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How to Calculate MVP Costs for Startups

Nearly half of all startups fail because of the wrong motivation. You should focus not only on growth, long-term profits, and often unreasonable ambitions. You must be a powerful advocate for a unique and, most importantly, accessible offering. A minimum viable product (MVP) should help you pave the way for a high return on investment (ROI). Otherwise, your idea won’t find application in the market, and your start will fail.

At Owlab , we have the know-how on testing a product in the field so that it comes out optimal in every way. Let’s learn how to correctly calculate the cost of MVP for startups so that you get a better grip on your startup success.

Factors Influencing MVP Pricing

Marketing and Advertising

MVP development cost is shaped by a lot of aspects, so it can be either completely negligible or prohibitively high. The final amount largely depends on the complexity of the project and the forces and means involved in its implementation.

Development Team

Of course, any project begins with the search for a qualified team. However, real talent always comes at a cost. Moreover, outsourcing may cost more than full-time specialists. Especially if the staff is able to perform several diverse tasks at once, for instance, combining development or design with testing.

Technology Stack

When planning development, the right choice of tools is essential. Reliable, scalable, and relevant technologies are preferred. You will need the latest technological experience, starting with a completely new or unfamiliar programming language, and front-end and server-side frameworks.

Technology Stack

Development Approach

The underlying methodology directly affects the MVP cost. In-house development takes place on existing infrastructure and is highly adaptable to changing conditions. This reduces overall costs, while outsourcing, to a greater extent, allows you to reduce operating costs and save time.

Design Cost

To attract clients to the result of development, the visual design and interface of your product must be stylish and flawless. When it comes to an application, every screen, every detail must be carefully designed. You will need skilled designers to ensure that navigation is perfect, and the layout of buttons and other elements is as convenient as possible for use.

Features

First, you need to implement key features. The more of them, the more expensive MVP development will be, which can be critical for startups. Make sure you focus on the top-priority functionality that your new idea is actually being implemented for.

Product Complexity

Unique and overly complex designs are often sought after, but they come at a high cost. On top of that, if the functionality and MVP are too complex, you will significantly reduce your chances of a quick launch. But it will take much more time to develop.

Time To Build

Technology Stack

Don't just calculate the time it takes to work. Consider collateral losses. Working in the office, developers waste time on chatter, restroom journeys, and other stuff. Productivity is highly dependent on management and team processes. Without good QA engineers, it will take them a quarter as much testing time. If your team does not have DevOps, developers will have to spend up to 10% more time setting up servers and deploying code.

How To Calculate The Costs

How much does MVP cost in the long run? Let’s take this question step by step.

First off, determine the requirements for the product. They must be adequate, correspond to the market, and reflect your ambition in the functionality. A preliminary analysis will allow you to figure out how much your product is demanded by potential users. Much depends on its type and scale. Some MVPs in startups don't need too many features in the first iteration.

To analyze costs at the early stages, make sure you have key features, technology requirements, business needs, and other things at hand to confirm that the product meets end-user expectations.

Analyze Team Requirements

An approximate minimum calculation of specialists and working time for a not very large project looks like this:

Technology Stack

  • Developer responsible for front-end, back-end, and deployment - full-time;
  • UX designer - full-time for a month or two;
  • QA specialist - half of the working day during the entire project.

Find Out The Developers’ Salary

The main advantage of freelancers is that they are usually cheaper. Considering the average hourly rate for them in Eastern Europe ($25), a developer costs about $4,000 for a month of work. Same goes for a UX designer, while the services of a quality control specialist cost around $2,000. If you contact specialists in other regions, the final price can increase up to 6 times.

Assess The Hours Required

Roughly estimate the time required for work, and then multiply it by the hourly rate of specialists. An MVP of average complexity is usually implemented in 4-6 months (900-2,500 working hours).

Multiply The Team’s Per Hour Cost With Hours

Based on the average hourly rate in Central Europe ($45), the cost of an average MVP will range from $40,500 to $112,500 (8 working hours per day, 22 working days in total). The final cost will depend on the choice of local or remote freelancers, as hourly rates may vary. The price will increase if the software requires complex UX or logic. You should also include the time spent managing and coordinating the team. The cost of services of specialized companies ranges from $35-65 thousand (Europe, Asia) to $75-120 thousand (USA). Below is an example of the calculation of one average project.

Post-Launch Costs

You must operate your product after development to get the expected results. After all, it still needs to be advertised in order to be sold. It needs to be managed to bring it up to the minimum marketable product (MMP). All this is also associated with costs (to be more precise, investments) that need to be taken into account. Below are three main post-launch costs.

Marketing and Advertising

Marketing and Advertising

The cost of marketing varies depending on the methods and platforms used. On average, such services are estimated at around $10,000. You can lower your score through social media campaigns and corporate events.

Sales

To attract the target audience and profit from the MVP, a well-organized sales funnel is extremely important. You need to develop a product deployment strategy to help your audience support your product in a targeted manner. You will have to shell out $5,000 to $10,000 to test ideas and determine the best sales funnel.

Maintenance

The amount associated with product maintenance typically makes 20% of the original MVP development budget. Please note that this depends entirely on its complexity and the geolocation of the team. For the IT sector, along with maintenance costs, you will also have to take into account the cost of renting a server and doing API integrations.

Conclusion

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When determining how much MVP costs, think about the final cost to the consumer. It must be balanced and reasonable. Strike a balance between what you want and what is possible, and then offer a profitable option that will become a bestseller in the future.

And if it all seems too complicated or you lack experience, trust the professionals . Our specialists have sufficient expertise to work with startups of any complexity. Let’s make your startup the next big thing together.

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