Hiring a Developer for Your Startup, Part II: How much should it cost?
This is part 2 of my series on hiring a developer. Interested in part 1 on sweat equity? Check it out!
You are ready to start building! You have done the work. You have the pilot customers. You have the research.
You. Are. Ready!
It is an exciting time, but come to think of it you don’t know anything about building software except that pros cost money. There are a million articles on how/where to get funded (and where not to), but a less commonly answered question is how much do you need to make your idea a reality and, more importantly, why does it cost that much?
So let’s get this out of the way.
After building and working with over 20 startups in the last 6+ years, $250,000 is the magic number that you need to have in mind when building a startup from scratch.
Of course there are a million variables here, but the biggest are:
- Where you live.
- How good/mature the development community is.
- How grand your idea is.
With all that said, $250,000 is a good starting point for most ideas. You don’t need to have all this at the start, but you definitely need a plan on how you will get it before you write a single line of code.
Phase I: Your best guess
Cost: $40,000 to $75,000
You, like all aspiring business owners have an idea that will change the world, but it is just that… an idea. No matter how much customer research you do at this early stage you can’t know what people truly want.
Prospective customers will tell you all sorts of things during an interview, but you can only learn what people really want and, more importantly, are willing to pay for by putting something out there. That is what this phase is all about.
This is not the time for bells and whistles. Your only goal is to get your core idea out there so that it can be weighed, judged, and measured by your customers. You should be focusing on your UX, your design (yes, those are two different things), and the bare minimum that you need to build to get your idea across to your customers.
Keep it tight. Keep it simple. Keep it focused on what will make you money.
With that said, this phase has nothing to do with actually earning money. You should always be clear that your idea will cost money, but you will very likely give it away at this point (think Beta) so that you can successfully complete the next phase.
As a bonus, here are a few features that all founders should include in this phase:
- User tracking (i.e. mixpanel): You need to know what your users are doing.
- Logging: This is an extension of user tracking. Logging is more “behind the scenes” but it is critical to know what is going on.
- User support (i.e. Freshdesk or Zendesk): Your users need an easy way to get in touch and give feedback (and complain).
Phase II: Quorum
Cost: $30,000 to $50,000
Once your idea is out there in a basic state, you need some users. Specifically you need a quorum of users that can test out your world-changing ideas and put them to use.
This phase is all about marketing and getting the word out there to find enough users to validate your idea and see what they love, what they hate, and what you need to build next to make some money. Please keep in mind that the goal here isn’t to attract the world. That will come later. For now you want a group of dedicated users. Depending on your idea this could be a few dozen to around a thousand users.
Outside of marketing, this phase also includes a lot of random costs that you have when starting any new venture: legal, government fees, and basic branding.
A few important notes
One: This phase should be done in parallel to phase one.
A common misconception with new founders is that they have to wait for development to be done before they can start marketing and getting the word out. This couldn’t be further from the truth. While the devs are sweating you should be hustling… hard.
Talk to the pilot customers you spoke to before you started development and get them on board. Work with your marketing team to get the branding locked down ASAP and come up with a plan to rush out of the gate when dev is completed.
Two: This phase has nothing to do with development.
It sounds obvious, but your dev team should not be doing your marketing. Very, very few teams can do both because they are completely different disciplines. I say this because some dev teams want to pretend that they do marketing. They don’t, or at least they don’t do it well.
Three: You shouldn’t do your own marketing.
Another common thing that new founders think is that they can do their own marketing. Lean forward and listen really carefully: You can’t.
Marketing is just as difficult as development, and unless you have a background in the field, you should hire a professional. Find a local firm that works with startups and pay them what they are worth. It will save you a ton of headaches and your idea will benefit greatly in the long run.
Phase III: Building with Data
Cost: $50,000 to $75,000
At this point you have a live app and you have some users actually using the platform. More importantly you have data. In phase one you were guessing what your users want. Now you know because you can see which features they are actually using and you have been reaching out to your quorum to get as much feedback as possible.
This phase is all about taking that data and building those features, tweaks, and improvements that your customers are clamoring for. This is also the phase when you are preparing to charge your users for the privilege of using your amazing idea.
Things to think about
- Make sure you have payments locked down, approved and ready to go. A lot of startups just use Stripe and think they are done, but if you don’t read the fine print you will learn the hard way that if you are doing anything outside of standard subscriptions and e-commerce they can kick you off the platform and leave you in a really bad situation.
- Don’t try to build every single feature that every user asks for. Again, this sounds obvious, but it is very common for founders to run down some crazy rabbit holes in order to please a single user. Focus your funds on features that are repeatedly asked for.
Phase IV: Get the word OUT
Cost: $80,000 to $100,000
Your app is rock solid. It is loaded with data-verified features. It is ready to make you some money. While phase two is kind of a soft launch that you tip-toed out into the market, now is the time to blow the doors off.
This is all about marketing and getting people signed up. Think influencers, social media, ads, and live events. This is going to cost some real money, but you HAVE to get the word out to your customers and there are no shortcuts here.
Welcome to the Slog
So your app is LIVE and you are getting the word out. It is an exciting time. Within a few weeks the excitement will die down and the slog will begin.
The slog is the period of time that almost all startups go through. It is the hustle, the grind, and the frustration that comes when you know you have something awesome to show the world but no one cares.
This is also when most startups die. It is easy to be excited and wake up every morning all enthusiastic during the building phase. It is much harder to stay motivated when you can’t find new users and those that you have only seem to complain.
I say all of this to let you know that you are not alone and that you can get through this. If all of this scares you, then it is probably worth a long, hard look at your idea to see if you really want to dedicate the next few years of your life to it. The slog is real. The slog sucks, but if you keep pushing you will find the other side.
Or…you will learn what to do next time.