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Choosing a business model

The App Store empowers you to scale your app distribution worldwide using a variety of business models. The right business model for your app balances your goals with your target market’s expectations. Choosing your business model before developing your app can inform your app design decisions for a cohesive user experience.

With free models, users don’t pay to download or use your app. Removing the barrier of price increases the likelihood that users in your target market will download and try your app, which can help increase awareness and expand your user base. If you’re looking to grow your brand or attract a large user base, consider offering your app for free.

Free without monetization. Your app doesn’t offer in-app purchases or the ability to buy physical goods or services within the app, and doesn’t display advertisements. You don’t earn any revenue from your app.

Free with physical goods and services. Users can purchase physical goods and services — such as clothing or food — within your app or order rides from transportation services. You earn revenue from these sales.

Free with display advertising. Display advertisements are part of the app experience and you earn revenue when presenting them. Make sure that all display advertisements in your app are appropriate and relevant to your target market, as low-quality, obtrusive, or inappropriate advertising reduces engagement and retention.

Your app and any third-party SDKs you use to help target display advertising or measure advertising efficacy need to follow the Data Use and Sharing and the Advertising sections of the App Store Review Guidelines.

Reader. Users purchase or subscribe to content — such as magazines, newspapers, books, audio, music, or video — outside of your app and enjoy access to that content within your app. You generate revenue outside of the app. For more information, see the “Reader” Apps section of the App Store Review Guidelines.

With freemium models, users pay nothing to download your app and are offered optional in-app purchases for premium features, additional content, subscriptions, or digital goods. Freemium apps are accessible to all users, regardless of whether or not they choose to spend, and offer the option to pay to enhance or customize the experience. You earn revenue from the sales of in-app purchases within your app. Successful freemium apps operate as services that are continually updated to attract and retain users. You can offer multiple types of in-app purchases, including subscriptions.

In-app purchase types

Consumable. Users can purchase different types of consumables, such as lives or gems in a game, to further their progress through an app. Consumable in-app purchases are depleted as they’re used, and can be purchased again.

Non-consumable. Users can purchase non-consumable, premium features within an app. Non-consumables are purchased once and do not expire, such as additional filters in a photo app. Apple can host content associated with your non-consumable in-app purchases.

Auto-renewable subscriptions. Users can purchase access to services or periodically updated content, such as monthly access to cloud storage or a weekly subscription to a magazine. Users are charged on a recurring basis until they decide to cancel. Learn more about subscriptions.

Non-renewing subscriptions. Users can purchase access to services or content for a limited duration, such as a season pass to streaming content. This type of subscription does not renew automatically, so users need to renew each time.

If you wish, you can allow users to access content or services across multiple Apple devices, as well as other platforms. If you offer any multiplatform functionality, be sure any purchasable items or services outside of the app are also available as in-app purchases within your app. For more information, see the Multiplatform Services section of the App Store Review Guidelines.

Learn about different freemium experiences

In the paid model, users pay once to download your app and use all of its functionality. There are no additional charges or in-app purchases. You earn revenue from the sales of your app. This model resonates with users who prefer to pay once to get the full experience. Because the cost to download might make users consider the app’s value more carefully, successful paid apps are often positioned as premium experiences through outstanding design, functionality, and marketing.

In this combination of the paid and freemium models, users pay to download your app and have the option to buy additional features, content, or services through in-app purchases if they want to engage more deeply. It offers the possibility of lowering the app’s download price while using in-app purchases for ongoing monetization. Successful paymium apps offer premium design, functionality, and content, as well as advanced features intended to complement the experience.

As with paid apps, the cost to download might make users consider the app’s value more carefully. Set expectations about what users get when they pay up front and what they’ll get if they purchase optional enhancements. Keep in mind that creating in-app purchases for features that are required to use the app can cause a negative experience and may affect your sales and retention.

App Store Small Business Program

The App Store Small Business Program is designed to accelerate innovation and help propel your small business forward with the next generation of groundbreaking apps on the App Store. It features a reduced commission rate of 15% on paid apps and in-app purchases, so you can invest more resources into your business to continue building quality apps that customers love.

Learn about the program

How to Write a Mobile App Business Plan + Free Template

Male and female entrepreneur sitting at work station comparing specs and writing code as part of their mobile app development business.

Anthony St. Clair

11 min. read

Updated February 7, 2024

Free Download:  Sample Mobile App Development Business Plan Template

When Apple released the first iPhone in 2008, it also launched its App Store—with about 500 apps. Nowadays, the number of apps on the Apple App Store and the Google Play Store totals about 5 million. If apps were people, they’d outnumber the population of Los Angeles.

Sure, the “gold rush” days of app development are long behind us, but building apps remains a solid way to bring useful or entertaining services to market. An app can also be part of a narrow or broader business strategy.

But with so much competition, building a profitable, successful app takes more than just an idea and a team of mobile app developers. You need a business plan to help guide your vision and implementation. This article will cover the steps to create your mobile app business plan, along with some tips to run it successfully. 

Need more guidance? Download our free mobile app development business plan for a full business plan outline that you can use to inspire your own plan.

  • How to write a business plan for a mobile app

A business plan can be as short or extensive as you need it to be, and not a page more. In fact, you could launch a successful business based on even a one-page plan for your app development firm.

Writing a business plan for your mobile app business comes down to thinking through where you are with your app idea, what you want to accomplish, and how you think you will get there. A good business plan gives you both a starting point and a road map, but you can always review it and update it as you go.

At its heart, that’s all your app business plan needs to do.

Here are some of the key things your mobile app development business plan should include.

1. Determine what kind of app you will develop

Competition and opportunity co-exist throughout every app sector. If you’re still trying to decide where you might want to target your app development , strong contenders and trending app verticals include:

  • Productivity
  • Shopping (mobile-specific and general eCommerce)
  • Health and Fitness
  • Personalization

The sector you’re developing your app for influences the type of app you’ll want to build. For example, will you code for Apple iOS, Google Android, or both? Will you focus on a web or hybrid app? Is the app an extension of a website or other business channel? 

You’ll need to have this information defined up front in order to conduct proper research and easily write your business plan . 

2. Conduct market research and identify competitors

It’s one thing to have a good idea for an app. But the real question is, does the idea have a market that will be hungry to buy in?

As you develop your business plan, understanding your potential customer base is key.

For starters, evaluate similar apps and competitors in the vertical you are developing for—especially if there is already an app doing something that you want your app to do. As you conduct research and put together a market and competitive analysis, be sure to think through the following questions:

  • Who are their customers?
  • Are they the same ideal customer and target market ? 
  • What steps will your company take to engage the market and involve them in testing and promotion? 
  • What are the demographics (such as profession, age, or sex) and psychographics (such as opinions, hobbies, and lifestyle goals) of your target market? 

If you don’t understand the market for your app, it will be difficult to get them to find, install, use, and tell the world about your app.

Researching the market and your competitors can also clue you into expected app features, pricing and revenue models, gaps in services, and pain points that customers feel aren’t being met.

Understanding these factors can also help your business plan address a potential threat to your app’s viability: abandonment. User retention can be challenging throughout the app market, with 25% of customers using an app one time and then ditching it. So, be sure that you take into account how to attract new customers as well as how you’ll keep them around.

3. Positioning and promotional strategies

Once you’ve proven the market demand for your app’s concept, you should start figuring out how to promote your app and position it in the marketplace. Your business plan doesn’t have to include a detailed marketing plan . But it can be the perfect place to set up a few essentials that can guide your app’s marketing throughout its development and release cycles.

At a minimum your plan should include foundational messaging for pitching, branding, mission, and your overall sales and marketing strategy for your app, such as:

Develop and refine your elevator pitch

How concisely can you get across what your app does, why it’s needed, and what will make people love it? Can you talk up those key points with anyone from potential investors to your ideal customer, developers, and engineers to your mom and your best friend?

Examine how you’ll build awareness, interest, and need for the app

Will early testers be part of your outreach? Will you work with social media influencers, traditional media, or celebrity endorsers? How will you articulate the problems your app solves or the joy it provides?

What are some of the branding and marketing tasks your startup will pursue? 

For example, what is the company name? The app name? How will you engage your market on the social media platforms they like to spend time on? What original supporting content will attract the interest of your key audience?

In your business plan, it’s essential to understand your startup from the point of view of a founder and key player. But the marketing and promotional components of your business plan help you see your app from the point of view of an outsider, such as a customer or investor. The better you understand these other points of view, the better you can develop your messaging, build your app, and make it a success.

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Free Mobile App Business Plan Template

Use this proven business plan example to successfully launch a competitive mobile app development business.

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4. Startup costs, financials, and pricing

Figuring out the potential startup costs for your app is not a one-size-fits-all equation. Generally, these are some of the factors to consider as part of your financial plan .

Platform development

Expect different development costs when developing for iOS, Android, or both. Your process will include defining a function, outlining what you need for your MVP, wire-framing, coding, testing, designing, and more.

Internal employees or outside contractors? 

If you’re planning to build up a full-on firm with employees, benefits, and offices, you will be looking at a different cost structure than if you want to outsource to a contracted development company or work with a freelance team that’s not employed by your app startup. That team may need pros in charge of mobile and backend development, design, QA, customer support, design, marketing, managers, and more.

The resources you have and the resources you need

How long it’ll take to develop and release your app depends in part on the resources you have access to.

Successful apps monitor and improve. Did the app crash? Is it scaling sufficiently to handle increases in use and load? What usage metrics are you monitoring and analyzing? How will you need to update the app to deal with OS updates?

By understanding these and other potential costs, you can develop a budget in your business plan. For more in-depth financial considerations, you should develop forecasts to gauge costs, future cash flow , and how your app company might grow and change over time by hitting release and growth milestones.

5. Development milestones

The release of your app is a milestone that’s farther down the road. In the meantime, you’ll be developing milestones that reflect major accomplishments in the development process. Your business plan can reflect some of those milestones, such as:

  • Production of key features and functions
  • MVP completion
  • Testing and refinement
  • Acceptance of app in app stores
  • Achievement of sales and adoption goals
  • Implementation of new features and versions

Remember, app development takes time. Focus your initial milestones on pre-release goals. From there, you can set and work toward post-release milestones that can pave the way to future growth, releases, and profits.

  • Mobile app development tips for startup growth

As you develop your mobile app’s business plan, here are a few other tips and considerations to keep in mind.

Native, hybrid, or web?

Creating apps tailored to each OS—Apple and Android—can cost the most to develop, but also can maximize your app’s performance. The better the performance, the most adoption and use you could see in your target audience. 

At the same time, other apps work solely on the web, and others are developed as hybrids. Hybrid apps can help you manage team and development costs, but they typically can’t take full advantage of each OS.

As a rule of thumb, typically the more complicated or intense the app’s function, the better it tends to be to develop a native app. Lightweight functions may work fine in a web or hybrid environment.

Security and privacy

Privacy and security are at the forefront of customers’ minds as well as industry discussions around app business models. If you are developing for regulated industries—such as health care or financial services—there may also be legal privacy and security requirement to adhere to.

Decide on a platform: Apple, Android, or both?

If your target market is predominantly on one OS, that can guide your development decisions. Developing for both platforms requires more resources, but can give you the benefit of maximizing your ability to develop the app for each OS, and reach the most customers. Another option to consider is launching on one platform and adding another over time, depending on milestones in your business plan.

Offline vs online

A growing consideration in today’s app development firms is whether the apps can only function online, or if it can function offline too. Some level of offline function—and messaging that the app is offline—can make for better customer satisfaction, since users will have access to at least some features regardless of their internet connection.

For example, Google Maps can download route information so a user still has the mapping and some functions, even if they enter a remote location or go through an area where they don’t have a cellular or wifi signal. 

Walking users through what they can and can’t do offline, and how functions can be completed or data can sync once online again—can also go a long way to winning trust and loyalty from your app’s users. You’ll also want to determine if the offline function is something you develop as part of the launch, or if you roll it out in a later version.

Revenue model: Free/freemium, subscription, in-app purchases, ads, or a combo?

Apps can drive revenue in many ways. A common strategy is a freemium model: Offer a free baseline app, but other features can be unlocked with purchase or subscription.

Subscription models (usually with a tie-based free trial period) have also become increasingly popular in companies, and they are finding broad acceptance in the market. An app can also drive revenue by being a mobile commerce tool, helping customers complete a transaction from the convenience of their phone instead of having to go to a browser, non-mobile device, or other fulfillment channels.

Some apps are only available for purchase, often as a way to showcase an app’s superior or unique place in the market. Once purchased, though, other revenue models can come into play. The popular game Minecraft is a prime example: Customers purchase the app, but the Minecraft Marketplace offers in-app purchases to further customize the game.

Test properly before launch

If your app doesn’t work at launch, it may never recover from that stumble.

As the app reaches development milestones, ongoing testing can help you find and resolve problems before you have to deal with them in the deployed product. Conducting extensive testing across various devices, users, and OS versions can help you catch problems before they harm your new app—and your startup’s viability and profitability.

  • Download your free mobile app development business plan template

Our free mobile app development business plan can give you the template you need to start setting up your business plan—and your business. It’s just one of hundreds of free sample plans that have been time-tested by our team and by thousands of entrepreneurs all over the world.

The question is simple: What mobile app development business will you create? Whatever it is, your business plan can help you get there. Download your free plan now and get started.

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Content Author: Anthony St. Clair

Anthony St. Clair is a business copywriter, author of the Rucksack Universe travel fantasy series, and a craft beer writer specializing in Oregon. Learn more at anthonystclair.com.

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The Best Mobile App Development Business Models

Business-Models

As an app developer, it’s essential to understand the various business models available to make the most money from your development services. This article outlines the best app business models for you to consider.

Freemium Model

The freemium app business model is one where you offer a free app with in-app purchases. This is a great way to monetize your app as it allows users to try it out before they commit to paying for it. However, to make this model work, you must ensure that your app offers enough value to persuade users to make in-app purchases.

An example of a freemium app is Supercell’s Clash of Clans. The app is free to download and play, but users can make in-app purchases for extra resources and upgrades.

Advertisement Model

The advertisement app business model is one where you display ads in your app. This is a great way to monetize your app if you have a large number of users, as you can generate a significant amount of revenue from advertising. However, it’s essential that ads are not intrusive and do not negatively impact the user experience.

An example of an app that uses the advertisement model is Facebook. The app displays ads in the News Feed, such as carousel, image, or video ads.

Sponsorship Model

The sponsorship app business model is one where you find a sponsor for your app. This is a great way to monetize your app if you have a large number of users, as you will be able to generate a significant amount of revenue from the sponsor. However, ensuring the sponsor is relevant to your app and that their branding is not intrusive is vital.

An example of an app that uses the sponsorship model is Runtastic. The app is sponsored by Adidas and users can see Adidas branding throughout the app.

Subscription Model

The subscription app business model is one where you charge users a monthly or annual fee to use your app. This is a great way to monetize your app, allowing you to generate recurring revenue from your users. However, in order to make this model work, you need to ensure that your app offers enough value to persuade users to subscribe.

An example of a subscription app is Netflix. Users can subscribe to the app for a monthly fee to gain access to all of the app’s content.

Affiliate Marketing Model

The affiliate marketing app business model is one where you promote products or services in your app and earn a commission on sales. This is a great way to monetize your app as it allows you to generate revenue from your app without charging users anything. However, to make this model work, you need to ensure that you are promoting products or services that are relevant to your app.

An example of an app that uses the affiliate marketing model is Amazon. The app promotes products on behalf of Amazon and users can purchase these products through the app.

e-Commerce Model

The e-commerce app business model is one where you sell products or services through your app. This is a great way to monetize your app as it allows you to generate revenue from your app without charging users anything. However, to make this model work, you need to ensure that you are selling products or services that are relevant to your app.

An example of an app that uses the e-commerce model is Etsy. Etsy allows users to buy and sell handmade products.

Paid App Model

The paid app business model is one where you charge users a one-time fee to download and use your app. This is a great way to monetize your app as it allows you to generate significant revenue from your users. However, to make this model work, you need to ensure that your app offers enough value to persuade users to pay for it.

An example of a paid app is Super Mario Run. The app costs $9.99 to download, and users can play the app without any in-app purchases.

Commission Model

The commissioned app business model is one where you create an app for a client who pays for your work. This is a great way to monetize your development skills, allowing you to generate revenue from your app development services. To make this model work, you must have the skills and experience to develop high-quality apps.

Selling User Data Model

The selling user data app business model is one where you sell your app’s user data to third parties. This is a great way to monetize your app as it allows you to generate revenue from your app without charging users anything. In order to make this model work, you need to ensure that your app has a large number of users and that you have the permission of your users to sell their data.

An example of an app that uses the selling user data model is Facebook. The app sells user data to third parties for advertising purposes.

Select the Right Business Model for Your App

There are many different app business models available to app developers. The best way to monetize your app depends on the type of app you have developed and the needs of your users. Consider all of the options available to you before deciding on the best way to monetize your app.

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A Guide to Mobile App Business Models and Monetization | SF AppWorks

We love building simple, useful apps. But   without a monetization strategy , we   can’t   drive traffic   through advertisement. Consumer apps are essentially microbusinesses - each needs its own revenue stream and business model. Here are the top mobile app business models used in consumer apps, with examples of each. 

1. Freemium (Zoom)

The basic mobile app business model concept of freemium is to   offer limited functionality   to hook users, then   charge them for expanded functionality   once they’re hooked. The art is in determining when to charge people.

Zoom , for example, gives users free conferencing for 2 people, and free for 3 or more up to 40 minutes. Not ready to pay? You can ‘workaround’ their premium by ending the call and starting a new one.

The point is not to jar users with an abrupt paywall that could drive them away out of spite. Rather,   minor inconveniences cleverly keep users   on your platform until, eventually, they just give up and say fine, take my money. 

Zoom uses a freemium mobile app revenue model.

Photo via Unsplash , by Charles Deluvio

Creative twist - Duolingo

Duolingo , the popular language app is free, but you have a   limited number of hearts , which you lose when you answer a question incorrectly. If you run out of hearts, you have to either wait for a heart to regenerate, or   upgrade to premium to continue using the app .

It’s an educational spin on the popular gaming mobile app revenue model of in-app purchases to speed up gameplay, but here you speed up learning through more repetition and increased pressure to perform.

2. In-app purchase (Farmville)

In-app purchase is the dim sum mobile app business model of app monetization that works well when   purchases help you advance an app’s utility   or gameplay. Think about games - in the beginning, you just want to be decent.

As you get better and your aspirations rise,   you want more powerful tools . That’s when a shop or ability to purchase   add-ons makes the most sense .

Farmville   did a great job   supercharging in-app purchases to advance gameplay . The basic concept of the game is to plant seeds in a plot of land. Those seeds grow in (sped up) realtime, so you have to leave the app and come back later to check in on them and water them.

But you can purchase a tractor, which speeds up the time that it takes for the plants to grow. Even better - the tractor can run out of gas, which you have to buy more of to continue reaping its benefits.

Creative twist    - Fortnite

Fortnite , the popular battle royale online game,   sells individuality rather than quicker gameplay . While their in-app purchases don’t give you better guns or heightened abilities, you can purchase skins, backpacks, and other   cosmetic add-ons that set you apart   in their digital social scene.

Unsure which mobile app revenue model you should use for your app?   Learn more about SF AppWorks’s AppStudio   where we help you plan, design, build and test a successful app in twelve weeks.

3. Subscription (Spotify)

The subscription mobile app business models work well for customers because they   lower the entry-level price   and   remove the hassle of repeated purchasing   decisions. Think about the shift to   subscription music services   like Spotify. Users get the promise of all the music they could ever want, when they want it, without having to think about what to buy.

For businesses, subscription mobile app business models make it   easier to predict revenue   through recurring sales and create higher lifetime customer value, which allows you to budget more for advertising and marketing. It’s a predictable form of revenue generation that is   well suited to a lot of business types , but in no place is it more advantageous to the business than in the case of fitness apps. 

adrian-regeci-SAS0lq2QGLs-unsplash

Photo via Unsplash , by Adrian Regeci

Most people struggle to stay in shape and are willing to try just about anything to move themselves towards healthier habits. Oftentimes, people believe that by paying for a gym or fitness app subscription, the commitment will motivate them to work out.

Through our research, we found that close to   half of fitness app subscribers aren’t monthly active users , yet   25% stay subscribed   for a year or more. What’s worse, when fitness users fail to utilize their app or gym subscriptions, they point the blame at themselves. 

On the flip side, offering   a freemium fitness app doesn’t make a lot of sense   from the business’s point of view. Because most users would start the free trial and never use the app enough to convince them to subscribe, they   won’t generate enough revenue to survive . 

That’s why fitness apps always charge up front, when users are most motivated to start working out and to pay for an app that helps them do that. 

* Side note : I struggled to build healthy workout habits until I learned about microhabits - tiny steps you can take every day to form a habit. If you want to run daily: 

  • You spend the first week putting your running shoes on every day at the same time
  • Then the next week you walk down to the mailbox
  • And then you jog around the block (and so on). 

We took our research and poured it into the simple, yet effective micro-habit building PushApp app, available for download here. 

Creative Twist - Pact

The fitness app Pact launched in 2012 with a novel, mobile app business model   twist on gym subscriptions . Users could   make pacts with others to get paid   when they worked out or to pay a penalty when they failed to. Unfortunately, it has since been shut down for *ahem  not paying  its users.

Related :   Ready to Hire a Mobile App Developer? Here's What to Expect

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4. Ad-supported (Facebook)

The   mother of all mobile app revenue models   is Ad-supported, but that’s because if you can support yourself with ads, you have an extremely sticky, fast-growing, massively trafficked product. The typical trajectory for a Silicon Valley unicorn is to   raise boatloads of venture capital   behind a   fast-growing and usually free product .

The aim is to   remove any and all barriers   to new user entry and   focus only on the widest and farthest reach   possible. Only after   achieving massive scale   do they turn on the money-making mechanism. That’s why Mark Zuckerberg doesn’t believe in monetizing digital products through ads   until they reach 1 billion users .

Types of Mobile Ads infographic

If you’re starting a new app,   don’t rely on ads   for a mobile app revenue model. It’s impossible to predict whether you will achieve the necessary scale. And, if you do, there will be many revenue opportunities available to you. 

You might not ever need to worry about it, since you’ll   probably get acquired   and your product will get folded into the parent company’s ad-revenue machine (see Instagram). But for fun, here’s a rough breakdown of the economics of ads:

Ad revenue = impressions*eCPM (Effective cost per thousand impressions)

Average revenue per impression for rewarded video ads = .02, for interstitials .16, and for offerwalls 2.50. Here’s a table with various levels of traffic and the corresponding revenue.

Average ad  revenue chart

As you can see, it   takes a whole lot of traffic to generate meaningful revenue . But as you can also see, when you have a whole lot of traffic, you can generate a whole lot of revenue.  

Creative Twist (TikTok)

TikTok, the hyper-addictive short-form video streaming app, moves users through quick, relevant video snippets in an easy to scroll fashion. The   ads mimic this content   and are often   designed to look like user-generated content , further blurring the lines between relevant content and relevant advertising. 

5. Paid apps (SkyView)

The advantage of putting your mobile app business model behind a paywall is that you can   really quickly ascertain your cost per user   and   lifetime user value . If you spend $5 on ads to sell a $6 app, then you keep spending. In reality, you have to also account for your operational costs, making the ratio closer to $1 to $5, but you get the point. 

The problem is you   only really get one chance to monetize   the user, unless you are selling upgraded versions each year. This is the traditional software model, though most software now sells for a monthly subscription. 

The ones who don’t tend to   offer limited-use functionality , such as a simple game, an astronomy app, or a selfie editor. It’s a tacit admission that the   app is probably more gimmick than utility . After all, if your app offered long-term value, why not monetize it as such? 

Creative Twist - Logic

One big exception   is Apple’s music editing software Logic. It’s offered at a high price point ($199), but   comes with a free full-use 90-day trial   that dares you to not become addicted. It’s clever because as you use the software and your data and projects grow, you become more entrenched.   And if you don’t become a fan   after 90-days,   you weren’t the target customer   anyway. 

Uber uses a revenue share mobile app business model.

Photo via Unsplash , by Viktor Avdeev

6. Revenue Share (Uber)

If you can build a marketplace that   depends on maximizing vendors/service workers and customers , you can play around with revenue sharing. Rev share is great if you have to   pay out users from day one for services rendered   because you only pay them when you earn revenue. Note that you still   need a good sized user-base   to be interesting to rev share partners. 

Creative Twist - Apple

Apple   takes a very high 30% cut   of revenue generated from its App Store. But if you build a sticky enough app to keep users onboard for a year or more, it drops to 15%.

VALIDATE YOUR IDEA

7. Sponsorship - Nike+

Running an agency? You might want to explore sponsorship as a   mobile   app revenue model. Rather than build out an app and hope for enough usage to drive meaningful revenue, you could   pitch app concepts to brands   and see which sticks. 

They might   offer you a fee to build   the app, or they   might license the app   for a monthly recurring fee. In either case, you can sell first and build later, which turns out to be a   pretty efficient way of vetting your app   ideas. 

Have an idea for an app but need help developing it? SF AppWorks can   help you create   a robust mobile app.

Creative Twist - Angry Birds

We’re   all trained to tune out ads   to some extent, but   tuning out gameplay characters is pretty tough . That’s why Angry Birds partnered with Everton Football Club to recreate human characters for your launching pleasure. The sponsorship   generated a reach of 4.8M across 100,000 impressions , along with  huge international coverage  and a prestigious award.  

See mobile app business model missing from this list?   Shoot us an email   and we’ll expand on the topic, or let us know what interesting mobile app revenue models you’ve been testing.

Related :   Hybrid Apps vs Native Apps: What's the Difference?

https://www.quora.com/How-much-money-does-a-free-app-make-from-advertising

http://fieldmarketing.com/news/everton-angry-birds-named-best-gaming-based-sponsorship-uk-sponsorship-awards/

https://www.ironsrc.com/glossary/ad-revenue/#:~:text=How%20much%20money%20do%20apps,interstitials%20and%20%242.50%20for%20offerwall.

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How to Start a Mobile App Business

How to Start a Mobile App Business

ON THIS PAGE

  • How To Start a Mobile App Business
  • How To Start a Mobile App Business FAQs

Helpful Slideshows, Videos & Images

  • Additional Resources in the Mobile App Industry

Starting a mobile app business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn how to start an app successfully.

Importantly, a crucial step in starting a mobile app business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Mobile App Business Plan Template here.

Download our Ultimate Mobile App Business Plan Template here

15 Steps To Start a Mobile App Business

  • Choose the Name for Your Mobile App Business
  • Develop Your Mobile App Business Plan
  • Choose the Legal Structure for Your Mobile App Business
  • Secure Startup Funding for Your Mobile App Business (If Needed)
  • Secure a Location for Your Business
  • Register Your Mobile App Business With the IRS
  • Open a Business Bank Account
  • Get a Business Credit Card
  • Get the Required Business Licenses and Permits
  • Get Business Insurance for Your Mobile App Business
  • Buy or Lease the Right Mobile App Business Equipment
  • Develop Your Mobile App Marketing Materials
  • Purchase and Setup the Software Needed to Run Your Mobile App Business
  • Build Your Team
  • Open for Business

1. Choose the Name for Your Mobile App Business

The first step to starting a mobile app development business is to choose your business’ name. This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your mobile app business:

  • Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
  • Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
  • Think about marketing. Come up with a name that reflects the desired brand and/or focus of your software company.

2. Develop Your Mobile App Business Plan

One of the most important steps in starting a mobile app business is to develop your mobile app business plan . The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business. Your business plan should include the following sections:

  • Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your mobile app business.
  • Company Overview – this section tells the reader about the history of your mobile app business and what type of mobile app business you operate. For example, are you building hybrid apps or native apps? Will your app be available for purchase from different app stores? Will it undergo app store optimization for Apple’s app store or another app store? Do you specialize in developing Android apps or iOS apps?
  • Industry Analysis – here you will document key information about the mobile app industry. Conduct market research and document how big the industry is and what trends are affecting it.
  • Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? What are their interests?
  • Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
  • Marketing Plan – your app marketing plan should address the 4Ps: Product, Price, Promotions and Place.
  • Product : Determine and document what products/services you will offer
  • Prices : Document the prices of your products/services
  • Place : Where will your business be located and how will that location help you increase sales?
  • Promotions : What promotional methods will you use to attract customers to your mobile app? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing. You might also try to secure advertising on an app store to reach a larger audience or creating YouTube videos that showcase your user interface and all the features of your app.
  • Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
  • Management Team – this section details the background of your company’s management team.
  • Financial Plan – finally, the financial plan answers questions including the following:
  • What startup costs will you incur?
  • How will your mobile app business make money?
  • What are your projected sales and expenses for the next five years?
  • Do you need to raise funding to launch your business?

Finish Your Business Plan Today!

3. choose the legal structure for your mobile app business.

Next you need to choose a legal structure for your mobile app business and register it and your business name with the Secretary of State in each state where you operate your mobile app business. Below are the five most common legal structures:

1) Sole Proprietorship

A sole proprietorship is a business entity in which the owner of the mobile app business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.

2) Partnerships

A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a software company together. The partners share in the profits and losses of the business.

The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.

3) Limited Liability Company (LLC)

A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a software company include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.

4) C Corporation

A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a software company is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.

5) S Corporation

An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.

Once you register your mobile app business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.

4. Secure Startup Funding for Your Mobile App Business (If Needed)

In developing your mobile app business plan, you might have determined that you need to raise funding to launch your business. If so, the main sources of funding for a mobile app business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a mobile app business that they believe has high potential for growth.

5. Secure a Location for Your Business

You might choose to run your mobie app business from home or build a remote team. Alternatively, you might secure a physical location for your business. To find the right space, consider:

  • Driving around to find the right areas while looking for “for lease” signs
  • Contacting a commercial real estate agent
  • Doing commercial real estate searches online
  • Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space

6. Register Your Mobile App Business With the IRS

Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).

Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.

Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.

7. Open a Business Bank Account

It is important to establish a bank account in your mobile app business name. This process is fairly simple and involves the following steps:

  • Identify and contact the bank you want to use
  • Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
  • Complete the bank’s application form and provide all relevant information
  • Meet with a banker to discuss your business needs and establish a relationship with them

8. Get a Business Credit Card

You should get a business credit card for your mobile app business to help you separate personal and business expenses. You can either apply for a business credit card through your bank or apply for one through a credit card company.

When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.

Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.

9. Get the Required Business Licenses and Permits

Every state, county and city has different business license and permit requirements. Nearly all states, counties and/or cities have license requirements including:

  • General Business License – This is the most common type of business license. It gives you permission to operate your business in a specific location.
  • Sales Tax License – This type of license is required if you will be selling products or services that are subject to sales tax.

Depending on where you open your business and the type of apps you develop, you will have to obtain the necessary state, county and/or city licenses.

10. Get Business Insurance for Your Mobile App Business

Business insurance policies that you should consider for your mobile app business include:

  • General Liability Insurance – This type of insurance can help protect the business if someone is injured or their property is damaged as a result of something the business did or failed to do.
  • Product Liability Insurance – If the mobile app business sells products, this type of insurance can help protect against any injuries or damages that occur as a result of using the product.
  • Workers’ Compentation Insurance – If the mobile app business has employees, this type of insurance can help protect against any injuries or illnesses that they may suffer while working for the business.

Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.

11. Buy or Lease the Right Mobile App Business Equipment

A mobile app business needs a computer, internet access, and software to create mobile apps. If you plan to have a physical location for your team, you might also need office supplies and furniture.

12. Develop Your Mobile App Business Marketing Materials

Marketing materials will be required to attract and retain customers to your mobile app business. The key marketing materials you will need are as follows:

  • Logo – Spend some time developing a good logo for your mobile app business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. Your logo might also be displayed within the app. The right logo can increase customer trust and awareness of your brand.
  • Website – Likewise, a professional mobile app business website provides potential customers with information about the products and/or services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how your target audience perceives you. A website is a good place to announce company news and app updates to new and existing app users.
  • Social Media Accounts – Establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your mobile app business. Social media pages are great for building communities of your users.

13. Purchase and Setup the Software Needed to Run Your Mobile App Business

There are a few software programs that a mobile app business needs in order to get started. One option is Appcelerator, which allows you to develop apps using JavaScript, HTML5, and Titanium. Another popular tool is PhoneGap, which helps you create cross-platform apps using HTML5 and JavaScript. Finally, you’ll need a development environment like Eclipse or Xcode in order to write code for your apps.

14. Build Your Team

A key component to starting most any business is to build a great team. This is especially true for mobile app businesses, which are heavily reliant on technology. You’ll need to assemble a team of talented engineers, designers, and marketers who can help you turn your vision into reality.

If you don’t have the necessary skillsets in-house, you’ll need to hire freelancers or consultants to fill the gaps. The most important thing is that you have a solid foundation of people who can bring your app idea to life.

15. Open for Business

You are now ready to open your mobile app business. If you followed the steps above, you should be in a great position to build a successful business and you will know everything you need about how to start an app business. Below are answers to frequently asked questions that might further help you.

How to Finish Your Mobile App Business Plan in 1 Day!

How to start a mobile app business faqs, is it hard to start a mobile app business.

Starting a mobile app business can be easy as long as you have great app ideas and the resources to make them come to life. Your biggest challenges will most likely be securing the funds needed to start the business and building a team for the app development process. The steps outlined above will help you and teach you how to start an app business.

How Can I Start A Mobile App Business With No Experience?

If you have a great idea for a mobile app but lack the experience to make it happen, you can always consult with or hire someone who does. There are many ways to get started in mobile apps without any prior experience. Doing thorough market research and investigating how other app developers run their businesses can also be very helpful in launching your own successful app development company.

What Type of Mobile App Business Is Most Profitable?

There is no definitive answer to this question since there are many factors that can affect profitability. However, some types of mobile app businesses that tend to be more profitable than others include those that offer unique and innovative products or services, target a specific niche market, or have low overhead costs.

How Much Does It Cost To Start A Mobile App Business?

The cost of starting a mobile app business can vary depending on a number of factors, such as the type of app you want to create, the platform you want to develop it for, and whether or not you hire someone to help you. In general, you can expect to spend several thousand dollars at a minimum to get your business off the ground.

Key startup costs include:

  • Hardware with enough speed and space to ensure a smooth work environment and a high-resolution screen
  • Finding and hiring the right coder(s), as needed
  • A place to work, if needed
  • Office furniture

What Are the Ongoing Expenses for a Mobile App Business?

Your ongoing expenses for a mobile app business will depend largely on the type of app you have created and the platform you are using to sell it. Generally, your biggest ongoing expenses will be employee salaries and software costs.

Key costs to remember include:

  • Wages – App developers typically have at least an undergraduate degree, and are required to have a specialized skill set. These factors combine to make your app development team’s wages your single largest industry expense.
  • Purchases – These generally entail development kits, hardware, and software updates.
  • Royalties – App store royalties are a significant cost for app development businesses, but these costs have been trending downward over the last five years.
  • Marketing - Marketing costs include advertising and any other expenses associated with promoting your business and products.

How Does A Mobile App Business Make Money?

Most mobile app businesses make money through a business model that is a combination of advertising and in-app purchases or subscriptions. Some apps also offer paid memberships that give users access to additional features or content. Users might also pay an initial fee to purchase when downloading an iOS app from the Apple app store or an Android app from the Google Play store.

Is Owning A Mobile App Business Profitable?

Yes, owning a mobile app business can be profitable. However, it is important to keep in mind that profitability depends on a number of factors, including the type of app you have created, your target market, and your marketing and advertising efforts.

Why Do Mobile App Businesses Fail?

There are many reasons why mobile app businesses fail. Some common reasons include a lack of innovative products or services, poor marketing and advertising efforts, and an inability to generate enough revenue to sustain the business. Additionally, many businesses fail due to a lack of understanding of the mobile app industry and how it works.

How Big Is the Mobile App Industry?

There are currently an estimated 455,835 Mobile App businesses in the US. This industry has experienced rapid revenue growth over the past five years, to reach $16.2 billion.

What Are the Key Segments of the Mobile App Industry?

The two largest product segments for the Mobile App industry are Games and Social Networking apps. Smaller product categories include News Apps, Entertainment Apps, and Other Apps.

What External Factors Affect the Mobile App Industry?

A number of factors affect the performance of the Mobile App industry. These drivers include:

  • Number of Mobile Internet Connections –This corresponds to the number of people who own a smartphone, which in turn affects demand for apps.
  • Percentage of Services Conducted Online – The increasing number of online purchases and business transactions represents a distinct opportunity for app developers, as more people complete these transactions via smartphone applications.
  • Time Spent on Leisure and Sport s – Since games are a major segment of the industry, it follows that the more time people have for leisure, the more game apps they will download. 

Who Are the Key Competitors in the Mobile App Industry?

The companies with the greatest market share are King Digital Entertainment, Kabam, Electronic Arts, and Zynga (all game app developers).

What Are the Key Customer Segments in the Mobile App Industry?

The Mobile App industry’s largest customer segment is consumers between the ages of 18 and 29. Consumers aged 30 to 49 are the second-largest customer segment, followed by those over the age of 50.

How Much Do App Developers Make?

About 25% of developers earn over $5,000 per month on the iOS platform, and 18% of developers make this on the Android platform.

According to PayScale, the median salary for a senior Software Engineer/Developer/Programmer is $99,193 per year.

Where Can I Download a Mobile App Business Plan PDF?

You can download our mobile app business plan PDF template here. This is a business plan template you can use in PDF format.

How To Build a Billion Dollar app?

Mobile App Development Cost and Design

Inside the Android Factory: 5 Ways to Build Profitable Applications

5 ways to build profitable android applications infographic

For additional information on the App Development industry, consider these industry resources:

  • The Application Developers Alliance: appdevelopersalliance.org
  • Gartner: www.gartner.com
  • The Verge: www.theverge.com/apps
  • App Mavericks: www.appmavericks.com

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success. Click here to see how Growthink’s professional business plan consulting services can create your business plan for you.  

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Maximizing Profitability: 7 Successful Business Models for Mobile Apps

In today’s fast-paced digital age, mobile applications have become an integral part of our daily lives. With millions of apps available on app stores, it is no surprise that the mobile app industry is growing rapidly. However, with increasing competition, it has become crucial for app developers to come up with innovative and profitable business models to stand out from the crowd.

Whether you’re a seasoned app developer or just starting, choosing the right business model is essential for the success of your app. The right business model not only helps you generate revenue but also plays a vital role in customer acquisition, user retention, and building a loyal customer base.

In this article, we will explore 10 of the most successful and profitable business models for mobile apps. By understanding the benefits and drawbacks of each model, you will be able to choose the one that best fits your app and maximize your revenue potential. So, let’s dive in and explore the world of app business models!

1- Subscription

If you haven’t heard the term yet, Software-as-a-Service (SaaS) is a powerful business model that allows you to sell software (your app) for a recurring fee—either monthly or annually.

The great thing about the SaaS model is that it’s very flexible and can be customized to whatever you want to include as part of your “packages” or “tiers.”

upgrade your subscription saas business models mobile app

Based on your target audience, the more advanced features can be included as part of certain tiers, whereas in other cases it makes sense to include the whole package in just one monthly tier and increase the price as customers add team members or custom metrics to their plan.

While definitely powerful, the SaaS model is hard to pull off in the sense that it would normally require you to have programming skills. That would have been the case 3-4 years ago.

However, you can now get a mobile app with an integrated SaaS business model without touching a single line of code thanks to strong growth in low-code technologies.

Pros of subscription model

  • Can generate consistent and predictable revenue through recurring fees.
  • Encourages long-term user engagement and loyalty.
  • Can offer access to exclusive content or features.

Cons of subscription model

  • Users may be hesitant to commit to recurring fees for an app.
  • Subscription fatigue can lead users to cancel or stop renewing their subscription.
  • Can require a significant amount of resources to continuously produce and update premium content.

2- Freemium

Gating features behind a paywall is a favorite of many fast-paced online businesses, especially if those features are only needed for a brief period of time before the user churns.

mobile app business models gated features example

Examples for apps that would benefit the most from this are logo makers, self-made design services, file conversion apps, and other “deliverable-style” software.

Here’s a practical scenario:

  • The user needs to create a Gif on their phone
  • They are unable to do so with the built-in features
  • Because of that – they go and look for an app that can help them achieve their desired outcome (creating a Gif as quickly and easily as possible)
  • When looking for an app – they find something for free that gets the job done
  • They download it and proceed to follow the steps to make a Gif
  • Once they are happy with the results – the app gives them the option to download (or “export”) the Gif – but with a big caveat displayed as 2 options »
  • You download for free and get the app logo displayed on top of the Gif as a watermark to spread the word when it inevitably gets shared online
  • You pay X once or on a monthly basis to get either 1 or as many downloads as you want free of the app’s logo shown on top of your creation

This is a very typical scenario and, although it can be annoying, some online services are able to pull this off rather effectively. The important thing here is to offer the right price.

If a user does all of that work only to see themselves paywalled with a $34.99 yearly subscription, they’re not going to go for it and they will talk badly about your app.

If a user does all of that work only to see themselves paywalled with a $34.99 yearly subscription, they’re not going to go for it.

But if you give them either the option to download 1 Gif for $1.99 or subscribe for as little as $3.99/mo, they might well consider your offer. It sits within “impulse-buy” range.

Of course, this is a business model that requires volume to work. That’s why the first option is to add a logo as a watermark so that more people get to know about the app quickly.

Pros of freemium model

  • Can attract a large user base with a free version of the app.
  • Users can test out the app before committing to paying for premium features.
  • Can generate steady revenue from users who choose to upgrade to premium features.

Cons of freemium model

  • Developing and maintaining multiple versions of the app can be time-consuming and costly.
  • Users may be deterred from paying for premium features if the free version is sufficient.
  • Can be difficult to find the right balance between free and premium features to incentivize upgrades.

3- In-App Purchases

This is the standard in mobile apps; you download one for free, whether that be a game, a productivity app, or a business solution, and you pay directly from within the interface.

For business purposes, this isn’t as powerful as something like a game since it doesn’t guarantee recurring revenue, although you can create in-app subscriptions as well.

fiverr business models app example for purchasing productized services

In-app purchases work well for:

  • eCommerce apps selling directly to an end-user
  • Consumer mobile apps selling digital goods
  • Productized service apps like Fiverr

If you want to sell to other businesses with this model in mind, you’re either looking to create an eCommerce shop that sells products in bulk or offer “productized” services.

A productized service is a service limited in scope by a predefined “package” that you offer for $X either as a one-time fee or on a recurring basis. It’s not super easy to pull off because you need to be able to personalize while staying broad enough to fit a specific target audience.

Pros of In-App Purchases model

  • Can generate significant revenue from users who are willing to pay for virtual goods.
  • Can incentivize users to engage with the app more frequently to earn or purchase virtual goods.
  • Can create a sense of exclusivity and reward for users who make in-app purchases.

Cons of In-App Purchases model

  • Users may be deterred from making in-app purchases if they perceive the value to be low.
  • In-app purchases can negatively impact the user experience if they are required for basic app functionality.
  • Can create an unfair advantage for users who are willing to spend money on virtual goods.

4- Paid Apps

Paying for an app upfront is definitely old school but it may still work if you’re looking to sell support licenses the way software providers have done for decades.

affinity designed mobile app business models license basis

Nothing wrong with that, it just won’t have the same effect on the market as selling access to a set of tools for a lower price and retain the customer for years instead of a one-time purchase and then you don’t really know what they are doing with your product anymore.

Paying for an app upfront works well when:

  • You only offer a yearly option with support and new updates not included if the customer doesn’t renew their purchase, making their version usable but obsolete.
  • Your app plugs into another platform or system as a sort of “plugin,” meaning that customers can quickly buy and test it without much of the risk.
  • The target market is large enough, allowing you to niche down in a specific offering that will always be available upfront and that is easy to pay for.

We don’t recommend paid apps if you’re looking to sell a business process like inventory management or customer relationship management. 

SaaS is best for those.

Pros of Paid apps model

  • Revenue is generated upfront with each app download.
  • No ads or in-app purchases can create a more streamlined user experience.
  • Can help establish credibility and value for the app.

Cons of Paid apps model

  • Users may be hesitant to pay for an app they have not tried.
  • Paid apps can be less attractive to users who prefer free alternatives.
  • Revenue is limited to the initial purchase price and may not be consistent.

5- In-App Advertising

Ads are also one of the more traditional ways to monetize an app but they don’t fit well with what customers expect from a modern mobile app today. Lazily spreading ads throughout your app in hopes that someone will click on them and generate you a tiny bit of money is not worth it.

Mobile ads work well for:

  • Reading experiences
  • Certain platforms

You don’t want to plaster a community app with ads; it’s the exact opposite experience of what a creator would want for their members. Instead, you should focus on creating rich media experiences that are augmented with relevant ads as part of the content itself.

Pros of In-App Advertising model

  • Can generate consistent revenue through ads displayed in the app.
  • No cost to the user, so it can attract a large user base.
  • Can be an effective way to promote other products or services within the app.

Cons of In-App Advertising model

  • Users may find ads intrusive and negatively impact the user experience.
  • Revenue may be unstable and depend on factors such as ad quality and user engagement.
  • Can be difficult to strike a balance between ad revenue and user experience.

6- Sponsorship

Sponsorships are a good business model if you’re building a media experience and can work on a certain creator platform type of apps. They’re certainly not the most straightforward to design or build as they require a network of deep-pocketed companies ready to pay for a mention.

I’m putting both this and affiliate marketing at the bottom of the list because—while interesting—they are quite hard to pull off and require a lot of time building a personal or business network without any guarantee that you’ll make a profit one day. Not easy!

Pros of sponsorship model

  • Can generate a significant amount of revenue from a single partnership.
  • Can increase brand awareness and credibility for the app.
  • Can provide opportunities for cross-promotion and collaboration with partner brands.

Cons of sponsorship model

  • Finding the right partner can be challenging and time-consuming.
  • The partnership may not align with the values or interests of the app’s user base.
  • Sponsorship deals may not be consistent and may not provide a stable revenue stream.

7- Affiliate Marketing

It’s not typical to have mobile apps making heavy use of affiliate marketing practices; this is more popular in the blogging scene as the medium makes it easy to share information related to certain products and services. However, some apps like publishing apps may well have integrated browsing experiences which can turn affiliate links into direct purchases.

Pros of affiliate marketing

  • Can generate revenue without the need for in-app purchases or ads.
  • Can be a low-risk way to test out different revenue streams and partnerships.
  • Can provide users with relevant and useful product recommendations.

Cons of affiliate marketing

  • Revenue is dependent on user purchases and can be unpredictable.
  • Over-promotion of products or services can negatively impact the user experience.
  • May require significant effort to identify and establish profitable partnerships.

What Business Model Will You Choose for Your App?

hire a pro to build the app in 21 days mvp launch checklist 8

Depending on whether you are selling to other businesses or to consumers, we’ve highlighted some of the most interesting business models to consider when building a mobile app.

My personal recommendation is to focus on business solutions as they are a lot less competitive than consumer ones and require less volume to become profitable.

LowCode Agency no-code agency helps with the tricky technical parts to implement in your app so that you can focus on the business model, grow the company, and make the profits.

See how much yours would cost »

Frequently asked questions

Depending on your target audience, some examples of business models are using monthly subscriptions to give access to the entire experience (or parts of it), gating features behind paywalls—such as additional user seats—or using in-app purchases and advertising.

To design a business model that’s profitable for your app, you need to consider your target audiences’ needs and wants closely. Selling to a business user will not be the same as selling to a consumer—they are more likely to want peace of mind and return on investment.

bio picture of jesus vargas

Jesus is the founder of Low Code Agency: a low-code development agency that allows small business owners to get their mobile and web apps done fast and cost-effectively while maintaining quality.

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Looking To Generate Revenue From Mobile App Development? Here Are 10 Profitable Business Models

Looking To Generate Revenue From Mobile App Development Here Are 10 Profitable Business Models

Mobile app development involves expenses. You have to pay your developers if you’re working with full-stack freelancers or you have to pay the mobile app development company you are collaborating with. There are marketing and promotional expenses that you need to take care of and then there are expenses involved in lead acquisitions as well. Obviously, there are tons of hidden costs such as operating expenses, overhead costs and more.

At the end of the day, you want your mobile app to generate revenue and fetch you profits. Well, that is the very basis of your app’s existence and why you decided to work on an ambitious project in the first place.

However, generating revenue from mobile app development is not simple anymore. With Apple App Store and Google Play Store housing 4.4mn and 2.9mn apps respectively, there are obviously a massive amount of market players eyeing on your customer’s revenue at the same time as you are.

So, how do you get your customers to spend not just time on your app but money as well? How do you turn your mobile app into a revenue-generating medium that operates on autopilot?

Well, this is what we will explore in this extensive article on the different types of business models you can implement for your mobile application development project.

Let’s get started.

Key Mobile App Revenue Statistics

  • The mobile app revenue market reached a value of $111bn in the year 2020.
  • The iOS app market has been solely responsible for close to 65% of the total app revenue.
  • The gaming sector had the largest market share (71%) with respect to app revenue generation in 2020.
  • Revenue from subscription-based services also increased to $13bn in 2020.
  • Users spend an average of $380bn just on in-app purchases globally.

Top Business Models For Mobile App Development

Freemiums

Sounds ironic, right? How could something that is free help you generate revenue? Well, that’s what freemiums are all about. A blend of two words - free and premium - freemiums, are apps that are available to users for free. However, they come with tons of options and features that could be availed by users for enhanced user experience by paying a small fee or price.

To throw in some surprise, 98% of all the revenue of Google Play comes from free apps.

Freemiums are ideal to get the word out for your app, get more users and retain them. You could cover your mobile apps development services expenses by limiting some premium options and features to paid users. When your app is too compelling, your users wouldn’t mind paying to get the complete experience your app offers.

For instance, if you’ve developed a diet and nutrition app, your paid features could be a consultation with a nutritionist or the preparation of a personalized diet chart. These micro modules are less expensive from a customer perspective and would ensure cash keeps flowing into your business.

Subscription Model

Subscriptions

Evolving from the good old days, where you would pay an annual or a quarterly fee to get your favorite magazines and newspapers delivered to your home, subscription models are a current rage in the app market.

This model became more prominent after video and audio streaming platforms like Netflix and Spotify deployed it to generate revenue. For the uninitiated, a subscription-based model lets your users pay a monthly, quarterly or a yearly subscription to avail all the services your app has to offer. When the subscription gets over, the app’s features and experiences get automatically disabled.

This is ideal for those who wish to block ads and experience uninterrupted app sessions. One of the advantages is that this model need not be your only business model for your mobile app development solutions project. This could be an addition to another business model.

For instance, you could have an on-demand app and still have subscription-based services to fast track deliveries and prioritize shipments like home Prime membership works.

Advertisements

Advertisements

Advertisements are one of the major sources of revenue for app developers. In this model, developers offer real estate for brands and businesses to showcase their products or services, deals and discounts or more in their app to capture eyeballs and possibly redirect traffic.

By displaying advertisements, developers can stay away from asking money from their users and keep their apps free. Their mobile app development expenses could be compensated through brand collaborations. Ideally, small businesses have to show some initial traction to be eligible to display advertisements by having a minimum amount of regular app usage and retention numbers.

Once the threshold is reached, brand collaborations happen on auto-pilot. Once ads keep coming in, developers can roll out ad-free experiences at a cost as well.

Sponsored Campaigns Or Posts

Sponsored Campaigns Or Posts

If you have a market aggregator service or an app, you could generate revenue by offering premium spots on search results to your customers. As an online marketplace, your customers are going to search for products and services and click on the first few links that are displayed.

You could let your brands and businesses pay for the top spot and appear as premium sponsors to get the immediate attention of your customers. This helps the brands get traffic and ultimately sales and you get revenue in return. On-demand healthcare apps have featured doctors, matrimony websites have featured profiles, restaurants have top restaurants and more.

Affiliate Marketing

Affiliate Marketing

One of the other interesting ways to generate revenue for your mobile application development project is through affiliate marketing. If you didn’t know, close to 15% of all the revenue of digital advertising revenue comes from affiliate sources.

Affiliate marketing involves letting interested people become official members of your app and promote it to their followers and users. To do this, they get a percentage or cut from the sale that happens through their affiliate link.

This is an interesting concept that can help your app reach more users and generate more revenue ultimately. A lot of YouTubers, Instagram influencers and bloggers promote affiliate links that are relevant and contextual to their domain and audience preferences. This way, you ensure conversions happen for sure as well.

Paid Apps

Paid apps are straightforward. There are no hidden terms and conditions or catches. Your users pay to download and install your app. As simple as that.

The features of a paid app are all available to customers as they pay in advance to avail the entire app experience to themselves. This is highly beneficial for super-niche apps and services, where your app stands as a unique offering in the market. What your customers pay should be worth what they get for in return.

Extensive research and analysis should go into this before applying paid strategies for your mobile app development project. Also, you should remember that you don’t get the full amount your customers pay online. App stores take a small cut for all the sales that happen on the platform with some conditions on caps and mobile app downloads.

Apps like Geoshred are iOS exclusive designed for musicians. They have a super-niche customer base who wouldn’t mind paying an amount to experience the app.

App Commissioning

App Commissioning

This is one of other interesting business models for mobile app development, where you bridge the gap between the problems of a specific audience and their solutions through a mobile app development services company

You are the idea that connects skills and solutions. You commission an app and sell in the market and generate revenue in return. Close to 26% of the developers out there develop apps on a commissioned-basis and make profits.

Wrapping Up

So, these were the top business models for mobile app development. There are more creative ways to generate revenue for your mobile app. However, how much revenue can be sustained in the longer run depends on how stable and impeccable your app is.

It’s not enough to have a great idea. It should reflect on the app’s quality and serve its intended purpose. That’s where the resources and skill sets of a solid mobile app development company like ours comes into the picture.

We are pioneers in the mobile app development industry having decades of experience in app development. We know what works in the market and what doesn’t. We also offer insights on the best business models for your mobile app and ensure you reap profits quickly.

Get in touch with us to discuss your ideas and turn them into a reality.

Kulmohan Singh.jpg

Kulmohan Singh

Kulmohan Singh is a Director of Sales & Marketing at X-Byte Enterprise Solutions , decade old technology evangelist, driven by a passion to innovate and create platforms and solutions that would make the tech sphere bigger and better for mankind. Using technology differently rather than using different technologies has been the soul of managing one of the leading technology ventures in mobile and cloud domain.

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How to Make a Business Model Canvas for Mobile App Ideas

How to Make a Business Model Canvas for Mobile App Ideas

Tech Editor and Content Team Lead

Table of content

Failing to plan is planning to fail.

This is the reason why the majority of businesses fail. The business model canvas app is genius in its simplicity, helping you plan your future company.

The fundamentals of your business will be presented in a brief, structured and comprehensive way.

Note, that a model canvas isn’t a replacement for a business plan - this document is obligatory as well.

However, it plays a slightly different role. Our article on how to write a business plan for an app startup is a great introduction to the topic.

A canvas includes the essentials only. Working on this document you answer the simple, yet tricky questions like “Who are your audience?”, “How will you attract them?”, “What are your goals?”, and “What are your revenue sources”. With a clear understanding of these points, you will have no difficulty presenting them to your investors.

On the internet, you will find many step-by-step tutorials telling you how to create a business model canvas for your mobile software company. We will show you how to make it work. A downloadable canvas template is included, don’t miss it!

But let’s start with a short introduction first.

business model canvas for mobile app

Mobile app business model canvas

To make a long story short, a business model canvas is a graphical representation of your company structure. The template represents the nine basic points of any business: value proposition, partners, resources, customer segments, key activities, customer relationship, sales channels, expenses, and revenue.

Why do you need a business model canvas for application development?

Generally, this template is used when creating a new business. In the case of a mobile app, it helps determine the most important points for the planning stage. This will help protect the company from spontaneous decisions, like choosing the app monetization strategy when discussing technical assignments with the project manager.

Yet, this canvas can even be used by mature organizations to optimize processes, as well as clarify company goals and strategies. When discussing each aspect of the canvas template, the business owners and managers can spot gaps or weak points in the strategy, define future development or discover ideas regarding business optimization or expansion.

Remember that accuracy and careful planning are your friends! Spontaneity and chaos have already led lots of companies to failure.

business model canvas vs. business plan

The difference between the business model canvas and an app business plan

Despite similarities, a business model canvas and a business plan are documents with completely different formats, goals, presentation and development. Let’s take a closer look at both.

A business model canvas is a brief presentation of your business structure. It does not contain any information about your strategy and ways to realize an idea. Here, you also don’t describe your business processes and optimization. It does not contain figures and calculations.

A business plan is an extensive strategic document. It is based on the business model canvas and here you describe your strategy for developing each aspect defined by the canvas. When writing a business plan, you also include all possible calculations, graphs, and diagrams.

Let’s imagine that your business is a house.

First of all, you make the project of your house. It includes research on the area where it will be built, the architectural design, a cost sheet, and information on communications.

Only when all these documents are ready and approved can you start conducting the actual building works, starting with the footing.

So, the business model canvas is your business project. It’s a simple way of presenting information which hides a lot of work, research, and brainstorming. Only when it is validated and approved can you begin building.

The business plan is the footing of your future company. You create it only when the ground is analyzed, the idea is validated, and the project is approved.

Do you know that the majority of business plans fail when it comes to implementation in real market conditions?

Reason #1 - Bad business idea

This does not actually mean that the idea itself is bad.

The idea may be really good and successfully exist in the market in recent years. It may be an improved version of the existing application… yet the customers may be already satisfied by the existing product. They may not be ready to pay for the improvements you offer.

It means that the idea is invalidated.

How can you avoid failure at this stage? By validating the idea, of course. This is the main reason why you should start by creating the business model canvas.

As we have mentioned, the canvas is created to validate the idea. Only when you can prove the consistency of the idea (i.e. each of the nine model aspects we will describe later in this article) may you consider it validated. Only when the model is validated may you continue with creating the business plan – the implementation strategy.

cta image

Structure of the business model canvas

Having discussed the importance of creating a business model canvas for an app, we begin to consider each point of the canvas template.

business model canvas template

Although the template seems to be simple, the meaning behind its building blocks may be unclear. The nine building blocks are divided into three key groups: Infrastructure, Customer & Sales, and Finance. Hopefully, our clarifications will help you understand how to create a business model for your app.

Infrastructure

This is the cornerstone that defines the essence of your app. The model shows how your startup is different from competitors and how you will support the development process.

1. Value proposition

Customers will not use and buy an application that does not solve their problem. A value proposition is a set of advantages that your product offers to users and the reason they should pay for it. Let’s see some business model canvas examples of a mobile app value proposition:

Novelty - satisfying needs that have never existed before or that are not satisfied yet.

Productivity - increasing the efficiency of satisfying the client’s corporate or personal needs.

Price - offering a solution that is less expensive than the existing one, but that offers the same or better efficiency.

2. Key partners

No company can exist without establishing partnerships with other people and organizations. That is why your business model canvas should contain a description of your key partners and your collaboration. Let’s review possible partnership types for a mobile-based startup:

Co-founders - let’s imagine that the author of an idea is a talented business or salesperson without a solid technical background. He or she will require the assistance of a tech person, who will become the CTO and coordinate the technical side of the development.

Contractors - while developing the mobile application, you will have to sign contracts with companies that will perform different aspects of the work: software development company, marketing agency, law and accountancy firm, etc.

Suppliers - in case your digital business will tightly integrate selling, buying or producing physical objects, you will have to establish a partnership with local suppliers.

Make sure to include all possible parties required to start a successful business

3. Key resources

To start a mobile app company, you will need to possess certain physical and intellectual property, or human and financial resources that will be applied for development. According to your business model canvas, this property will be described as your key resources. Let’s review some examples:

Material resources - physical objects, such as equipment, buildings, and transport.

Intellectual resources - intellectual property, such as patents, trademarks, patterns, and databases.

Human resources - people that will work to develop your idea. This is particularly important for science-based or creative projects.

Financial resources - money assets, credits, and funds that will be used to pay for the development process.

elements of business model canvas

Customers & Sales

This block defines which customer groups the company is going to target and how the sales process will be organized.

4. Customer segments

Now you need to describe the target audience of your application. While working on this section, you should analyze your potential customers from the point of view of demographics, interests and needs. The following questions will help you:

Who are your potential users? How old are they? Where do they live?

What are they interested in?

What is their need? What are their fears?

How do they make purchasing decisions? Why will they want to use your app?

This analysis should result in a buyer persona - a detailed description of your ideal customer. Understanding who your client is and what his preferences are will help you to make a product that better corresponds with his needs.

5. Key activities

How will you reach your customers and bring your value proposition to them? The key activities block of your business model canvas will help you answer this question.

If your company is thoroughly digital, key activities will focus on online marketing campaigns (email newsletters, social networks, online advertising, etc). Applications related to the physical world will also have to focus on creating a physical infrastructure: warehouses, distribution centres, shipping points, etc.

The main objective of this block is to think of the best channels for your product promotion.

6. Customer relationship

Here you will have to define how you will interact with your customers and support them. Let’s see how this process can be organized.

Personal support - direct communication of the customer with a company representative.

Self-service - the company does not communicate directly with customers but gives them all the necessary tools to do everything on their own.

Automated service - a more advanced form of self-service combined with automated tools like chatbots.

Community - creating communities where customers can exchange their knowledge. This form also helps the company better understand the needs of its customers.

7. Sales channels

How will you sell your value proposition? Think about this while completing this block of your canvas.

In case of a mobile app business models, the main options are applications for Android and iOS. You could also consider selling your product via a website, email campaigns, social networks, etc.

The final part of your business model canvas will describe your app’s two main money flows: expenses and revenues. Here you should oversee all possible expenses and consider product monetization.

8. Cost structure

The more expenditure items you oversee, the fewer challenges you will encounter while developing your app. Let’s review the expenses you will encounter for sure:

Organizational costs - establishing of your company as a legal entity with legal and accounting services.

Office, necessary equipment - everything you need to have your company up and running.

Development costs - hardware, the work of your software development team, maintenance of the online platform.

Human resources - employee salaries.

Marketing & advertising

We also recommend that you reserve some budget for unexpected expenses. It is always good to play safe.

9. Revenue streams

How are you going to monetize your application? Let’s review some possible options:

Revenue for selling the value proposition (selling the physical goods, commission, subscriptions. etc).

Advertising (you can use your platform to post ads).

Brand usage (when your app becomes a recognizable brand with a registered trademark, you will be able to charge for use of the brand)

Tips to create a business model canvas

Tips for creating a business model canvas for mobile app

Hopefully, our guide helped you understand what information you need to create a business model canvas. However, we understand that the most difficult part of any activity is deciding what to start with. So, keep reading the article to find some organizational tips!

Preparatory stage

Hopefully, before creating a business model, you have already conducted basic market research and studied competitor businesses. For clarity, you can even create a canvas describing their business models.

Brainstorming

The best way to create a canvas is to brainstorm it in the small teams of 3-5 decision makers (founders and co-founders of the business, C-level officers). You will also need:

A printed or drawn canvas template on a big sheet of paper You are welcome to download our free PDF with the business model canvas template. Print several copies since your canvas will likely go through multiple iterations.

Lots of markers and sticky notes

45-60 minutes

When brainstorming, do not forget that the canvas should contain only the basic points - leave strategic issues for the later. For your convenience, make the process as logical as possible, for example:

Connect each point of your value proposition to the corresponding block

Do not mix up actual ideas with future plans

Do not mix up ideas from different departments

Following these simple rules will help you move onto the next step.

Having finished brainstorming, put your canvas aside and return to it in a few days. This will help you review it with more objectivity. Create a checklist with criteria for the canvas evaluation. For example:

Will the customers pay for your value proposition? Why?

Is your model scalable?

Will it be able to produce stable revenue? When?

Is it protected from the competition? How?

If you are not satisfied with the answers, you can repeat the brainstorming session and make corrections to the model. Make as many iterations as needed, until your business model meets your expectations.

When the model is ready, you can save it in a digital format using canvas business apps like Canvanizer or just scan your paper business model. Now you are ready to share it with your partners, investors, and vendors.

By the way, a ready business model canvas is very helpful when starting your cooperation with a software development company. It gives your partners a brief overview of your app’s purpose and business strategy.

How to create a business model canvas

Let’s summarize the main points of the article:

Canvas is a powerful tool that will save you lots of time and money.The more attention you give to creating a canvas, the fewer challenges you will encounter later.

Business model canvases for apps and app business plans are not the same! Keep in mind the difference and don’t go into details when working on your model.

Use the printed business model canvas template to not forget any of the critical blocks.

Now you know everything about creating a business model canvas. You are closer to the successful implementation of your idea and prepared to all the challenges and unexpected expenses.

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How to Create a Convincing Business Plan for Your Mobile Apps?

business plan for mobile app

Steps To Create a Business Plan For Your Mobile App

1. detailed summary, 2. company introduction, 3.  all about the industry, 4.  marketing strategy, 5.  operational strategy, 6.  financial plan, why make a mobile app business plan, magnetizing investments, reducing the risks, helps you keep everything in perspective, wrapping up.

Having an app idea is simple. But planning the business needs is quite tedious and crucial!

If you choose to develop an application without doing the research, then while characterizing the audience, and planning use cases and features that will interest that audience, you risk developing a product you assume individuals will need, but in reality they don’t.

Therefore, having a business plan for a mobile app is crucial. A business plan not only helps in the initial planning and discovery phase of a project, but also acts as a reminder of all the critical aspects that should be taken care of during the mobile app development. 

So without further ado, lets move on to our main discussion “How to build Business Plan for a Mobile App Startup” or “How to Write Business Plan for Mobile Application Idea?”

Startup costs

You have to start somewhere! Thus, a short overview of your detailed mobile app business plan is something you must pay special attention to, since this is going to be the first thing that the potential investors will encounter. 

Things that make this section ideal are – convey more while writing less , refrain from mentioning the working of the product, and so on . Instead, focus more on market scenario, targeted users, and make sure you implement the below mentioned steps –

Focus on problems addressed

‘Problems’ are something that always prevails. Meaning, there is always room for improvement and innovation. What you are supposed to do here is analyze the problems users are facing with the existing solutions and find out –

  • The needs and demands of the users at the moment 
  • Problems users are facing with the products similar to yours
  • why these solutions fail to satisfy – what are they lacking that you can provide in a better and different way.

State your proposed solution

Try not to divert from the path of the problem while explaining its solution, i.e., do not go into the functioning and features of your app, rather stay focused on the problem and the ways in which your app addresses them.

Business Plan for Your Mobile Apps

Unique Value Proposition

This is where you can boast of the things that differentiate you from other organizations and solution providers, something about your app that is unique in itself. Not just better but definitely different. For example, the USP for Domino’s Pizza is “You get fresh, hot pizza delivered to your door in 30 minutes or less or else it’s free.”

End objective of your app

After everything’s said and done, it all comes down to this – The goals you plan to achieve with your app. 

You MUST state the vision of your app’s future, i.e., how many downloads you are initially expecting on your application, how much profit you are expecting, and much more. It is best to visualize your short-term plans and then improve your answer through metrics.

Advice

The next step while making a detailed and convincing business plan is to prepare your company’s information. Since the future is unpredictable, the things you have mentioned in the above section may not be as appealing to the investors as you may conjecture. 

Firms like Y Combinator, TechStars, to name a few, are known to select startups for funding based on the team and the founders. So, you see how crucial this section just became for you. Moreover, it would add as a plus point if you could provide information about the MVP or a prototype you have developed.

The things you should cover here are –

Provide an overview

There are some questions that you need to address in this section to help investors understand your organization and develop trust in it.

  • Type of entity – Are you an LLC or privately owned organization? 
  • Location – Where is it housed?
  • Duration – When was the organization established?
  • What is the team size of your company?
  • Do you operate off-shore as well or not?
  • What are the problems your company is currently going through?
  • What is the ultimate goal of the company?
  • What is your vision?

Advice 1

Take it from the top

Like a novel, you must tell the story of your organization while briefly touching on all the preliminary motivations, business app ideas, problems, etc. that you encountered at the time of its inception.

List everything about the history of your company that is worth knowing, since it could be a lot damaging if any crucial information is withheld from the investors and is revealed later. It can include the locations you have operated in, early hires, major pivots, product launches, and such.

Management team

Remember each and every person in your company is an important cog in your organization’s machinery. This is why you are required to mention the names of all the members of management with all the relevant information related to them, i.e., qualification, professional experience, expertise, KRAs while mentioning the organizational hierarchy.

Advisory panel

Almost every mobile app development company is backed by an advisory team. The panel consists of industry experts with years of experience under the belt. More often than not, they are the makers of some successful apps. Creating a list of such advisors can immensely improve your brand image and credibility, boosting the chances of getting funds.

Essentially, your end product is going to target a particular industry. Hence, it is obvious for you as an entrepreneur to know every grain of major information, from market history to current trends related to your targeted industry.

Market size

The most basic thing that you must know and also showcase in your app startup business plan is the size of the market. This includes – total available market (market demand for the app), serviceable available market (number of users you can target say in 3 to 5 years), and serviceable obtainable market (the segment of your initial users in 6 to 12 months).

If you are wondering how to do so then, you can always refer to the credible data provided by some trusted third-party platforms, namely, Sensor Tower , App Annie , and Statista .

Keep updated with market projections

You need to understand the market’s past and present to gain insight into future predictions. The best thing to do here is to compare and analyze the market size of the past 5 years, mention the number of new entrants in the industry, the number of total fundings, and so on.

Advice 2

Competitors analysis

Competitive analysis is an indispensable element of any business on this planet. Regardless of the organization type, industry, size, etc. – all religiously perform this step. 

Various models around this have been devised to gain the attention of angel investors. Out of the many, the one we recommend is the 2 x 2 matrix model, in which variables portray these four aspects: challengers, leaders, niche players, and visionaries. In order to highlight the execution and vision of the app as it progresses, these four elements are displayed via an x-y axis scale.

Self-assessment through SWOT

SWOT analysis representing four components – Strengths, Weakness, Opportunities, and Threats is used for self-assessment by all organizations. It enables you to give a structured description of your company’s situation in an efficient way in your business plan for app development .

Advice 4

Acting as a bridge between your app and the end-users, a solid mobile app marketing strategy wields the most power. Your role is to devise such a marketing strategy that acts as a ‘deal-sealer’ between your firm and the investors. This will show the investors that you have the medium to make your app reach the users’ smartphones from an app store.

These are some points that you can include in your marketing strategy- 

Describe the user persona first

Creating user personas is very beneficial . This is something you would be able to identify while you are doing your research on the market. In case there is more than one user personas, you must mention them in your app development business plan . The more in-depth it is, the more promising your business plan seems to the angel investors.

The said information is to be included in the user personas – Age, Gender, Occupation, Location, Income group, and Marital status. Other information that is classified as psychographic data includes attitudes towards money (price-sensitivity or value shoppers), the context of app usage, personal/professional aims, hobbies, preferred sites and apps, tech-savviness, and so on.

Customer acquisition strategy

Once you have identified the user personas of your app, you can determine your customer acquisition strategy. One thing you have to be absolutely sure about is your CAC (customer acquisition cost). You will be able to estimate the right cost once you have established which channels and campaigns you will employ in marketing your mobile app business strategy highlighting your app’s USP (unique selling proposition). 

Here are some channels that you can try to achieve great results –

  • Incentivized user downloads
  • Search engine marketing
  • Organic installs
  • Social media (Facebook/Twitter/Instagram) ads
  • Partnerships
  • App store optimization
  • Content marketing
  • Push and in-app notifications
  • Retargeting campaigns
  • Mobile site redirection
  • Mobile app wall ads
  • Email marketing
  • Event marketing

Advice 5

Product driven growth

Change in product driven growth is one of the most common elements of pivoting a startup . If your business model needs a large mainstream user base, then it is of utmost prominence for you to build a referral program in your mobile app business model to leverage network effects. A well-known and effective mobile app business plan example is Uber. For instance, Uber offers a coupon on the users’ next ride as a reward for referring to others and the referred person also enjoys coupons on the first ride.

Make a landing page

A landing page can really help you in numerous ways. One of which is that it can help you expand your horizons in terms of target users. It keeps the readers informed and updated about innovations and further updates of your app. One thing to keep in mind whilst doing this is to make sure it contains the name of your app, its description, promotional videos, etc.

Read here

Define your key metrics

There are several metrics on the basis of which you can measure your business growth and popularity of your mobile app. This is something that you must include in the web or mobile app business plan . You have to be careful while picking the right metrics suitable for your business model. An example – if your app is a social media application, then your ideal key metrics should be the daily active users instead of the number of downloads.

Advice 6

Stating the strategy regarding your daily operation imparts an impression of awareness and readiness on your part to the investors, something which always works in the favor. This also includes your strategy for customer relations.

You must describe and map out how you are going to handle customer services and maintain quality assurance. It also includes how you are going to perform the app development process and manage it. Other things to cover in this section are-

Users Process

You can mention information such as how your users are going to behave from the start to the end, i.e., when they first hear of your app and start using it. 

Personnel plan

This outlines all the data related to the employees. It concerns how and when you will hire the employees, how salaries will be expensed, how will you set the hierarchy in the organization and so much more. 

It is the stage where you could literally say “Let’s talk numbers”. What the investors would want to see in this section are the answers to the questions – how will you make money? What will be the cost to run the business? What will be the financial plan for mobile application? And how much funds do you need?

Devise an app monetization strategy

Just like for marketing, you need to have an efficacious mobile app monetization strategy ,  something that we have also covered in detail in our article named “ How to choose the right pricing strategy for your mobile app project ”. 

Startup costs

According to CB insights , 19% of the startups fail because they get out-competed.  In the graph below, you would find that 29% of the startups get shut down as they run out of cash.

business plan stats

You can avoid this fate by analyzing the costs you may need. Similarly, it is crucial for you to mention to the investors all the details related to the costs and expenses you would be needing and for what.

Since the devil is in the details, here is what you should include – one time costs, recurring costs (rent, inventory, etc.), fixed costs (rent, utilities, etc.) variable costs (i.e, the salary of employees) and a lot more.

Funding needed

It is here at this stage that you are going to ask for the fundings and reveal all the information related to it. Address these questions in this section –

  • How much money do you require?
  • What percentage of equity are you proposing to give in return?
  • Is this going to be a convertible note or a preferred stock?
  • For what duration this money will suffice before you need to propose for another funding round?

Now that we have discussed in detail about the steps to create a business plan, it is now time to sit down and ponder on the “why” of creating a business plan for your mobile application. 

According to Statistics, in 2023, mobile apps are projected to generate more than 935 billion U.S. dollars in revenues through paid downloads and in-app advertising.

Mobile-app-revenue

Another report by Statista states that by 2023, it is estimated that the annual number of app downloads worldwide will amount to 299 billion .

Now you can see the importance of mobile apps and the importance of making a business plan for your mobile app.

The most obvious reason why mobile app startups make a business plan for developing an app, as you might have surmised as well, is to bring in more and more investments. This is to attract investors and even start-up co-founders – the choice is yours to make, and sometimes you need to have the support of both. 

An efficacious business plan will help your vision be represented in a crystal-clear way while displaying the scope of your mobile app concept and business app ideas as well.

Un-planned actions pertain to risks, and risks in business are synonymous to cost-inefficiency and loss.  

When you devise a business plan, you actually map out the whole journey of your business, something that can provide you great insights into the many unanticipated and probable risks. 

When making big decisions, it is common to forget and leave out certain important aspects that can make or break the foundation of your business at a much later stage. However, when you have a blueprint including a set of points acting as a reminder of those crucial aspects, it becomes easy for you to remember them. Mobile app development business plan is that blueprint. 

Regardless of what category your mobile application belongs to, the business plan for each one is essentially similar, for the most part. A business plan is static in contrast to a business proposal for an app , which is dynamic. This is because it is a document created only once and is not rewritten after the purpose is fulfilled.

We hope that this article has provided you with detailed and good insights on business plan for your mobile app. If you need any assistance on mobile app development services, then you can opt for Appinventiv, a top mobile app development company in USA for quality results.

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How to Write a Business Plan for a Mobile App Startup?

Anton Baryshevskiy

Anton Baryshevskiy

Head of Business Development, Co-Founder

Anton Baryshevskiy

Head of Business Development

Get your project estimation!

How to Write a Business Plan for a Mobile App Startup?

If you’re on the threshold of launching your mobile app startup, there are numerous things you need to be concerned with: workload, core concept, budget, product implementation area, employees… You need to rightly put all key elements of this puzzle together to provide a clear roadmap for your project — that is, to compile a business plan for mobile app development.

We at Mind Studios know how to make a business plan for an app. Here, you'll find a complete guide to creating a business plan. Also, we’ve added our template to help all stakeholders and investors have a clear and most importantly, equal understanding of your startup idea. So if you don't know how to plan an app yet and where to start, let's find out more about it.

app development business model

A business plan is a guide that turns your ideas into action

As a rule, you should start with visualizing the project and formulating its key ideas. They will later become the basis of your business plan.

Another vital component of developing your project is writing a product requirements document (PRD) for your app. It consists of three sections: business requirements, user requirements, and software system requirements . The business plan is, actually, a component of the PRD, namely the business requirements part.

app development business model

All the preceding processes, such as developing a project vision, core ideas, and concepts, creating an app development plan, and drafting a PRD, allow all stakeholders to be on the same page as the startup's founder.

In this post, we’ll go through how to write a business plan for an app startup.

Some statistics

Still not sure if your startup needs a business plan? Numerous studies back up the value of having a well-thought-out business plan for companies on different stages of their business journeys.

According to one study that involved 3,000 company owners from diverse fields, those with business plans were almost twice as likely to succeed as those who didn’t. Furthermore, such strategic-planning companies were more effective in attracting investment or securing loans.

You can find more detailed information in the diagram below:

Some statistics

If your way is developing a mobile application

As of 2021, people have made 230 billion downloads of mobile applications, up by 63% than in 2016. Everyone appears to require mobile solutions these days, so your startup has a lot of room for imagination. You can choose from a wide range of mobile app types. To name a few, it could be a travel, event planner (here's an event app development guide), money management, social networking, or fitness app.

app development business model

No matter which one you decide to create, a pre-written mobile app business plan can help you seamlessly go through the mobile app development process with its four fundamental stages : discovery, idea validation , design, and actually, development.

A goal without a plan is just a wish

There is a plethora of mobile applications these days. It means, though, that there are hundreds of almost identical apps in each category. Attracting users becomes a task of utmost importance.

Chad Mureta, an app tycoon, says that a developer’s profit directly depends on their knowledge of what’s interesting to the user; that is, to create a successful and profitable application, a developer should think like a user .

Creating a mobile app business plan template based on thorough user analysis will help you explain your business idea to stakeholders. Also, you’ll see a path to a product-market fit. To make that happen, you should determine what your target audience wants, needs, likes/dislikes in competitors’ apps, and tends to expect from using your app.

Therefore, identifying your target audience preferences should be your priority, as it is one of the main drivers of your startup.

Understanding the market is the key to success

The author of the bestseller 4 Steps to Enlightenment. Strategies for creating successful startups , Steve Blank, suggests that very few people understand where their market is. The writer believes it is almost impossible to launch a thriving startup without analyzing the market it’s going to enter.

Before you start writing a business plan, it’s crucial to figure out not only the degree of public interest in your product but also the level of competition in the market you’re going to enter.

Thanks to the preparatory analysis of your rivals and potential app users, you’ll be able to flawlessly identify your product’s objectives, advantages, and unique value proposition (UVP). This will also help you form the basis of a proper business plan.

Review your business plan annually

Steve Blank claims that a business plan is static in contrast to a business model, which is dynamic. A business plan appears to be stable by definition: that’s a document created once and rarely revised after adoption.

But in our quick-to-change world, do you believe there’s anything that could remain static? Especially in terms of business? Investopedia , for example, shares an opposite to Steve Blank’s statement: A business plan should evolve in tandem with a company’s growth.

We at Mind Studios adhere to the last approach and recommend you go through your business plan for an app at least once every year . It will allow you to respond to changes in your users’ demands and assess what goals you have achieved and which ones you still need to accomplish.

Moreover, refreshing a business plan will enable you to keep your finger on the pulse of your startup’s current and upcoming financial needs and, therefore, help you develop efficient strategies to attract investments. Consider it a dynamic document that adapts to your startup’s development path.

Why should you make a business plan for apps?

In addition to helping you get your startup off the ground, a viable business plan acts as an indicator for investors to consider it as a potential asset.

app development business model

Let’s summarize the main reasons why your mobile app startup needs a business plan:

Reasons for a mobile app startup to draw a business plan

Both startups and established businesses need business plans, the content of which will depend on the company’s primary goal.

To attract partners, startup owners tend to use a business model canvas — a more flexible model of the traditional business plan. It can seamlessly adapt to the iterative nature of tech startup development, yet providing core information about a project.

However, the business model canvas for an app does not guarantee 100% success; it can only be one of the components that will help your project attract investment. A comprehensive business plan with a detailed description of your company and mobile app, justification of funds use, and coverage of all legal concerns is what can instill trust in all stakeholders of your project.

app development business model

Is there a difference between a business plan for a mobile app and other software?

There are obvious distinctions between mobile applications, websites, and other software solutions. They significantly contrast in marketing approach, monetization strategy, and feature sets. As a result, business plans for these solutions will differ as well.

A traditional software development business plan might be structured similarly to a business strategy for a mobile app company. However, any document that presents the firm and its product will be distinctive in content. It is reasonable since each project is unique, with its own goals and target audience.

What does a business plan for a mobile app look like?

Four core blocks of a business plan for a mobile app

Your mission is to create a reliable and stable mobile application for either enterprises, individuals, or non-profit organizations. In this case, a business plan will help you pave the road to make your project profitable.

Therefore, when writing a mobile app business plan for startups, you’ll need to estimate the cost of development and commissioning as well as the timing of the return on investment in your project. Only by doing this, will you get a clear picture of your app’s viability.

One of the essential factors in writing a good startup business plan for a mobile app is delivering maximum transparency at each part. Let’s highlight what you should include in your mobile app business plan to make it serve your business in the most effective way possible.

Executive summary

Let’s start with the executive summary . It is the first and most significant part of your mobile app business plan because it’s the first thing an investor will read. The executive summary should be clear and concise, with no detailed information about how your product works. Address the situation in the market, who your target customer is, and what unique problem your application can solve.

Make your proposal unique to distinguish your company from others. In other words, create a unique value proposition (UVP). Use your imagination: consider your executive summary as a movie teaser and your investor as a spectator. Would they like to see your movie?

Specify your goals . These objectives should rely on your business analysis. Investors will examine your aims to see if they satisfy their needs. You also have to determine the ultimate goal of your exit plan . Furthermore, you should establish a list of funding requirements and the proceeds that will be used to boost the attractiveness of your company. One of the essential factors in the startup business plan for your mobile app success is ensuring maximum transparency at each stage.

Make your document convincing . To do this, ensure your product’s concept and goals are crystal clear and do not vary throughout the paper. Provide the reader with accurate data and realistic expectations about your project. Of course, don’t forget to make sure that the name of the person who created the business plan and executive summary and the names of your team members are consistent throughout the documentation.

Business description

Introduce your company in this part, beginning with corporate information and ending with your mobile app concept. This part of your startup business plan will show investors the corporate values of your company, your mission, product vision, and the fundamental factors for your startup success.

This information is vitally important for investors. For example, a technology startup accelerator Y Combinator considers getting money as by far the easiest part whereas working on ideas — the most significant part for any startup in achieving success. In most cases, Y-Combinator-like organizations make compiling a thorough business plan a prerequisite before introducing newly-formed projects to investors.

app development business model

Company overview

Here you should describe your company’s:

Company's overview

This section should give the reader of your business plan detailed information about your startup: the official name of your company, the location of the headquarters, and its structure, namely the business entity type (LLC, corporation, etc.). Make sure to provide further details about your team, such as the number of workers, their names, job titles, and so forth.

Describe the purpose of your company and the fundamental principles that guide your business in the mission statement. After establishing your mission, outline the primary challenges and solutions your startup can offer.

app development business model

Company history

Before making any business proposal, describe the history of your company, how your team formed, and how you came up with your idea. In addition, you can talk about the main stages of your company’s development and the experience that precedes the product launch.

Whether you are outsourcing app development process or you have an in-house team, it is often the most significant part of the executive summary because your app development team is the main engine of your project implementation. You should specify each person’s name, position, work experience, and responsibilities in the company. In addition, you can involve an advisory group that will help you make essential decisions. Consultants on your advisory team should have experience in the industry.

Market analysis

Information about the state of the market should be the main factor in your app idea realization. You should be aware of the present situation in your industry, have up-to-date information, and be able to generate a short-term forecast.

To conduct market analysis , you should take several steps:

  • Examining existing business environment
  • Defining your market research criteria
  • Determining your total available market (TAM), service available market (SAM), and service obtainable market (SOM)
  • Identifying your direct competitors
  • Analyzing your target audience and figuring out the cost per acquisition (CPA) for your niche

No market research in the mobile app industry can be conducted without analyzing Google Play Store and Apple App Store with their ranks for top paid, top free, and top-grossing apps as well as user reviews.

Market forecasts

Forecasting is an integral component of writing a business plan for an app development startup realization.

Forecasts from reputable research firms such as Nielsen and Forrester are of interest when creating any business plan, be it a business plan for an app development, a website, or a traditional software startup business plan. To provide reliable market forecasts, you can:

  • Include data on the growth of companies with solutions similar to your mobile app
  • Add information on the amount of money poured into similar startups (platforms like Crunchbase or Y Combinator can help with this)
  • Enrich your business plan with some forecasts on your target customer behavior

Your goal is to assess whether there’s a real market for your product, whether there are enough customers in the market, and, accordingly, whether those customers are willing to pay money for using your product.

app development business model

SWOT analysis

SWOT analysis: Strengths Weaknesses Opportunities Threats

A SWOT analysis is a strategic planning method that allows you to present a structured description of your business situation. It can be a great way to evaluate your app startup concept from four perspectives. Namely, its:

  • W eaknesses
  • O pportunities

It’s natural when a business has weaknesses: knowing about them will serve as a powerful driver for finding solutions and will reduce any risks your company may need to face.

Marketing strategy

An app marketing strategy is a bridge that allows your product to fall into the hands of your customers. You have to convince investors that you have such a bridge. This is an important part of the mobile app strategy.

When drawing up a mobile app marketing plan, you have to define the marketing strategies you intend to use in application promotion. Here are a few examples, along with descriptions of how they work:

Create a landing page

Landing page for a mobile app example

Creating a landing page for your mobile app will help you reach a wider audience by informing users about new features and updates. Make sure your page contains the name of the application, a description of its functionality, promotional videos, and so on.

Launch a website and blog

Launching a website is a great way to promote your application. There, you may, for example, provide more information about your company, its goals and values, and an overview of your future mobile solution.

A website blog is also a helpful thing with your app advertising. You can share news on your upcoming product and publish SEO-optimized articles for better promotion.

Social media marketing

Consider social media marketing while developing a business strategy to promote your app. Describe how you intend to use this form of advertising at various phases of your mobile solution development: before launch while attracting your audience and retaining users.

Estimate your marketing budget

You may estimate the cost of marketing services based on the market analysis you outlined in the preceding section of your business plan. Understanding the marketing budget is essential to all parties: you, the app owner, investors, and other stakeholders.

Product growth

Depending on the type of app startup, growing the user base approach differs, as does the business plan for entering different markets. For example, a massive advertising attack tends to make sense in markets where consumers understand your product or service and its usefulness.

Take, for instance, Uber , which has successfully launched extensive marketing campaigns. The company’s ads have spread globally with Uber localizing advertising for each region.

So, if you’re still working on a business strategy, think about how you’ll expand your user base in advance. This will tremendously assist you in future product growth.

Choose your product launch type

Feature flagged soft launch for a mobile app

Be sure to indicate the product launch type in your business plan. There are two such types: hard and soft launch . The first one means delivering a finished product to your entire target audience. A soft launch is when you release an MVP or full version of your app, but for a limited audience.

To rightly set out this part of your business plan, you should clearly understand what kind of financing you need to move forward. Moreover, you need to express it as clearly as possible to be sure a potential investor will also understand what funding you need.

The financial model includes, as a rule, a three- to five-year forecast of all the main forecasted indicators, including profit and loss, cash flow, balance sheets, start tables, unit economics calculation as well as your app’s projected revenues and costs. Your financial document has to contain the following components to determine the actual cost and distribution of investments in the best way, with a clear explanation of each.

Startup costs/funding required

Inform your investors about estimated costs. We recommend placing reasonable estimates and leaving room for extra expenses since these numbers might fluctuate.

Designate all types of costs :

  • One-time costs (e.g. relocation costs, costs for buying an office space, equipment, servers, software, licenses)
  • Fixed costs: they remain unchanged regardless of whether you produce something or not (e.g. rent, insurance, lease payments, fixed salaries)
  • Variable costs: costs that change according to the production volume (e.g. wages)

Monetization strategy

It is another section you need to add to your mobile app business plan. By illustrating your monetization model, you’ll demonstrate to your investors and other stakeholders that your project will be profitable and provide a return on investment with positive unit economics. It will also help you be sure that your startup will reach its break-even point.

The most common ways to monetize an application are :

  • Advertising
  • Charging for the application (if your business model describes a paid application, you need to convince the consumer why they have to pay and what they’re paying for)
  • In-app purchases (this is a widespread mobile app business model in iOS and Android applications)
  • Subscriptions (this model of monetization is quite popular and works until the user decides to cancel the subscription; in most cases, subscription apps have a free trial period)

Activities Mind Studios took to build an effective monetization model for Fitr.Training

One of our prominent projects in which we’ve helped set up a monetization strategy is Fitr. Training , a remote fitness coaching application. Our team analyzed the platform’s performance and discovered we could enhance the conversion rate.

We established a monetization model based on the collected data and customer feedback. Namely, our team launched an efficient subscription option. The results were remarkable: one out of every four coaches now uses the paid membership.

Mind Studios can also assist you in elaborating a potent monetization strategy.

Business plan example for a mobile app startup

We’d like to offer you a business plan template for a startup updated to 2023. Keep in mind that, although this mobile app business plan itself is structured according to all the rules, the calculations are entirely fictional. To complement our business plan, we also provide a mobile app marketing plan template, ensuring a strategic approach to promoting your app in the competitive market. This template includes up-to-date techniques for 2023, guiding you through effective advertising and user engagement strategies.

Download the free PDF business plan template for a mobile app here .

Writing a business plan for a mobile app startup isn’t easy. As a rule, the most challenging part of developing a business plan for a mobile app idea is writing the first page. Many people in this situation rush to find and download a free copy of another company’s business plan. They mistakenly believe that someone else’s business strategy will help them achieve their goals. But it absolutely won’t!

A business plan cannot be a cloned document. It must be one-of-a-kind reflecting your passion and enthusiasm in bringing your idea into life . A successful business plan should demonstrate that your company is viable and financially attractive. The higher the viability, the higher the investment opportunity.

If you need to compile a well-thought-out business plan to attract investments and successfully launch your app, our expert team at Mind Studios is here to help .

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Business Model Canvas for Lean Mobile App Development

Business Model Canvas for Lean Mobile App Development

Customer’s expectations of what their mobile apps can do are high as they are looking for consistent quality of services and streamlined experience. Therefore, developing a custom mobile application that can retain users is not an easy thing. Being a key factor that determines the success of an application, retaining users is one of the most crucial metrics in the process of mobile app development.

By keeping a check on the current and future mobile app development trends , businesses can gain a competitive advantage that can help them attain significant growth.

First, ask yourself the following questions:

  • Who is your target audience?
  • Why they need your app?
  • How will they find out about your app?
  • Why would they download your app?
  • Which device to develop for?

The mobile landscape is rapidly evolving and to survive in the market, leveraging lean thinking would be the ideal option. It has characteristics such as small development teams, high environmental volatility, and short development cycles.

The lean canvas is incredibly useful throughout the custom mobile application development process. It is an ideal method for app development to incorporate customer validation and maximize customer value. It helps one to figure out what customers actually want.

Following are the reasons for applying the lean methodology to mobile app development:

  • Mobile app development works well with short iterations (due to smaller cycle times).
  • Early prototyping is very important in mobile testing.
  • Mobile app development requires a high degree of collaboration with customers.
  • Continuous integration is not so common in mobile testing.
  • Using lean methodology, startup can develop a mobile application in a cost-effective way.
  • It engages customers throughout the app development cycle.
  • Less wastage of time, less financial risk, and lower cost.
  • It measures how customers behave.
  • Lean approach tackles both market validation and product parallelly (using short iterations).

Lean Business Model Canvas for Mobile App Development

app development business model

Lean Canvas is a fast, concise, and effective adaptation of business model canvas which was designed by Alexander Osterwalder.  It focuses on problems, solutions, competitive advantages, and key metrics. The idea behind lean canvas is to make it easier for entrepreneurs to map out important key points so that they can get a clear and precise picture of their business idea.

Following are the 9 segments of the lean business model canvas:

In this section, you write a brief description of at least 3 top problems that a customer segment is facing. Identify pain points and understand their needs and challenges. To get a better understanding of the problem, you can conduct:

  • User Interviews
  • Surveys and other relevant Questionnaire

Search for Existing Alternatives

There are competitors of your future business and it’s important to identify them. Here are a few questions to ask yourself:

  • What products or services already exist as alternatives to what you are planning to offer in your app?
  • How else can your customers solve their problems?

Customer Segments

Both the problem and customer segments section are viewed as intrinsically connected. In this section, you have to determine your user base.

  • Who is your audience?
  • Do these people work in a specific industry?
  • Do they have specific job titles?
  • Is there any similarity in their demographics?

The Concept of Early Adopters

  • Who will come first to try your app?
  • Why will this group want your app first?

Identifying early adopters is crucial as your first version of mobile app will revolve around their needs.

Benefits of Finding Early Adopters

  • You can make necessary changes or revisions by getting feedback from early customers.
  • Early adopters will always stand behind your app and even encourage others to check it out.

Talk to your customer segments to find their expectations. Define the features your mobile application offers to solve the problems of your customer. This will help you to get started with the solution process.

Unique Value Proposition (UVP)

Defining UVP sets out the value that your mobile app will provide. It must give a clear statement to your customers; why your app is different and worth buying? By reading your UVP, the customer must understand that he found exactly what he needs or looking for.

A good UVP should be:

  • Easy to understand (in about 3-5 seconds).
  • Easily communicate the benefits a customer receives by using your mobile application.
  • Able to clearly explain why your mobile application is unique and better than competitors.

How to craft a good UVP?

  • Target early adopters: Always remember that at this point of time, your product is not ready for the mainstream audience. Your UVP should target early adopters with a clear, relevant, and specific message.
  • Focus on Benefits: Your UVP should focus on the benefits that your customers drive after using your mobile application.
  • Answer what, who, why: A good UVP should clearly and directly answer questions such as: what is your app about, who the customer is, and why they should choose you?

To find and connect with your customer segment is the most difficult thing. While there are a plethora of channels, some may be inapplicable to your mobile application. To find relevant ones, ask yourself the following questions:

  • How will customers come into contact with your mobile app?
  • From where they will first learn about your mobile application?
  • Will it be through advertising?
  • Will it be through social media? If yes, which sites?

Different stages to improve engagement over mobile:

Before Purchase

  • Social media platforms
  • Word of mouth
  • Advertising

During Purchase

  • Your mobile app or main website
  • Conversations with your team members (sales or other)

After Purchase

  • Email updates or messages on the launch of new features in your app
  • Customer feedback surveys
  • “Thank you” notes

Important Channels to Consider

Blogging, social media, push messaging, pay-per-click (PPC) advertising, cold calling, word of mouth, trade shows, and customer interviews.

Revenue Streams

Your pricing model is an important part of your lean canvas as it will help you answer questions such as:

  • Where is your money going to come from?
  • How much are customers willing to pay?
  • What’s the minimum you can charge to meet your goals?

Top 5 revenue streams: Usage Fees, subscription fees, asset sales, delivery or installation fees, and advertising.

Cost Structure

What you charge is the most crucial thing to get right as it determines your positioning. Here are a few important questions to consider:

  • What will be your total monthly running costs?
  • How much will market research cost?

Freemium – Highly Cost-Effective Model

It is a marketing tactic to fill your pipeline with potential prospects. Get users to try your service for free and then up-sell them into the right premium plan after some time.

Key Metrics

Key metrics help you to track and evaluate the success of your mobile app. Fill in the sections with key metrics that are most important i.e. metrics that track consumer engagement and usage of your mobile application.

Important questions to consider:

  • What activities drive your mobile app usage?
  • Which statistics/figures indicate how well your mobile app is doing?

Unfair Advantage

You have to mention the special and unique qualities of your mobile app that cannot be repeated by your competitors.

Following are some examples of unfair advantage:

  • Personal Authority: Being able to build a reputation as an authority in the industry in which your mobile app will serve as a great unfair advantage.
  • Community: Loyal customers, partners, and users help you to add more value to your app business. This highly motivated die-hard team will always back your application.
  • Inside Information: Having a deep understanding of the industry you serve and knowledge of pain points is an absolute advantage to have.
  • Unique talent: If your team is loaded with people who can think out of the box, you are set to win in the competition.

One Metric That Matters

There are dozens of metrics but what’s difficult is to determine which matters the most. One Metric That Matters (OMTM) is a single metric that you should be taking care of at a given point in time.

Following are some of the metrics that are important for scaling and measuring the success of your mobile app. You can choose the one according to your own business requirements:

  • User Retention: It is measured by calculating the number of users that return back to the mobile app after the first visit. You can raise the rate of app retention by keeping the app updated with the latest features.
  • Session Length: It measures the duration for which your mobile app is used or how much time a user is spending on your application. Give a reason to your users for interacting with your application every day in order to improve session intervals.
  • User Acquisition Cost: The total cost spent to acquire a customer or converting a user into customer including marketing, advertisements, and all other costs. To cut down user acquisition cost, you can boost the conversion rate and utilize marketing automation.

Challenges in Applying Lean Methodology to Mobile App Development

Lean Methodology isn’t perfect. It requires excellent documentation and a highly skilled team. There are chances of getting off-track as the outcomes are not clear. Also, excessive flexibility sometimes leads the developer to lose focus. When lean thinking is specifically applied to build mobile apps, the following types of challenges emerge:

High Design Bar: In lean methodology, a developer is trying to validate an initial concept with a series of experiments. However, the poor design can lead to negative feedback which tends the developer to give a more polish design in order to test out the hypothesis. In the case of a lean startup, the developer is often found stuck between a poorly-designed prototype (which may interface with testing) and an over-polished app (which is both costly and time-consuming).

Apple’s App Store Submission Cycle: Apple’s app store review process causes major delays between the time an app iteration is ready for release and the time it actually goes live. Because of this, it’s difficult to run an agile cycle with a required velocity and rhythm through a loop with the customers.

Mobile App Development Service That Adds Value for your Customers

Let’s Connect

Day-by-day, we are entering into an era where interaction points are going to be early and across devices of all types. Mobile apps should be designed in such a way that they leverage all those interaction points in a manner that are contextually relevant to the user. Leveraging a lean canvas for custom mobile app development is the right way to achieve success online and offline.

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Author: Rohan Sharma

Rohan Sharma is a Marketing Analyst and a B2B Content Marketer who writes impactful marketing material for a wide range of industries, notably for Ecommerce and Online Reputation Management.

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5 business models for apps

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The development of mobile applications (apps) is becoming a huge business, and it is estimated that it will be a 70 billion dollar business in 2017. The work that involves the creation, development, launch and promotion of an app is more than a lot, so its monetization – in order to recover the initial investment – makes perfect sense. And how do you make money with an app? There are several business models to consider.

What business models exist for apps?

The business models that can be implemented in order to monetize a mobile application are diverse, but not always an easy choice for app producers. Among the most current and popular choices, the highlight goes to: advertising, selling the app itself, the services/features that can be purchased within the app (in-app purchases), subscription, transaction and reference commissions.

Advertising

When it comes to monetizing an app, the most popular business model of all is probably advertising. Why? Not only because of its easy implementation, but also because of its widespread acceptance by mobile application users.

A paid app, which means a simple app purchase, which occurs as a one-time payment, is another very common business model when considering the monetization of mobile applications. However, choosing this source of income significantly affects the number of mobile application downloads, because there is extremely high competition between free apps that offer similar services. Naturally, users tend to be very price sensitive and, as such, their choice usually goes to the free option.

In-app purchases

Because of the natural tendency that users have to download free apps, producers are also equally prone to make their apps available for free, allowing the purchase of additional features within the app (in-app purchases) later on, such as the option of removing advertisements.

Subscriptions

Another business model that also permits free apps is the subscription model. This model can have many variations in terms of implementation; however, it is usually applied as follows: a free version of the app is made available, but with reduced features. Then, the users are persuaded to subscribe to the full service through the recurring payment (monthly, quarterly, yearly, etc.) of a subscription. This specific type of model is known as freemium.

Transaction and reference commissions

Another source of income that apps can adopt is related to transaction and reference commissions for the sale of goods and services from other companies. What does this mean exactly? An app that facilitates an advantageous transaction between two users can bring a transaction fee to the app producer; at the end of a game, an invitation to download a similar game can bring a referral commission to the app producer.

How to choose the right business model for your app?

The choice of a business model for app monetization doesn’t have to be limited to only one of the existing options – the truth is that this business model can include a combination of several or even all options simultaneously. There's nothing like experimenting and discovering which one, or ones, can bring bigger and better results!

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Mobile App Business Plan

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A business has three pillars: the idea, the plan, and the execution. Congratulations! You have the app idea already, now you have to step forward with a plan.

But, somewhere with all the workload, the concept of the app, hiring the right people, budget, and development of the app, entrepreneurs overlook the need for planning.

Worry not, we are here to lighten your burden with our step-by-step guide for mobile app business plan writing.

Key Takeaways

  • A mobile application business plan helps you define your marketing strategy, customer acquisition strategy, retention strategy, and strategies to achieve your business goals.
  • Craft an impactful executive summary that outlines the type of your app business, marketing approach, financial outlook, and team expertise to attract potential investors and partners.
  • Conduct thorough market research to understand market trends, consumer preferences, and the needs of your target market.
  • To ensure efficient daily operations, provide in-depth operational plans that incorporate staffing, additional services, and customer service.
  • Create realistic financial projections for sales revenue, expenses, and profit forecasts while considering contingencies & emergencies.

Let’s get started with our guide, without any further ado:

How to Create a Mobile App Business Plan: A Complete Guide

1. executive summary.

An executive summary is a quick overview of the whole business plan. From mission & vision to financial projections, it includes everything in between.

Generally, entrepreneurs write this section at the end after having the full knowledge of the entire business plan.

Begin your executive summary with a brief introduction of your business, and include other elements like:

  • Market Opportunity
  • Vision & mission statement
  • Target market
  • Unique value proposition
  • Details of your services
  • Management team
  • Financial Outlook
  • Call to action

For instance, here is an example of an app business USP’s section:

USP for PrivyConnect – Social Media App: “Connect with Total Privacy”

Our social media app is dedicated to ensuring your online interactions remain private and secure. Unlike many other platforms, we don’t share your data or personal information with third parties.

We use robust encryption to protect your messages and content, and you have full control over who can see your posts. With us, you can truly connect with your friends and family in a safe and trusted environment. Your privacy is our priority.

Note: your readers might not read the whole business plan, but they will go through the executive summary. Therefore, make sure you write it engagingly to grab their interest.

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2. Company Overview

In this section, present your business in detail. It should provide the details of your business & app name, the location of your office, the structure of your business, and other such information.

Now it is time you introduce what type of business you own, for example, your app type will be one from below:

  • Social media app
  • Messaging app
  • E-commerce app
  • Entertainment app
  • Health and fitness app
  • News or magazine app
  • Navigation app
  • Finance app

After that, mention the company history if you have any. Add the name and other qualifications & achievements of business owners. Mention the vision & mission statement of your app business along with your future goals.

In short, this section should provide an in-depth understanding of your business and business owners.

3. Industry Analysis

In the industry analysis section of your mobile app business plan, you have to provide the details about the mobile app industry. It will help you understand the market and gain a better insight into your business positioning.

Here are certain questions to ask while performing industry analysis:

  • What is the current size of the app industry in terms of both revenue and users?
  • What are the current trends of mobile app businesses?
  • Which apps are leading the industry?
  • Which mobile app concept is famous in public?

Conduction this industry analysis will educate you about the market and help you prepare marketing strategies according to the market trends.

In short, industry analysis will help to know a clear picture of the market, helping you in making informed decisions.

4. Competitive Analysis

Competitive analysis will help you identify the unique selling propositions (USP). Also, this way you will get to know your competitors.

Start by specifying who are your competitors – then compare it with both direct and indirect customers.

Now, let’s focus on your direct competitors, those similar to your mobile app. Provide an overview of each competitor, including their size and where they’re based.

Here are some questions to ask for competitive analysis:

  • Who are your primary competitors?
  • Who do they serve?
  • What are their USPs?
  • What is their pricing strategy?
  • What do they need to work on according to their customers?

A more effective way to this analysis is to conduct it from the customers’ viewpoint. You might even ask your competitors’ customers what they like and dislike about their apps to better understand customers’ perspectives.

Here is an example of competitors and competitive advantage of the app:

Competitors

SocialShield: SocialShield is a notable competitor in the privacy-focused social media segment. It emphasizes strong user data protection and secure communications. Their user base has been steadily growing, particularly among privacy-conscious users.

GuardChat: GuardChat offers encrypted messaging and content sharing. It has a user-friendly interface and strong encryption features. While their user base is smaller compared to established platforms, they have garnered a dedicated following.

PriviNet: PriviNet has made a name for itself by offering comprehensive privacy controls and anonymous user interactions. They have built a niche community of users who value privacy and user-controlled sharing settings.

Competitive Advantages of PrivyConnect

PrivyConnect’s comprehensive privacy controls and encryption set it apart as a top contender.

The app’s transparent communication and commitment to environmental responsibility contribute to its appeal.

PrivyConnect’s active community-building efforts and user engagement foster loyalty.

The app’s plans to expand into secure content sharing and social community growth align with industry trends.

This way you can get to know the USP of a mobile app development company. Once you get the USP, flaunt it in the entire business plan.

5. Market Analysis

In the market analysis section, do the market research and dive right into the market where you will be providing your app services. Begin the section by providing the details of your target customers.

Your target customers will depend on the type of app you own and the services you provide.

After a thorough discussion of the target market, discuss the market trends. Mention what your target customers prefer and what new are they looking for. For example, people might be looking for:

  • Integration of AR/VR
  • Sustainable and eco-friendly apps
  • Privacy and data protection
  • Personalization

At the end of the market analysis, do mention the regulatory environment mobile apps need to follow in the particular location.

6. Sales and Marketing Plan

Writing the sales and marketing section means jotting down the marketing strategy you will use to acquire new users and retain the existing ones.

Now it is time to mention the marketing strategies for your app, there are three phases of the launch:

Pre-launch phase

  • App-store optimization: Before launching the app, search for the keywords to include in your title, description, and other content.
  • Build a landing page: You can create a website or build a landing page to make your brand presence prominent on the web too.
  • Pre-launch promotion: Launch a teaser for your app before the release date itself. Give some special offers to the ones who will sign up even before the launch.

Launch phase

  • Deploy it on major app stores: Launch your app on all the major app stores to reach a wider audience. Make sure it is working smoothly and is free of bugs.
  • Social media marketing: There were going to be 147.2 billion annual app downloads in 2023 itself. Imagine the competition, so be sure to make your visibility strong through social media platforms.
  • Content marketing: Create blog posts, videos, or infographics related to your app’s niche. Share valuable content on your website and social media to engage users.

Post-launch phase

  • User reviews and feedback: Encourage users to leave positive reviews and ratings on app stores. Actively respond to user feedback and address issues (if any) ASAP.
  • User engagement strategies: You can enable push notifications or in-app notifications to interact with your users. You can also ask them to invite friends in exchange for a referral bonus.
  • Collaboration or influencer marketing: You can collaborate with some other mobile app companies and do cross-marketing. Influencer marketing is also a great choice.

Once you have noted down how you will acquire customers, then mention below things too:

  • Customer acquisition cost
  • Your monthly paid advertisement budget
  • Number of followers you have on social media
  • If there are any in-app purchases

7. Management Team

Knowing who is behind your app business will increase the appeal of your business plan.

The management team tells you about the people in charge of the app business. It should explain each manager’s experience, what they’re good at, and what their jobs are.

Here is an example of the management team:

Management team of PrivyConnect

Founder and CEO – Sarah Anderson Sarah is the visionary leader behind PrivyConnect. With a background in cybersecurity and a passion for online privacy, she founded the company to provide users with a secure and private social media experience. Sarah is responsible for setting the company’s strategic direction and ensuring its commitment to user privacy and data protection.

CTO – David Ramirez David brings a wealth of technical expertise to PrivyConnect. He has a strong background in mobile app development and security protocols. David oversees the technical development of the app, ensuring that it employs state-of-the-art encryption and privacy measures.

CMO – Emily Davis Emily is the marketing guru behind PrivyConnect’s success. With a knack for digital marketing and user engagement, she is responsible for building the app’s user base and promoting its unique selling propositions. Emily focuses on user-centric marketing strategies and community engagement.

COO – Michael Chen Michael is the operations expert at PrivyConnect. With years of experience in streamlining business operations, he ensures the app runs smoothly and efficiently. He also oversees partnerships and collaborations to enhance the app’s offerings.

8. Operations Plan

As earlier sections mentioned everything about your company goals, here it is time to mention how you will reach them. These goals are differentiated into two sections:

Everyday goals

They’re the heart and soul of your mobile app’s daily life, from coding and upgrades to the nitty-gritty of customer support. These are the everyday heroes that keep your app running smoothly.

Long-term goals

It’s all about milestones: the moments that make you pop the champagne. Picture celebrating your 10,000th app install, hitting that milestone sales figure you’ve dreamt of, or expanding your team.

9. Financial Plan

Your financial plan needs to have a 5-year financial forecast. For the first year, break it down into monthly or quarterly details, and then summarize it annually. This forecast should cover your income statement, balance sheet, Use of Funds, and cash flow.

Income statement

An income statement, often known as a Profit and Loss statement or P&L, displays your earnings and then deducts your expenses to know the profitability of your business. Make practical assumptions based on your competition.

Balance sheet

Balance sheets display your assets and liabilities. Although they can contain a lot of details, like equity, goodwill, other intangible assets, etc.

Uses of Funds

When you are seeking funding, this statement becomes necessary to show where you will use the funds. Here is an example of the Uses of Funds chart with the help of Upmetrics:

Uses of Funds Chart for Mobile App Business

Cash flow statement

Your cash flow statement helps you see how much money you need to start or grow your business and avoid running out of money.

Surprisingly, you can make a profit but still face financial problems that could lead to bankruptcy. Therefore, you will need proper cash flow planning to avoid such circumstances.

Why Do You Need a Business Plan for Your Mobile App

For entrepreneurs who jump into business directly without writing a business plan is like delaying their success. Here are some reasons why you need a mobile app business plan:

Writing a business plan helps you work out and make clear your business strategy. Do you want customers to pay upfront? Or there are in-app purchases? Writing this down from the start helps your team understand where you’re headed.

Finances are important

Sometimes, it takes months or even a year to cover customer acquisition costs. So, you need a plan with a solid financial forecast. A good plan lets you play with different situations, so you know how much money you need for both the long and short term.

Acquiring and retaining customers

Acquiring and retaining customers is one of the sole purposes of a business. In the business plan, you have to mention in detail about your strategies to have a clear roadmap.

Knowing Your Market

A business plan lets you identify your ideal customer profile. Knowing your customers is crucial, and having a deep understanding of your customers helps you make the correct updates to your product in the future.

Related Mobile App Resources

  • How Much Does it Cost to Start an App
  • How to Start an Mobile App Business

Download a Mobile App business plan template

Ready to kick-start your business plan writing process? And not sure where to start? Here you go, download our free mobile app business plan pdf , and start writing.

This intuitive, modern, and investment-ready template is designed specifically for mobile app businesses. It includes step-by-step instructions & examples to help in creating your own mobile app business plan.

The Quickest Way to turn a Business Idea into a Business Plan

Fill-in-the-blanks and automatic financials make it easy.

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Finally! You know how to write a mobile app business plan. Thus, you are one step closer to starting or expanding your business.

No doubt, writing a business plan is a challenging task, but it is a lot smoother with a top business planning tool . Therefore, take a deep breath and get started with your plan. All the best!

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Frequently asked questions, do i need to include information about competitors in the business plan.

Yes, in the section of competitive analysis: you need to mention your competitors and their USPs. This will help you to understand the market and know your strong points.

How often should I update my mobile app business plan?

An app business plan is a living document, you can change or update it whenever you want. Ideally, go through your plan and make changes according to the current situations atleast once a month.

Can I use a mobile app business plan to secure funding for my app project?

One of the main purposes of writing a business plan is to secure funding or get a loan. So, of course, you can present a solid mobile app business plan in front of lenders to secure funding.

How much does it cost to create a mobile app business plan?

Writing a mobile app business plan might cost from a few hundred to thousands of dollars depending on the complexity of the app, the number of integrations, UI/UX, etc.

About the Author

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Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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Top App Development Companies (2024)

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Updated: February 21, 2024

What are the top mobile app development companies on the market I should get in touch with? You maybe asking yourself this question whether you need to create an app for iOS, Android, or Windows Mobile or build a cross-platform one. By any stretch, it’s not a trivial question and to make the right choice you need to see many options on a single list to compare and make an informative decision.

Top App Development Companies

Fullestop

  • AI App Development
  • IOT App Development
  • Enterprise Mobile App and Web development

NMG Technologies

  • Mobile App Development
  • Software Solutions
  • Web Development

Light IT Global

  • End-to-end Web & Mobile Development
  • IT Consulting & Business Intelligence
  • Certified Experts & Proven Software Quality

Groovy Web

  • Complex Solutions Development
  • Mobile and Web development
  • Transparent Communiction

ELEKS

  • Blockchain Solutions
  • Security Advisory Services
  • Cloud Migration

Intellectsoft

  • Native & cross-platform solutions
  • Mobile app development services
  • Mobile app product strategy

Owebest Technologies

  • Enterprise and Consumer Mobile App Development
  • Custom Software Development
  • Digital Transformation Services

Because of the nature of the app development process, the top Android and iOS  app developers can be found scattered across the globe, from California in the USA to Europe and South East Asia. In many cases, these companies split their office between multiple locations. For instance, they may open headquarters with sales and marketing, let’s say in US, and its design and development arm somewhere in India or Eastern Europe (think Ukraine, Belarus). On the other hand, there are strong agencies that are wholly located in India and Latin America too, and the UK always has a good proportion of the top app developers.

This guide rounds up the best app development companies from multiple geographies. To cut your googling that maybe painstaking, we chose for you companies with a proven track record and a diversified portfolio; most of the top app development companies here can code for iOS, Android, Windows Mobile or go cross-platform and build a hybrid app. We looked at the strength of their UX/UI design and their willingness to dabble with new tech like wearables, AR, VR, Blockchain, Amazon Alexa and conversational bots. Finally, we did not discriminate by size, as small studios can compete with larger companies on all quality metrics.

Featured App Developers

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Our database contains hundreds of app development agencies, but you also need to know how to choose one. Brand names and awards are not enough as the app developer needs to be right for you, your business and your app idea. This brief guide helps you make a more informed choice.

Types of app developer

There are four main types of app developers, though you can find many subsets within these (such as specialization in a particular vertical or platform). Broadly, Enterprise-level companies tend to cost more but have the strongest and quickest means to develop your app, while boutiques are more like small artisans, and the final category is sole freelancers.

Enterprise (in house): Large companies that generally do everything from designing your app to building, testing and publishing it. They tend to require the largest budgets, and their designers and coders are mostly employees.

Enterprise (outsource): The main difference between these and the companies above is that these employ freelancers to work on your project. This allows for more flexibility – maybe you already have a User Interface, or have coding skills but would like something designed. It also drives costs down – app development through these companies is generally cheaper.

Boutiques: These studios can be as small as a two-person team. They take on fewer projects and deliver high levels of polish and also tend to be highly specialised in particular types of apps or industry verticals.

Freelancers: You may find one person willing to do everything (design, coding, testing, publishing) but truth be told, the people who can do all of this and do it well are few and very expensive. It’s not impossible to build an app with freelancers, but it does add a lot of work and uncertainty.

App development platforms

Years of the fierce competition resulted in mobile operating systems duopoly. Right now there are two major well-established platforms – iOS (Apple’s mobile operating system for iPhones, with several branches – the ipadOS for iPads and the watchOS for Apple Watch) and Android OS (Google’s mobile operating system that runs on varios hardware from Samsung to Xiaomi and Huawei smartphones). 

There’s also Windows 10 Mobile, although that has less than 1% of market share in the US and in all other markets is under 10%. As of October 2017, Microsoft announced that it discontinue the platform active development. with no new software and harware features to be developed.

App developer locations

As with most tech industries, major cities are the main hubs for app development because of an advantageous combination of univercities that graduate qualified app developers, designers and such and venture capital to power app development companies. Some boutique studios can be found in smaller communities, but the general rule applies.

California is the number one hub for mobile app developers, with San Francisco and Silicon Valley being the main ones and Los Angeles not far behind.  New York is probably the second biggest US city for app development, with some big name studios located there, followed by Chicago and Boston.

London is the major hub here, with a very high concentration of app devs; the north also offers some excellent studios however, chiefly in Manchester and Newcastle.

India is a very large hub for app development and the majority of devs are concentrated in three cities: Bengaluru, Hyderabad and the New Delhi metropolitan area.

Eastern Europe

Ukraine is the strongest contender for the “central hub” title of app developers in Eastern Europe, with big app development powerhouses in Kiev, Odessa, Lviv and Dnepr. And there are plenty throughout the region, with some of the best ones being in Poland, Bulgaria and Romania.

App development pricing and costs

The price of an app can vary massively depending on how complex the app is, on whether it’s just Android or iOS, if it’s native or hybrid and especially on the developer you choose.

Estimates range from as little as $3000 to $150,000 for more complex apps made by high-end developers.

Costs also change according to country and here we see the range from $10 – 50 an hour in India to $60 – 125 an hour in the United States.

If you’d like to know more about app development costs , you can also check our guides on how to choose an app developer in the US, UK and in India.

How to select an app developer

Checking out the app developer’s portfolio is always a good idea. Previous experience in your field or business sector might not only get you a better app, but a cheaper one too: the challenges tackled and resolved in making prior apps will reduce the development time for yours and it also helps if your chosen app developer knows the ins and outs of your specific industry.

Reviews and recommendations are also a valuable resource – if you know a business similar to yours, find out who made their app and whether it works and read the reviews for it in the app store.

You can also check out our marketplace for app developers, and read our in-depth guide on how to choose one.

App Developers FAQ

Our answers to the most frequently asked questions about finding, choosing and engaging with an app development company or agency.

How much does it cost to develop an app?

It depends on a wide variety of factors, from the type of app and it’s features and the developer you choose. The lowest price point hovers around $40,000, while larger apps can cost as much as $125,000. Some estimates for an Uber-like app go up to $300,000. In this guide, we break down the cost of app development to show you where the money goes.

A good tool to estimate an approximate cost for your app idea can be found here .

How long does it take to make an app?

According to Cleveroad app development cost calculator it takes between 1,000 to 2,000 hours to develop a mid complexity mobile app. Once again, this greatly depends on the type of app and your developer, but this range includes the majority of development times for medium-sized apps.

How can I find an app developer?

There are a large number of resources online. You can start by looking through Business of App’s directory. Other app developers directories to check out are TheManifest, GoodFirms, Clutch.

If you’re looking specifically for freelancers then online platforms like Upwork , Freelancer and We Work Remotely .

Where can I find a developer partner for a startup app?

Meetup is a great tool for this, and developer meetings can often be found on the platform , as well as platform-specific ones for iOS and Android .

How many app developers are there?

A lot. In 2019, the most recent estimates put the number of app developers at 26.4 million globally, of which around 6 develop solely for Android, and 2.8 million focus on iOS.

In 2014 , Asia held the highest number of app developers with 760,000 (32.9% of total app developers at the time), swiftly followed by Europe and North America with 29.7% and 29.4% of devs. Keep in mind however that since then around 800,000 new developers have entered the market per year.

How should I choose an app developer?

There’s a number of criteria to keep in mind when choosing your app developer. The first one is, of course, your budget, but beyond that you should:

Review portfolios

This is a standard procedure, and most companies will make proudly show their app development portfolio on their websites. Keep in mind that while app building is a skill unto itself, development for particular sectors (for example healthcare or games) can be very specific. Check to see if the developer specialises in your industry, and especially if they cover the specific platform (iOS, Android or Cross-platform) that you’re targeting, as well as specific mobile tech, for instance, Augmented Reality, Virtual Reality, IoT.

Ask for References

Digging a little deeper, you can always contact the companies the studio has developed apps for and find out what their experience was like. If a development studio is trusted time and again by operators in a certain industry, then they must be doing something right. Which leads on to:

Check their app’s reviews on the App Store or Google Play

It may not be obvious at first, but you can always read user reviews for published apps on their app stores to see what people think of the studio’s work. Just remember the negativity bias: people have more incentive to write a review when they dislike something than when they like it. One hundred bad reviews isn’t so bad if the app has tens of thousands of active users.

Reading app reviews, keep in mind that some app developers engage in deceptive practice of buying fake app reviews that have nothing to do with an objective evaluation of apps. A good indicator of a fake reviews case is that if the bulk of the reviews have either 5 or 1 star, meaning the app in point has serious issues and its developer simply purchases fake review to improve its rating without fixing the problem.

Questions you should ask an app developer

What platforms do you develop for natively do you develop cross-platform apps.

You want to make things clear right from the get-go: for which devices can your chosen studio develop an application for? Do they specialise in iOS, Android or crossplatform (apps that work on both and other platforms by using “generic” coding as opposed to platform-specific coding). How will the apps be converted from one platform to another? If the app is linked to a website, will the website be optimised for mobile phones? Keep in mind as wide an audience as reasonable for potential users of your app, both in terms of demographics and in devices used to access it.

Do you cover every stage in the development cycle?

Some studios only offer user-experience or user-interface design. Others do the development and coding, but post-launch maintenance is considered to be an additional cost. If your app requires a back-end (servers and software), not all studio developers include that in their services. It vastly depends on the kind of app you are designing, but make sure the studio you go with covers all the steps of the app development cycle, or can point you to companies whose services integrate well with the ones they offer.

How can my app generate revenue?

This should be part of your business plan as well as the conversation with your chosen development studio. Will your app make money via advertising? If so, it needs to be optimised for that purpose. If your app is a storefront, or just driving traffic to your website where the money is made, how will it engage users to come back after their first visit or first transaction? Remember that one of the major problems app developers are facing today is the user churn – a small portion of the app users continue to use the app after 30 days since they downloaded the app. This is the kind of conversation that you need to hold with your app developer and make sure you are absolutely on the same page. It will also be one of the first questions a serious app developer will ask you.

How do you communicate during the development process?

A key part of the development process is keeping the client in the loop about how the process is going. The best studios make this really transparent, with constant (sometimes even daily) updates. Ensure your chosen app developer communicates as often and in ways which you are comfortable with.

What kind of testing will you do?

This is sort-of the opposite of the question above: it’s the nitty-gritty, the necessary whittling process which turns a good idea into a streamlined app. There are many types, from stress to A/B testing, and while not all of them will be relevant to all apps, some will be necessary for yours. Ask your developer what testing methods they use, what they’re for and how they help your app improve. As well as what third-party app performance monitoring platform they use.

Is submission to app stores included?

Submitting an app to the store isn’t too hard, if you know what you’re doing. Only subscribed developers can submit an app to the Apple’s iTunes app store, and the Cupertino company has strict guidelines on what can and cannot be published. Android Google Play store is more liberal in its guidelines, but it also requires a registration and a fee. Some developer studios do this, others do not: make sure you find out first, and whether the submission fee is part of the price you’re paying.

What’s the latest tech you’re using?

Beacons, GPS, deep linking, Wifi-Bluetooth integration: the great thing about the app development world is there’s always something new being developed or a ground-breaking idea being explored. If you want your app to be cutting edge and really set the standard for those that follow, ask your developer what ideas or technology they’re playing with right now. The development process includes a lot of experimentation, and an exchange of ideas with your devs could lead to the next big thing or a memorable app.

Now, having laid out the types of app developers, their locations, app development costs, explaining how to select an app development company, we’re providing the list of app development companies that lead the field in 2021.

List of mobile app development companies

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Emizen Tech

Mobile app Development Company

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Light IT Global

Reliable technical partner for more than 500 companies since 2006

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Your Technology Partner for Software Innovation and Market-leading Solutions

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NMG Technologies

Award Winning Mobile, Web & Software App Development

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Delivering On Promises

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Intellectsoft

Engineering Your Vision

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Owebest Technologies

Work Speaks For Itself

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⭐World-Class Digital Solutions ✅ On-Time ✅ In-Budget ⭐

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Lomray Software

Mobile app development

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3 Sided Cube

LET'S BUILD TECH FOR GOOD

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Konstant Infosolutions

Top Mobile App Development Company

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Digital Transformation Company

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Startup App Experts

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Trusted Extended Team that Solves Technology-Related Challenges. ⭐️⭐️⭐️⭐️⭐️

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Growth Done Right

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Top-notch application development services and custom software solutions for innovators. Enable digital transformation now!

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Transformative by Design

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App Maisters

Trusted Digital Transformation Partner for Startups, Growing and Enterprise Companies

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Take care of tech, so you focus on core business.

app development business model

Foresight Mobile

Developing your vision

app development business model

Heads and Hands

We turn ideas into effective business tools

app development business model

Chelsea Apps

We challenge your ideas so users don’t have to

app development business model

Zco Corporation

25+ Years of Custom Software Development Experience

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Skylark Infotech

Not just technology marvels but market success

app development business model

Appus Studio

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We create mobile and web apps that meet business goals and user needs.

app development business model

Mobisoft Infotech

Discover Mobility

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Mobile First Innovation Studio

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Agicent App Company

Finest App Developers from India

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Code Brew Labs

Transforming your ideas to reality

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DESIGN/MOBILE DEVELOPMENT COMPANY

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[x]cube LABS

We Deliver Not Just Apps But Market Success

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Web and Mobile Apps Development

App Developer Platforms

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How it works

Do you need a mobile app for your business?

Chances are either you’re on a quest to find a professional team that will craft a great app to facilitate your business or you’ve got one already and aren’t quite happy about it.

At Business Of Apps we have the form for posting app projects, we send to professional app developers we host in our directory.

It works really simple:

  • You fill in the form with requirements for your app
  • The information you’ve submitted will be send to app developers
  • Expect to hear from them soon to discuss your project

PS. And yeah – it is free.

By signing up you agree to our privacy policy . You can opt out anytime.

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The Changing Economics of App Development

  • Peggy Anne Salz

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Small-scale developers can succeed if they know their customers.

In many ways, app developers, like popular consumer brands in a supermarket, are locked in a fight for two scarce resources: consumer attention and shelf space.

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  • PS Peggy Anne Salz is the Content Marketing Strategist and Chief Analyst of Mobile Groove, a top 50 influential technology site.

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App Revenue Models for a Mobile App

coins on a mobile phone

written by:

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Growth Manager

What App Monetization Models Are There?

There are many app monetization models out there, but we’ll focus on the five most popular app monetization models available for developers: 

In-app advertising

In the in-app advertising revenue model, app developers display ads inside applications. The advertisers pay the developer every time an ad is displayed. The potential for this mobile app advertising revenue is essentially limitless. If your users spend enough time in your app, advertisers will want to buy the ad space.

For example, even though Instagram is a free social app, they generate revenue from advertising. By delivering highly personalized ads based on data acquired from its users, Instagram’s revenue has been growing rapidly. It’s projected to exceed $18 billion in ad revenue in 2021 in the US alone.

A smartphone with the Instagram app open

Still, even Instagram can overdo its advertising endeavors. The algorithms are smart at firing highly (and sometimes eerily) accurate ads, but the growing number of ads sparked multiple debates on Reddit and in media outlets . So the key to doing Instagram right is to make the ads feel natural and unique — you want your users to stop and enjoy the storyline of the ad, just as they would the content of someone they follow. And yes, this advice applies to B2B selling as well, both on Instagram and in mobile ads.

table with pros and ons of in-app mobile advertising

In-app purchases

In-app purchases are a pricing strategy in which basic services or products are provided for free (or at lower cost) while more advanced services or products require additional payment. The idea behind this is that the company will make up losses by monetizing other features of its service. 

in-app purchase pop-up

Subscriptions

When it comes to long-term revenue streams, subscriptions are often the best choice. Oftentimes users are either given free access to a limited amount of features or access to all features for a trial period.

One of the most profitable non-gaming apps that utilizes this model is Tinder. It offers two paid tiers and the option to boost or sponsor your profile.

Tinder subscription tiers example

Freemium is a type of app revenue model that offers an application for free and then generates revenue from in-app purchases. The freemium model has been widely adopted by app developers, as it allows them to distribute their applications for free while still generating significant revenues. 

Spotify is a great example of a freemium model. They have a free, ad-supported tier that is available to all app users. If people get tired of ads, the premium tier packs additional features and eliminates ads. Spotify also offers a free 3-month trial for a premium version, which builds a stronger relationship with the product and convinces many to continue paying for the app.

Spotify premium model example

Paid apps, also known as premium apps, are the least used app monetization model. Developers charge users a one-time fee to download the app from the mobile app store. The upside is that it's easier to plan expenses in advance if you know how much revenue is going to be generated from the start of the project. There are rarely any surprises later once users start using the app. The biggest downside is estimating how many users will actually pay for the app. 

In a world where we’re bombarded with low-quality digital products, make sure that what you’re trying to sell has a laser-focused target audience, is tested, well designed, and delivers what it promises.

Currently, one of the most successful paid apps is Forest . For a one-time fee of $2,29, Forest gamifies productivity and focus. When users stay in the app for a set period of time, they get to plant a tree — both inside the app and in the real world.

Forest paid app example woman in the field planting a tree

Sponsorships

Sponsorships are one of the least known app business models. While online banners or video ads improve brand awareness, they don’t necessarily give the customer anything. Sponsorships, on the other hand, operate on an app monetization model where users receive rewards by completing tasks in the app.

Sweatcoin is doing an amazing job when it comes to creating revenue and engagement through sponsorships. It’s a free step counter app that pays its users a made-up currency (sweat coins) for their steps. Users can use the digital currency on the app’s marketplace and grab discounts or even free products.

Sweatcoin app example with marketplace elements from app developers

How Do I Choose a Monetization Model?

To choose a revenue model, first consider why you’re developing an app at all. You also need to know who you're developing your mobile application for. In other words, what is your mobile app's ideal customer persona .

Given that over 90% of apps are free , you might be tempted to go that avenue. However, it all depends on the long-term strategy you have for your app.

For example, you might develop an app for controlling your IoT (internet of things) device with the app being a complementary addition to the paid device. As the app matures and gets more refined, and you’ve attracted enough loyal and invested users, you can start charging for your app. This is especially valid for businesses that want to grow and scale with enough stickiness and financial capacity.

But again, the app monetization advice highly depends on your app and target audience. So it’s best to always start with the customer in mind. Try to talk to a few of your customers about their experience with the app: how much would ads spoil their experience; would they be willing to support your app by paying for it.

More app developers are leaning towards the hybrid model by including several monetization strategies. For instance, your app could be free with ads and an option to remove them via an in-app purchase.

How Much Revenue Do Mobile Apps Generate?

Global mobile app revenues are projected to grow to almost a billion dollars by 2023. However appealing this number may sound, these numbers can be misleading. According to SurveyMonkey Intelligence , the top 200 apps make on average $82,500 daily, whereas the top 8,000 make $3,500.

Global mobile app revenues from 2014 to 2021 statista

To be able to predict how much revenue your app could generate focus on the following:

  • compare similar apps (similar when it comes to category, design, audience, tone, features, monetization strategy)
  • compare the average revenue per user since most of these apps have notably different number of users
  • identify benchmarks in your specific category

How Much Does Mobile App Advertising Cost?

With mobile app advertising, you're able to reach your target audience in a much more personalized way and get them to interact with your brand. It has been 30% more effective than traditional advertising which comes as no surprise since mobile currently represents the majority of digital media consumption.

Here are some statistics about the average in-app CPM (cost per impression) in 2018 :

  • $2 across all Android devices 
  • $5 across all iOS hardware
  • For a mobile interstitial ad was $3.50
  • For a native ad on mobile was $10
  • In 2016, the average global CPC was $0.27

Which Apps Generate the Most Revenue?

Even though only 52% of users have games on their smartphones , they comprise the biggest category in mobile app stores. Mobile games generate the most revenue accounting for 72.3% of all revenue generation in March 2020 . 

While non-gaming app revenue is on the rise, it has seen a sharp decrease when giants, such as Netflix and Spotify, stopped offering subscriptions through the app stores. The top revenue-driving non-game apps in 2019 are from the Photo & Video category, followed by Entertainment.

According to a Think with Google report, the pandemic caused a shift in the global mobile gaming trend — users are inclined to play more and continue to spend money on games and watch in-game ads. However, a report by SensorTower shows that smartphone users are expected to spend more on non-gaming mobile apps by 2024 .

Still, whichever app type you're developing, make sure that you've done your homework and learned how to market a mobile application .

Increase Your Mobile Revenue Model Earnings and Effectiveness

You don’t have to decide on one monetization strategy and stick with it. If you know your business needs well, then there are a few strategies that work best for different types of businesses. For example, if you sell products online but also offer services or membership perks, consider using both in-app purchases and subscriptions.

A hybrid app monetization strategy can be the perfect solution for a business that doesn’t want to rely on in-app purchases or advertising alone. The financial benefits of this model are unmatched — with so many options available, you can experiment and look for a combination that brings the best result. If you have yet to come up with an app monetization plan, we recommend going hybrid.

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app development business model

How to Start an App Development Company

Has every app conceivable already been invented? Not at all. There are literally millions of apps that have yet to be created. Some have an obvious demand while some apps introduce new emerging ideas. Going into this business is very rewarding because it is getting easier to create software applications. Additionally, new users tend to multiply, which continues to create more demand for apps.

Learn how to start your own App Development Company and whether it is the right fit for you.

Ready to form your LLC? Check out the Top LLC Formation Services .

App Development Company Image

Start an app development company by following these 10 steps:

  • Plan your App Development Company
  • Form your App Development Company into a Legal Entity
  • Register your App Development Company for Taxes
  • Open a Business Bank Account & Credit Card
  • Set up Accounting for your App Development Company
  • Get the Necessary Permits & Licenses for your App Development Company
  • Get App Development Company Insurance
  • Define your App Development Company Brand
  • Create your App Development Company Website
  • Set up your Business Phone System

We have put together this simple guide to starting your app development company. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas .

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

What will you name your business?

  • What are the startup and ongoing costs?
  • Who is your target market?

How much can you charge customers?

Luckily we have done a lot of this research for you.

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our App Development Company Name Generator

If you operate a sole proprietorship , you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name , we recommend researching your business name by checking:

  • Your state's business records
  • Federal and state trademark records
  • Social media platforms
  • Web domain availability .

It's very important to secure your domain name before someone else does.

Want some help naming your app development company?

Business name generator, what are the costs involved in opening an app development company.

If you want to start with a professional development team, you will need to establish an LLC company, rent a space, install high-end computers, license the appropriate software, and pay the utilities, which includes the electricity and the Internet connection fees.

A typical start-up team of software developers will require these start-up expenses:

  • LLC and Business license fees - The average is around $1,000 depending on the state.
  • Facility rent and security deposits - $5,000 to start, and $2,000 per month thereafter.
  • Computers with monitors - $3,000 each to buy them, $150 per month to lease them. This expense depends on the team members. Typical teams are six people.
  • Software licenses - $1,000 to $2,000 per person.
  • Desks - up to $250 per person.
  • Desk Chairs - up to $150 per person.

Many developers decide to start out by themselves, taking less projects, and working increased hours.This helps save on some of the above costs, until the company starts to experience so much demand that it is necessary to hire others.

What are the ongoing expenses for an app development company?

You will need to rent a space and pay for Internet for your software development team. Other costs may include monthly subscriptions to development software, computer maintenance, and, of course, payroll.

Who is the target market?

If your business model includes creating apps for other companies, you will want to find companies who will give you a steady workflow to keep your software programmers busy and also pay you a fair price for the work.

If your business model includes selling the apps you create yourself, your customers will be as many people as you can possibly find in your target market. If the app has a lot of interest by the general public it will sell easily. On the other hand, if the app solves some critical problem for a niche market it will sell to a smaller group of people or companies, but at a higher price.

How does an app development company make money?

There are four business models for applications and various combinations of them, which are:

  • Work For Hire - Getting paid to create applications for others.
  • Advertiser Supported Free Apps - An app that is popular can earn revenues from associated advertisements.
  • Free to try (or limited version) with Premium Paid Service - An entry level app is either a free trial for a specific time or a limited version. Those who pay for a premium version get enhanced features and can remove advertisements.
  • Paid Apps – These apps charge for their use by timeframe, by the number of users, or by other means, such as a license fee. There are no free versions. These apps may be highly specialized and very valuable to those who pay for them.

The charge for clients that want you to develop software applications for them is usually based on a set fee, with a very specific request for the work to be done. If the work is more open-ended then you can charge based on the hourly rates for the level of skills the programmers have, who are assigned to the tasks. Because of the global competition, these rates can be minimal or much higher depending on where the individual software programmers live.

Software development rates per hour range from the low end of $5 per hour for international programmers, to $75 per hour for programmers from the US.

An example of a recent project to develop a mobile phone app had three software developers. One was in Pakistan and the other two were in India. About 15 global freelancers were used to translate the software display results on mobile phones into multiple languages. The total project cost was less than $2,000 and took one month to complete. This same project would cost over $50,000 if made solely in the USA.

The average cost for a paid app is $0.99.

When you sell apps online, the best method is to give a modified version away for free and offer enhanced services for those that like the free version and want to have more features. This is a very successful business model. There may be, for example, tens of millions of free users that make a specific app very popular. Of those tens of millions, a smaller percentage will want to pay for the enhanced services. Even if only capturing five to ten percent of millions that use your free version, who pay for the enhanced services, the revenue stream is exceptional.

How much profit can an app development company make?

You may make nothing to billions. The amount you make comes from your app’s popularity.

How can you make your business more profitable?

Make sure you are creating apps for things people really want. In some ways, the market for apps is becoming oversaturated, so you will have to find your own unique niche in order to thrive as a business.

There is a caution you will need to understand regarding earning a “fair price” for the work. Software development of apps is a global business. In countries where the standards are lower and the cost of living is substantially less than the more developed countries, there are programmers that work very cheaply. If you are not in one of these countries you can still use the programmers from the areas of the world with lower labor costs. If you do not do this, you will not be competitive and you will probably not get much work from other companies that want your software development team to make apps for them.

An example of the price differential for labor is that a highly qualified computer programmer in the USA might cost $80,000 per year, whereas international programmers with the same skills might cost only $20,000 per year. The labor costs are a big part of developing software apps, so you really need to understand the global dynamics.

Though international outsourcing comes with certain financial benefits, US-based programmers may come with other advantages, including the ability to work locally. This can greatly help when it comes to communication and meeting project deadlines.

Want a more guided approach? Access TRUiC's free Small Business Startup Guide - a step-by-step course for turning your business idea into reality. Get started today!

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship , partnership , limited liability company (LLC) , and corporation .

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your app development company is sued.

Form Your LLC

Read our Guide to Form Your Own LLC

Have a Professional Service Form your LLC for You

Two such reliable services:

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services . You can choose to hire a registered agent or act as your own.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

You can acquire your EIN through the IRS website . If you would like to learn more about EINs, read our article, What is an EIN?

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil .

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

  • Separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • Makes accounting and tax filing easier.

Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.

Get a business credit card

Getting a business credit card helps you:

  • Separate personal and business expenses by putting your business' expenses all in one place.
  • Build your company's credit history , which can be useful to raise money later on.

Recommended: Apply for an easy approval business credit card from BILL and build your business credit quickly.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate an app development business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses .

Services Contract (e.g. MSA)

App development companies should require clients to sign a services agreement before starting a new project. Such agreements clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership (who will ultimately own the app). Here is an example of one such services agreement .

Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your app development business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.

Trademark & Copyright Protection

Because an app development business may be creating its own apps and related intellectual property, it is prudent to protect your rights by registering for the appropriate trademarks and copyrights. Learn more about trademark and copyright protection .

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance . This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance . If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

FInd out what types of insurance your App Development Company needs and how much it will cost you by reading our guide Business Insurance for App Development Company.

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners , we'll give you helpful tips and advice for creating the best unique logo for your business.

Recommended : Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker .

If you already have a logo, you can also add it to a QR code with our Free QR Code Generator . Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.

How to promote & market an app development company

The best apps, by being very useful, promote themselves. It is very easy to put an app for sale in the Apple Store or on Google. You can offer a two-tiered system with a “free version” and a paid enhanced version and put your software available for download on download.com run by CNET.

Attending trade shows is an excellent way to meet potential customers if you want to do work-for-hire. There are many freelance systems online that you can use to find customers looking for software developers with specific skills. Giving public speeches and becoming known as an industry leader is a great way to increase the popularity of yourself and the applications made by your company.

How to keep customers coming back

Your reputation says it all. There are two types of reputations. The first one is with clients that hire you to create applications for them. The second type is a public reputation for apps you sell directly. Both reputations are enhanced when your app serves an important need and the users fall in love with the app, as well as they tell all their friends about it on social media and in other ways.

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business .

While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn’t delay building your website:

  • All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
  • Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
  • Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.

Recommended : Get started today using our recommended website builder or check out our review of the Best Website Builders .

Other popular website builders are: WordPress , WIX , Weebly , Squarespace , and Shopify .

STEP 10: Set up your business phone system

Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.

There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.

Recommended Business Phone Service: Phone.com

Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.

TRUiC's Startup Podcast

Welcome to the Startup Savant podcast , where we interview real startup founders at every stage of the entrepreneurial journey, from launch to scale.

Is this Business Right For You?

Anyone who loves computer programming or general problem-solving would be great for this business. It helps if you have experience working on software development teams that produce popular applications before you try to go off on your own to start an application development company.

Software programmers often work very long hours without immediate reward, because solving the programming problem is the driver that pushes them forward. In this type of work, it is rare to have regular working hours, so you should be prepared to adopt a schedule that can adjust according to changing workloads.

Want to know if you are cut out to be an entrepreneur?

Take our Entrepreneurship Quiz to find out!

Entrepreneurship Quiz

What happens during a typical day at an app development company?

As a business owner of a software application company, you will need to be able to interface with clients (if doing work-for-hire) and manage the interface with the public if your programs are sold on an advertiser-supported model or on a subscription basis.

Your other main job is to manage the software development team. Your software development team may be on the edge of eccentricity and on the border between genius and insanity. This is normal for this business.

Your daily job is to create an amazing creative environment where other geeks will want to stay in and spend many days or maybe many weeks creating software code without much need for doing anything else.

Another part of your job is to keep the team heading in the best direction. Really intelligent people have a tendency to wander off into tangential thoughts that are not part of the project they are supposed to be working on. As the business owner, your job is to guide them towards producing positive and useful outcomes.

What are some skills and experiences that will help you build a successful app development company?

Having a degree in computer programming is helpful although not necessary. Knowing programming code, even if self-taught, is extremely valuable. You will succeed if you love what you do. If you would develop apps as a hobby simply because you enjoy doing it, you will definitely succeed in this business.

You will have to enjoy working long hours, sometimes through the night, and not necessarily getting paid for your time when you first get started. Your goals, when you start, are to learn as much as possible.

One way to get the “chops” necessary to succeed in this business is to volunteer on an open source program to help improve it. Everyone working on an open source program works for “free.” However, they get paid by what they learn from the others that are more advanced than they are.

There are very few “brick-and-mortar” schools that offer this level of expertise and real-time learning. Software programmers who are the best in the world are renegades. The really superb ones want to teach skills to others. However, you better be quick and learn fast because they have no time for slow-learners.

What is the growth potential for an app development company?

Depending on your skills to make apps that attract attention and gain paying customers, you can start with a single successful app and build a business worth many billions. Software development is always about being new, innovative, and showing your paying customers ways to do things they never imagined before.

Any newly starting company has the same chance to create an industry disruption coming from their new ideas.

TRUiC's YouTube Channel

For fun informative videos about starting a business visit the TRUiC YouTube Channel or subscribe to view later.

Take the Next Step

Find a business mentor.

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Learn from other business owners

Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.

Resources to Help Women in Business

There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:

If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.

How and when to build a team

This is all about budget. If you can pay to add staff and have enough work that is paid work for them to do, then, by all means, hire more staff to help you. Use freelancers as much as possible in the beginning and find the best ones by giving them small tests of things to do to advance your projects.

Useful Links

Industry opportunities.

  • Application Developers Alliance
  • ACT The App Association

Real World Examples

  • Link to Jackrabbit Mobile’s app development page
  • Michigan-based app development company

Further Reading

  • How-to guide detailing the process of starting an app development business
  • How to Start a Home-based Mobile App Developer Business by Chad Brooks
  • How-to video detailing the process of starting an app development business

Have a Question? Leave a Comment!

How to Create and Market a White-Label App: Business Models, Technologies and Cost

Sveta Cherednichenko

White labeling is a viable business model: you can develop something once and sell it to an unlimited number of businesses with just small tweaks to each case. Learn how to create a white-label app and market it to your target market.

Today, it’s hard to imagine a business without a mobile presence. Mobile websites have become standard long ago, and now mobile applications are the new must-have for businesses. 

However, not all businesses are ready to invest in lengthy and costly custom development. This is where white-label apps come in.

In this article, you’ll learn how to create a white-label app and, more importantly, how to price white-label products.

What is a white-label app?

A white-label app is a piece of software one company makes to sell to other companies. The companies that buy white-label apps can customize them and add their branding to use these ready-made apps as their own. 

White-label apps offer a win-win deal for both parties: a white-label app development company needs to build software once and then scale its revenue by selling it to other businesses. Their B2B clients, on the other hand, save time and money and get a ready-made solution they can customize to their needs. 

White-labeling is a viable business strategy that you can scale and earn money for years by investing in its development once.

White-label apps work for many industries, from e-commerce and food delivery to sharing economy apps and tourism. Let me give you an example. 

  • You build a white-label app for a specific industry, such as scooter sharing.
  • Another company wants to start a scooter-sharing business, but they’re not sure about developing their app yet, because it’s costly — they’d rather start with a simple MVP and test the waters
  • You offer them your white-label app and help them customize it with their own branding, aesthetics, and even functionality to some extent.
  • In the eyes of scooter-sharing users, the app was built by a scooter-sharing provider, not by you. 
  • The app has everything needed for scooter sharing, so you can re-sell it again and again to other similar businesses with minor changes and new unique branding.

The demand for white-label apps is growing as more and more businesses see the value in offering mobile apps to their customers. The demand drives the supply as well. 

However, white-label apps have their limitations and challenges, which we’ll also cover in this article. If you’re considering becoming a white-label app provider and wondering where to start, read on!

Pros and cons of white-label app development

White-label apps have a pretty ambivalent reputation: some say they’re too simplistic to bring real value or too risky because you don’t know what’s under the hood until you purchase one. 

  • Multiple monetization options
  • Ability to turn existing software into a white-label solution
  • Unlimited business and revenue scalability
  • Clone apps risk being deleted
  • The need to balance functionality and simplicity

The discourse around white-label apps is hot, but it’s undeniable that the demand is high, and businesses are ready to purchase them. Let’s discuss the pros and cons of building a white-label app for your business and cover the main challenges. 

Pros of building a white-label app

You can turn your existing custom app into a white-label app.

If you already have a custom-made application and full rights to its code, you can turn it into a white-label app and make a profit. This is a great way to open a new revenue stream and multiply your investment returns. 

Turning a custom solution into a white-label app will still take time and effort, but it will we faster and cheaper than building an app from scratch. 

You can sell and operate your white-label app in multiple ways

There are multiple ways to build and sell your white-label solution to other businesses. You can either sell copies of your app to different businesses that will be their sole owners and users, or you can support multiple businesses from a single code base. 

This is called single-tenant (backend-based) or multi-tenant (SaaS) white labeling. I’ll talk about both approaches later in this article.

You can scale your revenue, and only the market is your limit

You can sell your white-label software to as many businesses as you want, so your target market only defines the limit. This is amazing because you just need to invest in your app once and monetize it for years. 

White-label software development challenges

Generic apps risk being deleted from app markets.

There are rumors app markets don’t accept that template apps like App Store or Google Play according to the new guidelines. Some apps may have indeed been deleted, but you can easily avoid them with sufficient customization. 

To avoid issues with app markets, offer multiple customization abilities: allow your customers to change not only color but also the shape of UI elements and even make layout changes.  

The price is a core factor, and it may limit your app complexity

Businesses buy white-label apps because they’re a cheaper alternative to custom development. As a white-label software provider, you need to strike a perfect balance between your app’s complexity and price. 

On the one hand, you need to keep your solution simple so the price isn’t too high. On the other hand, white-label apps aren’t often trusted because of their low quality. You must ensure you build high-quality software that can be customized and used without significant issues.

It’s important not to overcomplicate your app with third-party integrations and sophisticated functionality. Usually, businesses that require this level of complexity prefer custom development, as the price won’t be that different. 

White-label app examples

Appinstitute.

white label app development

This is a white-label app builder for small businesses. It features a drag-and-drop interface that’s easy to grasp even if you’re a non-technical person. AppInstitute offers endless templates for all kinds of businesses, from coffee shops and hotels to fitness centers and restaurants. 

It also categorizes templates by the app’s purpose, for example, selling products, increasing loyalty, or getting bookings. The AppInstitute apps allow for customization, support multiple languages and push notifications. 

app development business model

This is a famous white-label website builder that allows businesses and individuals to create websites in a matter of minutes. It has an easy drag-and-drop function that allows building a custom, unique website — no coding experience required.

Users can build their Wix website for free or shift to paid plans that cost $5, $10, $14, and $29 per month. The data space depends on the plan you get, and the bandwidth for all plans except for the two last plans is limited.

Wix’s database features over 800 templates for all kinds of businesses that users can further customize to their needs. Fonts, colors, icons, and graphic elements are all customizable.

Wix also offers an SEO planning service to help businesses rank higher in Google search. 

white label app examples

This company offers restaurants and other businesses a white-label solution for their delivery services. With Elluminati, businesses can build client-oriented websites and mobile apps that allow them to order and pay for food online. 

Other possibilities include table reservation, QR code scanning, loyalty program functionality, order scheduling, tipping, and more. It has everything a restaurant customer needs to order food and manage their order.

Other types of white-label apps Elluminati offers are:

  • Repair services
  • Crypto exchange services
  • Delivery services

Two main models of selling white-label apps

As I already mentioned, there are two main ways to sell white-label apps:

  • SaaS model — you develop a product with a set of functionality and customization abilities. All your customers use products from a single platform but can customize their versions independently. 
  • Backend-based model — you reuse a single backend code and customize the front end for each customer. They get an independent copy of your product with a changed front-end part.  

These two options determine your marketing and business structure and your white-label product’s architecture, functionality, and cost. 

Let’s explore the differences between a SaaS and a backend-based model and discuss their pros and cons.

The Sofware-as-a-Service model, or a multi-tenant model, suggests that multiple people use your product at the same time. For this, you need to develop a single platform with a set functionality that allows customization of the UI elements.

The architecture of white-label SaaS products is this: a single server stores all customer data and hosts the software. 

The main advantage of this model is its centralized architecture. It allows for fast maintenance, support, QA, testing, deployment, and easy updates. If you detect a bug or a breach, you can quickly fix it and push it to all your users simultaneously. 

SaaS products are often subscription-based. It means you can predict your income and have a steady monthly flow. This white-label software business also allows you to build a relatively complex platform without sacrificing the price. As you’ll have multiple tenants, you can divide the cost among them. 

The main focus in the SaaS model for businesses is cost-efficiency and quick deployment rather than customization, so your marketing strategy should highlight the benefits of getting their solution up and running in a matter of minutes. 

It’s essential to explain to your customers the customization limitations before they purchase your solution. Here are some ways you can do it:

  • Provide your customers with a demo in exchange for their email
  • Provide a free trial version of your product
  • Showcase the features and optimization possibilities on your landing page, videos, presentations, and other marketing materials

Backend-based model

According to this model, you provide your customers with a singular product copy. 

Usually, you’ll customize the front-end part of the app for each separate client. It will take more time than simply giving access to a SaaS platform, but your customers will have more options for customizing their apps. 

The only part you fully resell is the backend part of the solution. The architecture of each copy is the same, but UI customization allows your customers to get a more personalized product.

Here are the specific properties of an architecture needed for this model:

  • A database is isolated, so you don’t store all your customers’ data in one place
  • You can make changes to apps independently, and they won’t be pushed to your other customers’ apps
  • Your customers are independent and have complete control over the updates 

Some white-label app providers sell the apps completely, giving customers all the code rights. We at Mobindustry audit, customize, and even rewrite such applications, as businesses don’t know what’s under the hood until they purchase the solution. Such an approach is somewhat risky because the quality is often low. 

Other providers continue to support their customers and update the code regularly. The challenge here is to update multiple versions of the same app. If you have many clients, supporting them can become tricky, as you won’t be able to automatically push the same update to everyone.

Also, some businesses purchase backends made by other companies and create custom front ends in order to resell these apps to other businesses. This means a single white-label software can go through multiple resellers before becoming a fully-fledged product.

White-label app customization

What customization abilities can you give to businesses that will purchase your white-label app? What are the limitations? Let’s explore.

App icon and Splash screen

An icon is the face of the app, and it should be recognizable and unique. It’s important that you add their icon and change its shape. The icon should correspond to the app market guidelines, so make sure you provide your customers with a construction kit and recommendations. 

app development business model

The splash screen is the second thing a user sees when installing the app for the first time. It can be as simple as just a logo and animation that demonstrates the app’s launch or feature a multi-step onboarding tutorial. 

The customization abilities can vary greatly, for example:

  • Will you only allow color change, or will your customers be able to change the layout and images on their splash screen?
  • Will you allow your customers to upload their images and elements to the splash screen or offer a set of your own elements to choose from? 
  • Will you allow uploading a video to the splash screen? If you do, define the video size and format, and make sure the video looks good on screens of different sizes

The first basic thing your users should be able to change its color. Usually, white-label app providers offer color systems that include primary and secondary palettes. 

how to create a white label app

A primary color palette includes the color of the main app’s elements, like buttons and links. The secondary color palette is dedicated to backgrounds and sections that have different saturation, shades, transparency, and tones to help organize the app’s content. 

Your customer should be able to change both primary and secondary color palettes. You can create presets with complementary colors to make the customization easier.

Templates, layouts, and components

The ability to customize UI components is the most important feature of a white-label application. With just a little tweaking, your customers will be able to add their unique touch to the app and express their brand identity through it. 

whitelabel product

Like colors, there are primary and secondary UI components; for example, a primary button is usually larger and brighter than smaller secondary buttons. According to the best design practices, there should be only one primary button on the screen. Otherwise, you risk confusing users. 

How do you give your customers the ability to customize the UI components? Allow them to change the components: 

You can also provide multiple options for layout by creating pre-determined templates or even developing a drag-and-drop interface, so your customers can create their own layouts.

White-label app architecture

As I already mentioned, the architecture of your white-label app will depend on your strategy and business model. 

With SaaS-like solutions, the whole platform is hosted on a single cloud server so that users have access to their app versions from anywhere, and you have control over the updates. 

With a backend-based model, you only provide your customers with a ready-made backend. They can handle the front end on their side or use your services to build a front-end part for them. 

According to this model, you can either sell a copy of the backend so your customers can support it on their own or host it on your server and provide support to each tenant. 

We at Mobindustry use a microservice architecture for our white-label apps. This allows us to create independent services that are responsible for different parts of the app. This architecture allows us to build and deploy code faster, isolate services, and develop modules independently. 

The maintenance and support of microservice-based apps are also easier and faster, as you don’t need to worry that a single change in one module will affect the whole app. 

The cost of creating a white-label app 

The cost of building a white-label app varies greatly depending on multiple factors like:

  • The number and complexity of features
  • Your chosen model of distribution
  • The number of platforms
  • The design complexity
  • The number of third-party integrations
  • Your team’s hourly rate

The scope of work and the team’s hourly rate are the two most influential factors that determine the final price. 

outsourcing cost

You can save money significantly by outsourcing the development overseas. For example, a dedicated software development team in Ukraine can cost you up to 4 times less than the same team in the US. 

The development of a basic white-label app will cost approximately $20,000 — 30,000 for a single platform. You can save around 30% of your budget by choosing a cross-platform technology if you want your app to work on both Android and iOS. 

A fully-fledged white-label app with both backend and front-end parts costs around $60,000 and more, depending on its size and complexity. 

Mobindustry experience

Our white-label projects.

We at Mobindustry have built and rewritten multiple white-label apps for our clients and also created our own white-label solution called ScooterGO .

ScooterGO is a white-label cross-platform mobile application for scooter sharing. We developed it to allow our clients to get a high-quality app for just a fraction of the price, with no recurring payments, commitments, or issues. 

ScooterGo app

The scooter-sharing market is full of ready solutions. Some companies offer apps based on a SaaS model, so scooter-sharing business owners have to pay more and more as their business grows. 

Often, these recurring payments are connected to the number of users or supported scooters. As you can imagine, once a business owner expands their operation, the subscription cost becomes unbearable and amounts to hundreds of thousands of dollars annually. 

Other scooter-sharing businesses purchase full rights to the ready-made code of a white-label solution without knowing what’s under the hood. Soon enough, inconsistencies, errors, and bugs pile up — we’ve seen countless examples of this when clients came to us for quality assurance, additional customization, or maintenance. 

scooter sharing app white label

Often, we needed to rewrite the code completely. This was when we decided to build our own white-label app. ScooterGO has everything a business needs to start operating in the scooter-sharing industry. We support scooter integrations and recommend hardware. If our clients need any additional customization, we can easily implement it. 

Unlike other providers, we sell full rights to the code and have no hidden or recurring fees. Moreover, we offer maintenance and support, and our clients can always be sure of the code quality, longevity, and maintainability.

ScooterGO uses a microservice-based architecture to stay flexible and ease customization — with this pattern, we can easily add new functionality without affecting the whole code. For front-end development, we used Flutter — the best cross-platform technology on the market that allows you to deploy your app to Android and iOS platforms easily.

electric scooter sharing admin panel

The admin panel we offer, along with the application, gives business owners and their staff full control over the whole scooter fleet.

White-label app code audit service

We at Mobindustry have experience fixing, advancing, and auditing white-label apps made by other companies. If you’ve purchased a white-label application and you’d like to know what’s under the hood and how you can add or remove features, we can definitely help you with our software code audit service .

Our developers can perform any work, from technical audit and code optimization to additional development and support. If the code is not sustainable, we can refactor or even rewrite it so you get a high-quality product you can use for years to come. 

Key takeaways

White-labeling is a viable business strategy that you can scale and earn money for years by investing in its development once. There are two main strategies to choose from: sell access to a single platform that hosts multiple tenants and charge a recurring fee, or create a backend and customizable front-end and sell independent copies to businesses.

Both approaches have their pros and cons. The SaaS model allows you to easily maintain your product for all your clients, push updates automatically, and also get a stable revenue stream from subscriptions. 

The backend model is cheaper to develop, and you can offer more customization abilities to your customers, as well as more control over their versions of your product. At Mobindustry, we have experience building SaaS software and developing white-label apps both from scratch and based on existing code. If you’d like to build a white-label app from scratch or make changes to your existing off-the-shelf solution, make sure to contact us!

Frequently Asked Questions

How do i decide what type of white-label app to create, what technologies do i use for my white-label app, rate the article, related articles, share your project with us, what happens next:.

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InfoQ Homepage News Apache Pekko: Simplifying Concurrent Development with the Actor Model

Apache Pekko: Simplifying Concurrent Development with the Actor Model

This item in japanese

Feb 13, 2024 2 min read

Andrea Messetti

Apache Pekko is an open-source framework designed to simplify the development of concurrent, distributed, resilient, and elastic applications. Leveraging the Actor Model, Pekko offers high-level abstractions for concurrency, allowing developers to focus on business logic rather than low-level implementation details. It originated as a fork of Akka 2.6.x, preceding Akka's adoption of the Business Source License . Two years ago, Pekko entered the incubation phase at the Apache Software Foundation and last year it released version 1.0 while the latest release is 1.0.2.

Modern computer architectures pose challenges such as component crashes, lost messages, and fluctuating network latency, even in well-managed data center environments. Pekko addresses these challenges by providing multi-threaded behavior without the necessity of low-level concurrency constructs like atomics or locks. It also streamlines communication between systems and their components by providing transparent remote communication capabilities. This eliminates the need for developers to write and maintain complex networking code and offers a clustered, high-availability architecture that scales dynamically based on demand, enabling the creation of resilient and scalable applications.

The actor model , upon which Pekko is built, provides a level of abstraction that simplifies the development of correct concurrent, parallel, and distributed systems. Actors, the fundamental units of computation in Pekko, encapsulate state, behavior, a mailbox, child actors, and a supervisor strategy behind an actor reference. This abstraction allows developers to think about their code in terms of communication between actors, similar to exchanges in a large organization.

In the actor model, actors communicate by sending messages to each other, without transferring the thread of execution. This non-blocking communication enables actors to accomplish more in the same amount of time compared to traditional method calls. Actors behave similarly to objects in that they react to messages and return execution when they finish processing the current message. Upon reception of a message, an Actor can do the following three fundamental actions: send a finite number of messages to Actors it knows; create a finite number of new Actors; and designate the behavior to be applied to the next message.

The image below describes the Pekko actor hierarchy:

app development business model

Pekko is designed as a modular application and encompasses different modules to provide extensibility. The main components are: Pekko Persistence enables actors to persist events for recovery on failure or during migration within a cluster that provides abstractions for developing event-sourced applications; Pekko Streams module provides a solution for stream processing, incorporating back-pressure handling seamlessly and ensuring interoperability with other Reactive Streams implementations; the connectors modules include connectors for integrating with other systems such as Kafka and Cassandra ; Http and gRPC modules provide HTTP and gRPC capabilities and a series of different utilities for operating and managing Pekko clusters.

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OpenAI teases an amazing new generative video model called Sora

The firm is sharing Sora with a small group of safety testers but the rest of us will have to wait to learn more.

  • Will Douglas Heaven archive page

OpenAI has built a striking new generative video model called Sora that can take a short text description and turn it into a detailed, high-definition film clip up to a minute long.

Based on four sample videos that OpenAI shared with MIT Technology Review ahead of today’s announcement, the San Francisco–based firm has pushed the envelope of what’s possible with text-to-video generation (a hot new research direction that we flagged as a trend to watch in 2024 ).

“We think building models that can understand video, and understand all these very complex interactions of our world, is an important step for all future AI systems,” says Tim Brooks, a scientist at OpenAI.

But there’s a disclaimer. OpenAI gave us a preview of Sora (which means sky in Japanese) under conditions of strict secrecy. In an unusual move, the firm would only share information about Sora if we agreed to wait until after news of the model was made public to seek the opinions of outside experts. [Editor’s note: We’ve updated this story with outside comment below.] OpenAI has not yet released a technical report or demonstrated the model actually working. And it says it won’t be releasing Sora anytime soon. [ Update: OpenAI has now shared more technical details on its website.]

The first generative models that could produce video from snippets of text appeared in late 2022. But early examples from Meta , Google, and a startup called Runway were glitchy and grainy. Since then, the tech has been getting better fast. Runway’s gen-2 model, released last year, can produce short clips that come close to matching big-studio animation in their quality. But most of these examples are still only a few seconds long.  

The sample videos from OpenAI’s Sora are high-definition and full of detail. OpenAI also says it can generate videos up to a minute long. One video of a Tokyo street scene shows that Sora has learned how objects fit together in 3D: the camera swoops into the scene to follow a couple as they walk past a row of shops.

OpenAI also claims that Sora handles occlusion well. One problem with existing models is that they can fail to keep track of objects when they drop out of view. For example, if a truck passes in front of a street sign, the sign might not reappear afterward.  

In a video of a papercraft underwater scene, Sora has added what look like cuts between different pieces of footage, and the model has maintained a consistent style between them.

It’s not perfect. In the Tokyo video, cars to the left look smaller than the people walking beside them. They also pop in and out between the tree branches. “There’s definitely some work to be done in terms of long-term coherence,” says Brooks. “For example, if someone goes out of view for a long time, they won’t come back. The model kind of forgets that they were supposed to be there.”

Impressive as they are, the sample videos shown here were no doubt cherry-picked to show Sora at its best. Without more information, it is hard to know how representative they are of the model’s typical output.   

It may be some time before we find out. OpenAI’s announcement of Sora today is a tech tease, and the company says it has no current plans to release it to the public. Instead, OpenAI will today begin sharing the model with third-party safety testers for the first time.

In particular, the firm is worried about the potential misuses of fake but photorealistic video . “We’re being careful about deployment here and making sure we have all our bases covered before we put this in the hands of the general public,” says Aditya Ramesh, a scientist at OpenAI, who created the firm’s text-to-image model DALL-E .

But OpenAI is eyeing a product launch sometime in the future. As well as safety testers, the company is also sharing the model with a select group of video makers and artists to get feedback on how to make Sora as useful as possible to creative professionals. “The other goal is to show everyone what is on the horizon, to give a preview of what these models will be capable of,” says Ramesh.

To build Sora, the team adapted the tech behind DALL-E 3, the latest version of OpenAI’s flagship text-to-image model. Like most text-to-image models, DALL-E 3 uses what’s known as a diffusion model. These are trained to turn a fuzz of random pixels into a picture.

Sora takes this approach and applies it to videos rather than still images. But the researchers also added another technique to the mix. Unlike DALL-E or most other generative video models, Sora combines its diffusion model with a type of neural network called a transformer.

Transformers are great at processing long sequences of data, like words. That has made them the special sauce inside large language models like OpenAI’s GPT-4 and Google DeepMind’s Gemini . But videos are not made of words. Instead, the researchers had to find a way to cut videos into chunks that could be treated as if they were. The approach they came up with was to dice videos up across both space and time. “It’s like if you were to have a stack of all the video frames and you cut little cubes from it,” says Brooks.

The transformer inside Sora can then process these chunks of video data in much the same way that the transformer inside a large language model processes words in a block of text. The researchers say that this let them train Sora on many more types of video than other text-to-video models, varied in terms of resolution, duration, aspect ratio, and orientation. “It really helps the model,” says Brooks. “That is something that we’re not aware of any existing work on.”

“From a technical perspective it seems like a very significant leap forward,” says Sam Gregory, executive director at Witness, a human rights organization that specializes in the use and misuse of video technology. “But there are two sides to the coin,” he says. “The expressive capabilities offer the potential for many more people to be storytellers using video. And there are also real potential avenues for misuse.” 

OpenAI is well aware of the risks that come with a generative video model. We are already seeing the large-scale misuse of deepfake images . Photorealistic video takes this to another level.

Gregory notes that you could use technology like this to misinform people about conflict zones or protests. The range of styles is also interesting, he says. If you could generate shaky footage that looked like something shot with a phone, it would come across as more authentic.

The tech is not there yet, but generative video has gone from zero to Sora in just 18 months. “We’re going to be entering a universe where there will be fully synthetic content, human-generated content and a mix of the two,” says Gregory.

The OpenAI team plans to draw on the safety testing it did last year for DALL-E 3. Sora already includes a filter that runs on all prompts sent to the model that will block requests for violent, sexual, or hateful images, as well as images of known people. Another filter will look at frames of generated videos and block material that violates OpenAI’s safety policies.

OpenAI says it is also adapting a fake-image detector developed for DALL-E 3 to use with Sora. And the company will embed industry-standard C2PA tags , metadata that states how an image was generated, into all of Sora’s output. But these steps are far from foolproof. Fake-image detectors are hit-or-miss. Metadata is easy to remove, and most social media sites strip it from uploaded images by default.  

“We’ll definitely need to get more feedback and learn more about the types of risks that need to be addressed with video before it would make sense for us to release this,” says Ramesh.

Brooks agrees. “Part of the reason that we’re talking about this research now is so that we can start getting the input that we need to do the work necessary to figure out how it could be safely deployed,” he says.

Update 2/15: Comments from Sam Gregory were added .

Artificial intelligence

Ai for everything: 10 breakthrough technologies 2024.

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Our writers look at the four hot trends to watch out for this year

  • Melissa Heikkilä archive page

Google’s Gemini is now in everything. Here’s how you can try it out.

Gmail, Docs, and more will now come with Gemini baked in. But Europeans will have to wait before they can download the app.

Deploying high-performance, energy-efficient AI

Investments into downsized infrastructure can help enterprises reap the benefits of AI while mitigating energy consumption, says corporate VP and GM of data center platform engineering and architecture at Intel, Zane Ball.

  • MIT Technology Review Insights archive page

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EU AI Act: first regulation on artificial intelligence

The use of artificial intelligence in the EU will be regulated by the AI Act, the world’s first comprehensive AI law. Find out how it will protect you.

A man faces a computer generated figure with programming language in the background

As part of its digital strategy , the EU wants to regulate artificial intelligence (AI) to ensure better conditions for the development and use of this innovative technology. AI can create many benefits , such as better healthcare; safer and cleaner transport; more efficient manufacturing; and cheaper and more sustainable energy.

In April 2021, the European Commission proposed the first EU regulatory framework for AI. It says that AI systems that can be used in different applications are analysed and classified according to the risk they pose to users. The different risk levels will mean more or less regulation. Once approved, these will be the world’s first rules on AI.

Learn more about what artificial intelligence is and how it is used

What Parliament wants in AI legislation

Parliament’s priority is to make sure that AI systems used in the EU are safe, transparent, traceable, non-discriminatory and environmentally friendly. AI systems should be overseen by people, rather than by automation, to prevent harmful outcomes.

Parliament also wants to establish a technology-neutral, uniform definition for AI that could be applied to future AI systems.

Learn more about Parliament’s work on AI and its vision for AI’s future

AI Act: different rules for different risk levels

The new rules establish obligations for providers and users depending on the level of risk from artificial intelligence. While many AI systems pose minimal risk, they need to be assessed.

Unacceptable risk

Unacceptable risk AI systems are systems considered a threat to people and will be banned. They include:

  • Cognitive behavioural manipulation of people or specific vulnerable groups: for example voice-activated toys that encourage dangerous behaviour in children
  • Social scoring: classifying people based on behaviour, socio-economic status or personal characteristics
  • Biometric identification and categorisation of people
  • Real-time and remote biometric identification systems, such as facial recognition

Some exceptions may be allowed for law enforcement purposes. “Real-time” remote biometric identification systems will be allowed in a limited number of serious cases, while “post” remote biometric identification systems, where identification occurs after a significant delay, will be allowed to prosecute serious crimes and only after court approval.

AI systems that negatively affect safety or fundamental rights will be considered high risk and will be divided into two categories:

1) AI systems that are used in products falling under the EU’s product safety legislation . This includes toys, aviation, cars, medical devices and lifts.

2) AI systems falling into specific areas that will have to be registered in an EU database:

  • Management and operation of critical infrastructure
  • Education and vocational training
  • Employment, worker management and access to self-employment
  • Access to and enjoyment of essential private services and public services and benefits
  • Law enforcement
  • Migration, asylum and border control management
  • Assistance in legal interpretation and application of the law.

All high-risk AI systems will be assessed before being put on the market and also throughout their lifecycle.

General purpose and generative AI

Generative AI, like ChatGPT, would have to comply with transparency requirements:

  • Disclosing that the content was generated by AI
  • Designing the model to prevent it from generating illegal content
  • Publishing summaries of copyrighted data used for training

High-impact general-purpose AI models that might pose systemic risk, such as the more advanced AI model GPT-4, would have to undergo thorough evaluations and any serious incidents would have to be reported to the European Commission.

Limited risk

Limited risk AI systems should comply with minimal transparency requirements that would allow users to make informed decisions. After interacting with the applications, the user can then decide whether they want to continue using it. Users should be made aware when they are interacting with AI. This includes AI systems that generate or manipulate image, audio or video content, for example deepfakes.

On December 9 2023, Parliament reached a provisional agreement with the Council on the AI act . The agreed text will now have to be formally adopted by both Parliament and Council to become EU law. Before all MEPs have their say on the agreement, Parliament’s internal market and civil liberties committees will vote on it.

More on the EU’s digital measures

  • Cryptocurrency dangers and the benefits of EU legislation
  • Fighting cybercrime: new EU cybersecurity laws explained
  • Boosting data sharing in the EU: what are the benefits?
  • EU Digital Markets Act and Digital Services Act
  • Five ways the European Parliament wants to protect online gamers
  • Artificial Intelligence Act

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Google Gemini: Everything you need to know about the new generative AI platform

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Google’s trying to make waves with Gemini, a flagship suite of generative AI models, apps and services. But while Gemini appears to be promising in a few aspects, it’s falling short in others — as our informal review revealed .

So what is Gemini? How can you use it? And how does it stack up to the competition?

To make it easier to keep up with the latest Gemini developments, we’ve put together this handy guide, which we’ll keep updated as new Gemini models and features are released.

What is Gemini?

Gemini is Google’s long-promised , next-gen GenAI model family, developed by Google’s AI research labs DeepMind and Google Research. It comes in three flavors:

  • Gemini Ultra , the flagship Gemini model.
  • Gemini Pro , a “lite” Gemini model.
  • Gemini Nano , a smaller “distilled” model that runs on mobile devices like the Pixel 8 Pro .

All Gemini models were trained to be “natively multimodal” — in other words, able to work with and use more than just words. They were pretrained and fine-tuned on a variety of audio, images and videos, a large set of codebases and text in different languages.

This sets Gemini apart from models such as Google’s own LaMDA , which was trained exclusively on text data. LaMDA can’t understand or generate anything other than text (e.g., essays, email drafts), but that isn’t the case with Gemini models.

What’s the difference between the Gemini apps and Gemini models?

Google's Bard

Image Credits: Google

Google, proving once again that it lacks a knack for branding, didn’t make it clear from the outset that Gemini is separate and distinct from the Gemini apps on the web and mobile (formerly Bard). The Gemini apps are simply an interface through which certain Gemini models can be accessed — think of it as a client for Google’s GenAI.

Incidentally, the Gemini apps and models are also totally independent from Imagen 2 , Google’s text-to-image model that’s available in some of the company’s dev tools and environments. Don’t worry — you’re not the only one confused by this.

What can Gemini do?

Because the Gemini models are multimodal, they can in theory perform a range of multimodal tasks, from transcribing speech to captioning images and videos to generating artwork. Few of these capabilities have reached the product stage yet (more on that later), but Google’s promising all of them — and more — at some point in the not-too-distant future.

Of course, it’s a bit hard to take the company at its word.

Google seriously underdelivered with the original Bard launch. And more recently it ruffled feathers with a video purporting to show Gemini’s capabilities that turned out to have been heavily doctored and was more or less aspirational.

Google’s best Gemini demo was faked

Still, assuming Google is being more or less truthful with its claims, here’s what the different tiers of Gemini will be able to do once they reach their full potential:

Gemini Ultra

Google says that Gemini Ultra — thanks to its multimodality — can be used to help with things like physics homework, solving problems step-by-step on a worksheet and pointing out possible mistakes in already filled-in answers.

Gemini Ultra can also be applied to tasks such as identifying scientific papers relevant to a particular problem, Google says — extracting information from those papers and “updating” a chart from one by generating the formulas necessary to re-create the chart with more recent data.

Gemini Ultra technically supports image generation, as alluded to earlier. But that capability hasn’t made its way into the productized version of the model yet — perhaps because the mechanism is more complex than how apps such as ChatGPT generate images. Rather than feed prompts to an image generator (like DALL-E 3 , in ChatGPT’s case), Gemini outputs images “natively,” without an intermediary step.

Gemini Ultra is available as an API through Vertex AI, Google’s fully managed AI developer platform, and AI Studio, Google’s web-based tool for app and platform developers. It also powers the Gemini apps — but not for free. Access to Gemini Ultra through what Google calls Gemini Advanced requires subscribing to the Google One AI Premium Plan, priced at $20 per month.

The AI Premium Plan also connects Gemini to your wider Google Workspace account — think emails in Gmail, documents in Docs, presentations in Sheets and Google Meet recordings. That’s useful for, say, summarizing emails or having Gemini capture notes during a video call.

Google says that Gemini Pro is an improvement over LaMDA in its reasoning, planning and understanding capabilities.

An independent study by Carnegie Mellon and BerriAI researchers found that Gemini Pro is indeed better than OpenAI’s GPT-3.5 at handling longer and more complex reasoning chains. But the study also found that, like all large language models, Gemini Pro particularly struggles with math problems involving several digits, and users have found plenty of examples of bad reasoning and mistakes.

Early impressions of Google’s Gemini aren’t great

Google’s promised improvements, though — and the first arrived in the form of Gemini 1.5 Pro .

Designed to be a drop-in replacement, Gemini 1.5 Pro (in preview at present) is improved in a number of areas compared with its predecessor, perhaps most significantly in the amount of data that it can process. Gemini 1.5 Pro can (in limited private preview) take in ~700,000 words, or ~30,000 lines of code — 35x the amount Gemini 1.0 Pro can handle. And — the model being multimodal — it’s not limited to text. Gemini 1.5 Pro can analyze up to 11 hours of audio or an hour of video in a variety of different languages, albeit slowly (e.g., searching for a scene in a one-hour video takes 30 seconds to a minute of processing).

Gemini Pro is also available via API in Vertex AI to accept text as input and generate text as output. An additional endpoint, Gemini Pro Vision, can process text and imagery — including photos and video — and output text along the lines of OpenAI’s GPT-4 with Vision model.

Gemini

Using Gemini Pro in Vertex AI. Image Credits: Gemini

Within Vertex AI, developers can customize Gemini Pro to specific contexts and use cases using a fine-tuning or “grounding” process. Gemini Pro can also be connected to external, third-party APIs to perform particular actions.

Google brings Gemini Pro to Vertex AI

In AI Studio, there’s workflows for creating structured chat prompts using Gemini Pro. Developers have access to both Gemini Pro and the Gemini Pro Vision endpoints, and they can adjust the model temperature to control the output’s creative range and provide examples to give tone and style instructions — and also tune the safety settings.

Gemini Nano

Gemini Nano is a much smaller version of the Gemini Pro and Ultra models, and it’s efficient enough to run directly on (some) phones instead of sending the task to a server somewhere. So far it powers two features on the Pixel 8 Pro: Summarize in Recorder and Smart Reply in Gboard.

The Recorder app, which lets users push a button to record and transcribe audio, includes a Gemini-powered summary of your recorded conversations, interviews, presentations and other snippets. Users get these summaries even if they don’t have a signal or Wi-Fi connection available — and in a nod to privacy, no data leaves their phone in the process.

Gemini Nano is also in Gboard, Google’s keyboard app, as a developer preview . There, it powers a feature called Smart Reply, which helps to suggest the next thing you’ll want to say when having a conversation in a messaging app. The feature initially only works with WhatsApp but will come to more apps in 2024, Google says.

Is Gemini better than OpenAI’s GPT-4?

Google has several times touted Gemini’s superiority on benchmarks, claiming that Gemini Ultra exceeds current state-of-the-art results on “30 of the 32 widely used academic benchmarks used in large language model research and development.” The company says that Gemini Pro, meanwhile, is more capable at tasks like summarizing content, brainstorming and writing than GPT-3.5.

But leaving aside the question of whether benchmarks really indicate a better model, the scores Google points to appear to be only marginally better than OpenAI’s corresponding models. And — as mentioned earlier — some early impressions haven’t been great, with users and academics pointing out that Gemini Pro tends to get basic facts wrong, struggles with translations and gives poor coding suggestions.

How much will Gemini cost?

Gemini Pro is free to use in the Gemini apps and, for now, AI Studio and Vertex AI.

Once Gemini Pro exits preview in Vertex, however, the model will cost $0.0025 per character while output will cost $0.00005 per character. Vertex customers pay per 1,000 characters (about 140 to 250 words) and, in the case of models like Gemini Pro Vision, per image ($0.0025).

Let’s assume a 500-word article contains 2,000 characters. Summarizing that article with Gemini Pro would cost $5. Meanwhile, generating an article of a similar length would cost $0.1.

Ultra pricing has yet to be announced.

Where can you try Gemini?

The easiest place to experience Gemini Pro is in the Gemini apps . Pro and Ultra are answering queries in a range of languages.

Gemini Pro and Ultra are also accessible in preview in Vertex AI via an API. The API is free to use “within limits” for the time being and supports certain regions, including Europe, as well as features like chat functionality and filtering.

With AI Studio, Google launches an easy-to-use tool for developing apps and chatbots based on its Gemini model

Elsewhere, Gemini Pro and Ultra can be found in AI Studio. Using the service, developers can iterate prompts and Gemini-based chatbots and then get API keys to use them in their apps — or export the code to a more fully featured IDE.

Duet AI for Developers , Google’s suite of AI-powered assistance tools for code completion and generation, is now using Gemini models. And Google’s brought Gemini models to its dev tools for Chrome and Firebase mobile dev platform.

Gemini Nano is on the Pixel 8 Pro — and will come to other devices in the future. Developers interested in incorporating the model into their Android apps can sign up  for a sneak peek.

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