistic assumptions when modeling the addressable market and financial projections. Ongoing tracking of competitor app store ratings, social media metrics, and new feature releases is prudent after launch too.
3. Costs to Start an App Business
Launching your own app startup entails both upfront investments and recurring overhead. Carefully projecting these costs is imperative for securing adequate funding and mapping financial milestones.
- The most variable and significant start-up cost is developing the app itself. Simple apps with basic functionality can be built for as little as $50,000.
- The app’s design complexity, number of platforms (iOS, Android, web), and integration need primarily dictate the cost. Using no-code tools like AppMaster can expedite development and reduce coding time and expenses.
- Formally registering your app business as an LLC or corporation incurs state filing fees from $500 to $2,000. Trademarking your brand and securing other intellectual property protections typically costs another $1,500 to $3,000.
- Cloud hosting and servers run $100 to $500 per month. Once built, apps require backend hosting on servers or cloud platforms to deliver content, process requests, and store/access data.
- Amazon Web Services, Microsoft Azure, and Google Cloud offer flexible, scalable solutions at monthly rates correlated to the computing resources used. Most early-stage apps suffice with $100 to $300/month plans.
- Marketing costs run between $5,000 to $25,000. User acquisition requires significant marketing spending, especially for consumer apps chasing volume.
- Paid channels like app store ads and social media promotions offer the most predictable ROI. Allot at least $5,000 to $25,000 for pre-launch and post-launch campaigns while organic efforts are established.
- Your initial fundraising round should cover administrative needs, vendor payments, staff payroll, and brand building until the app generates profitability. Project working capital needs at $15,000 to $100,000.
- Bootstrapping an app startup realistically requires around $75,000 to $600,000 in upfront capital and financing.
Once launched, apps accrue monthly overhead expenses including:
- Server and cloud costs ($100 to $500)
- Software and SaaS subscriptions ($50 to $500 per service)
- Staff payroll ($2,000 to $20,000+)
- Marketing and advertising ($500 to $10,000)
- General admin, legal, and accounting ($500 to $2,000)
Careful financial planning and cost control keep overheads manageable as the business scales. Apps possessing viral potential to amass huge user bases can achieve profitability at under a $1 million valuation. But like any startup, patience and long runways are prudent when striving for transformative outcomes.
4. Form a Legal Business Entity
When founding an app business, savvy entrepreneurs select appropriate legal structures to limit personal liability and support scalable growth. The four main options for a successful app development business include:
Sole proprietorships offer the easiest route to registering an app company. You bypass bureaucratic filings and operate under your identity. However, this exposes your house, cars, and savings to app lawsuit risks without corporate liability shields. Retaining full ownership control and income offsets heightened financial dangers. Come tax season, your personal and business finances co-mingle as well.
Forming an app partnership with a co-founder can ease launch stresses through shared execution. You still assume unlimited liability though. Disagreements over vision or unequal work levels breed resentment over time too. The partnership must also file taxes separately from personal returns.
Limited Liability Company (LLC)
Establishing an LLC (Limited Liability Company) limits an app developer’s fiscal accountability only to their invested capital, not personal assets. Having LLC status necessitates drafting an operating agreement outlining ownership percentages and responsibilities. Taxes get handled similarly to partnerships through pass-through filings.
App corporations formalize companies as distinct legal entities shielded from individual obligations. Incorporating enables issuing stock shares to founders, investors, and employees while capping ownership liabilities. Corporations do however incur closer governmental oversight and stricter record-keeping standards.
5. Register Your Business For Taxes
To start an app development company, you must obtain an Employer Identification Number (EIN) when founding any app startup formally transacting business. The EIN serves as a unique ID number for your company used when opening business bank accounts, paying taxes, and hiring employees.
Acquiring an EIN is easy and free through the IRS website. The entire application takes under 10 minutes to complete. Simply navigate to IRS Assistant and click the “Apply Online Now” button. This launches a short wizard that requests basic information about your business structure, ownership, and contact details.
No paperwork gets mailed – the EIN gets issued on the spot upon submitting the form digitally. You can then access and print it any time from your IRS online account. Having an EIN eliminates using sensitive personal data like Social Security numbers for company banking and tax purposes.
Beyond applying for an EIN federally, app founders must register with state revenue departments to collect/remit sales tax from customers. Sales tax permits allow legally charging sales tax on paid apps, in-app purchases, and subscriptions sold to users located in assessed states. Permit fees are typically less than $100.
The Streamlined Sales Tax System helps app sellers easily handle tax computations for all member states. Alternatively, sellers can integrate a tax engine like TaxJar to automate calculations. Failing to adhere to sales tax compliance exposes apps to substantial audit risks and penalties.
6. Setup Your Accounting
Rigorous financial tracking and reporting make or break app startups. Without disciplined accounting, budget overruns materialize, taxes fall into arrears and audits trigger huge fines. Conversely, dialed-in processes afford keen financial visibility to optimize operations.
Open a Buisness Bank Account
The foremost priority is segregating personal and business finances into discrete bank accounts. Commingling opens the door to IRS red flags down the road. Once you have a dedicated business checking account, integrate accounting software to automatically log transactions. This powers cash flow analysis to guide spending decisions.
QuickBooks syncs with bank/credit card accounts to import and categorize transactions based on intelligent algorithms. You classify remaining items across income, cost of goods sold, operating expenses, payroll, etc. The software then generates financial statements like profit/loss reports and balance sheets reflecting the true financial health of an app business.
Hire an Accountant
While apps automate grunt work, enlisting an accountant provides expert advice. A good accountant handles bookkeeping, payroll, quarterly taxes, and annual financial statement preparation. Expect to invest around $200 per month for these common services up to tens of thousands annually for specialized firms catering to high-growth startups.
7. Obtain Licenses and Permits
Before launching, app startups must ensure full compliance with all relevant licensing and permits. Skirting registration requirements risks painful fines erasing profitability. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.
Foremost, legally building apps mandates owning or licensing copyrights and trademarks associated with the software, branding, and content. US copyrights protect creative intellectual property like code, visuals, sounds, text, etc.
Registration isn’t compulsory but does enable the pursuit of infringement claims. Trademarks distinctly identify brands – both the app name itself and associated logos. Securing trademarks also helps contest potential imposters.
Selling digital goods like premium app features, subscriptions or in-app currencies obligates sales tax registration. States levy sales tax on all taxable goods sold to in-state residents.
Transaction processing also depends on the app stores themselves. Apple and Google established extensive guidelines around appropriate app content, functionality, and metadata that publishers must accept. Rejection risks wasted development efforts if violations occur. Know platform policies thoroughly.
8. Get Business Insurance
Business insurance shields app companies from financial ruin when unforeseen disasters strike. Without adequate coverage, minor incidents balloon into crushing liabilities decimating startups.
Consider if hackers penetrated lax security infrastructure and stole sensitive user data. Resulting class action lawsuits could yield massive settlements absent data breach insurance. Or envision critical cloud servers hosting apps crashing from fires, floods, or electrical surges.
Lacking contingent business interruption insurance to cover profit losses until restored would sink cash reserves fast. Maybe key development staff get injured and can’t work for months. Missing disability coverage transfers their salary burden fully onto struggling founders.
Each scenario depicts how overlooked insurance gaps expose app startups to existential threats. Comprehensive policies mitigate the impacts when turmoil erupts. Common startup coverage options include general liability, cyber liability, errors & omissions, business property, and key person insurance.
Securing protection begins by taking inventory of potential risks given your operations. Next, approach reputable providers like The Hartford for customized rate quotes tailored to your needs. Expect monthly premiums ranging from a hundred to a few thousand dollars based on revenue size and desired coverage ceilings.
9. Create an Office Space
While app development and business happen predominantly online, securing physical office space still benefits growth. Offices allow convening staff for strategy sessions, hosting pitch meetings with investors, providing quiet workspace, and reinforcing branding with professional settings.
Initially working from home offers convenience and savings. But distractions hamper productivity. And appearing unestablished to partners risks credibility. Be sure to investigate tax advantages. Home offices can provide up to $1,500 in tax rebates annually.
Coworking spaces like WeWork provide stylish, flexible offices for fledgling ventures. Open layouts promote collaborating with peer entrepreneurs and networking while move-in-ready offices skip buildout costs. Expect all-inclusive monthly rates from $300 to $500 per desk. The energizing community fuels innovation although privacy suffers at times.
As companies scale, dedicated commercial offices better suit sensitive planning meetings and expanding teams. Blank slate warehouses get customized with the exact desired layouts although renovations hit five to six figures. Leasing full-floor plates in high-rise buildings provides panoramic views and prestige but requires long-term commitments. Class A spaces in major metros start around $60 per square foot.
10. Source Your Equipment
App businesses maintain light physical equipment needs with most infrastructural elements hosted remotely through cloud platforms. But technology and furnishings still enable smooth operations. Savvy founders access deals sourcing lightly used staples.
Buying new computers, phones, servers, and office furniture at full retail proves necessary at times but strains bootstrap budgets. Prioritizing certified refurbished or open-box items combines sizable discounts with intact warranties from retailers like Best Buy.
More affordable still, buying used equipment through Craigslist and Facebook Marketplace risks product conditions and lack of protection plans. But dramatic savings over 50 to 80 percent retail makes the trade-off worthwhile for most non-mission critical items. Perform due diligence inspecting products beforehand and factor in potential replacement costs sooner.
Rent-to-own stores like Rent-A-Center permit obtaining premium equipment like high-spec computers for small monthly payments. While paying more over time, flexible lease terms allow upgrading gear strategically while preserving capital for urgent projects.
Lastly leasing via vendors like Dell Financial Services supplies state-of-the-art products through affordable monthly payments backed by warranties and support. Avoiding large upfront payouts benefits cash flow with only modest premiums over outright purchases long-term.
11. Establish Your Brand Assets
Distinct branding sets thriving apps apart from failing imitators. Investing in professional assets lends startups an aura of trust while conveying competence to users, investors, and partners.
Get a Business Phone Number
Central to branding is securing a memorable business phone line via providers like RingCentral. Call routing, voicemail transcriptions and unlimited calling empower staff connectivity. Number portability also aids seamless growth transitions later.
Design a Logo
An iconic, meaningful logo similarly ignites emotional connections with audiences. Looka‘s AI logo maker synthesizes inspiring designs matched to your vision within minutes. Vector files scale crisply on devices and collateral. Own all rights perpetually.
Print Business Cards
With brand elements defined, translating them across touchpoints through cohesive business cards, packaging, signage and swag from Vistaprint promotes retention. Expect starter kits from $50. Strategically sharing branded items also serves passive marketing efforts.
Get a Domain Name
Next, solidify digital turf by registering exact match domain names with Namecheap. Aim for .coms but consider alternatives like .io and .app to reinforce app positioning if ideal URLs get claimed already.
Design a Website
Creating a polished website then spotlights professionalism while demonstrating credibility. Using Wix‘s drag-and-drop editor, novices craft gorgeous pages and e-commerce stores affordably. But for advanced custom designs, Fiverr freelancers provide incredible value.
12. Join Associations and Groups
Beyond digital domains, real-world networking unlocks growth secrets for app founders through affiliations with supportive local communities. Don’t isolate – immerse in ecosystems rallying behind your vision.
Local tech associations like The App Association provide forums to mingle with fellow innovators. Conferences, mentor hours, and socials foster connections while seminars educate on overcoming shared hurdles.
Meetup surfaces niche gatherings happening in your metro via localized search. Discover app marketing hack nights, coding camps, startup founder workshops, and more wherever you call home. Consider launching your own Meetup group later to give back.
Industry-specific Facebook groups like Web and APP Developers and Android App Developers unite global wisdom across social media. Gain traction tips, development lifecycles, funding tactics, and technical guidance from thousands of members 24/7.
13. How to Market an App Business
Marketing represents the lifeblood flowing through thriving app businesses. Without active user acquisition efforts, even the most ingenious products fade into obscurity. Approach marketing as a gradual process – first catalyzing organic growth through existing networks before investing in broad paid channels.
Tap friends, family, and colleagues to kickstart critical mass. Offer exclusive early access or discounts in return for user feedback. Craft referral programs awarding account credits or swag for sharing with new sign-ups. People trust personal recommendations, this sentiment sparks viral wildfires when the experience delights.
Digital channels then provide targeted exposure to wider audiences. Consider:
- Google Ads targeting specific keywords and intent signals relevant to your app’s utility
- Facebook/Instagram ads focused on lookalike audiences mirroring early adopters
- Guest posting on niche blogs educating potential users on addressing needs
- Launching SEO-optimized content and videos answering common app questions
- Leveraging influencer campaigns on TikTok, Twitch, and YouTube to engage Gen Z
- Optimizing conversion funnels across the entire customer journey
- Retargeting visitors who browsed but didn’t convert through digital ads
Traditional options like print, radio, and TV ads still penetrate some demographics albeit less cost-effectively. Carefully test:
- Local newspaper and magazine ads in metros matching customer sweet spots
- Terrestrial or internet radio spots on stations aligned with listener psychographics
- Targeted direct mailing campaigns to neighborhoods heavy on customer archetypes
- Local TV commercials around shows indexing high with buyer personas
- Billboards, guerilla marketing, classifieds, and the Yellow Pages remain viable at times
Pulling multiple marketing levers simultaneously combines to drive exponential app adoption fueled by word-of-mouth advocacy. Market deliberately – survey efficacy frequently and double down on what works. With lean budgets, efficiencies must prevail. Let data guide marketing optimization always.
14. Focus on the Customer
Customer service represents the human touch sealing app loyalty beyond digital interfaces. While flawless UX provides baseline satisfaction through self-service convenience, dedicated support conveys genuine care for user needs on an interpersonal level.
Consider an app crash erasing important project files with a looming deadline. Or envision personalized recommendations mysteriously not registering despite repeated use. Frustrations peak rapidly – will venting users warn circles against adopting?
Now imagine those same fiery users getting connected directly to empathetic support staff within minutes. Real-time chat or screen share sessions quickly diagnose issues. Perhaps discounts get extended on premium versions as a goodwill gesture.
Not only do crises abate through helpful resolutions, but lasting positive impressions override temporary pain points. Users freely dispense praise for the app and team to professional networks when feeling valued.
Savvy startups invest heavily in customer service infrastructure to scale support in pace with growth. Besides maximizing satisfaction, analytics reveal common app problems to address systematically. Talkdesk and Zendesk lend proven frameworks minimizing wait times and connecting context between issues.