How to Start an App Company

People usually have a good grasp on what it is they want to develop, but what’s less certain is how they’re going to actually start their business.

An interesting thing happens when you start a mobile application development company – everyone starts coming to you with app development ideas. Over the years we’ve heard hundreds thousands of app development ideas. People usually have a good grasp on what it is they want to develop, but what’s less certain is how they’re going to actually start their business.

The main reason for this is that people with app ideas come from all walks of life and business is not always their core background. As a result I wanted to write this blog post with some general, but hopefully helpful and insightful information about actually launching a business to support your future software product(s).

First things first: the road to starting and building a successful company is long, twisted and highly unpredictable. The idea of entrepreneurship is often much nicer than actually working 70 hours a week, begging people for investment capital and trying to convince people to buy your product. For these reasons do a serious gut check and ask yourself, if everything goes according to plan, is this something that I’m passionate about and want to spend years and years of my life building?

If the answer is yes, awesome! If the answer is no, consider abandoning the idea. Throughout the rest of this post I’ll include “tips” to starting a business based on my experience and things that are really important (I’d originally called these ‘rules’, but the one rule of business is there are no ‘rules’).

Here’s the first tip:

Tip #1 – Building a company purely for profit without enjoying loving (often obsessively) what you do, will lead to a high amount of displeasure and likely burn you out before you ever make any real money. The reason for this is when the going gets tough (and it will at points) the only thing you may have at the end of the day is the love of your business.

The next step is to validate that there is an actual market for your product. I’ve helped launch dozens of products and seen friends and customers launch many more. If there’s anything I’ve learned, it’s that consumers are stingy when it comes to making a purchase and understandably so – they worked hard for that money, as did you! Everyone needs food, water, shelter and a cell phone – not everyone needs a social network app for their fish.

Tip #2 – Make sure that your product fills a need, and isn’t an erroneous luxury good.

Still here? Okay good, so now the assumption we’re working with is that your product idea fills a verifiable need in the market. The next thing we need to ask ourselves is whether this need is already being met by someone else – also known as the competition. Even if you invented a similar idea to Floppy Bird in a vacuum (meaning no outside influence) this probably wouldn’t be the best time to move forward with your idea as there are literally thousands of clones currently in the marketplace.

Tip #3 – Doing some preliminary research to understand your competition, your position in the marketplace and what makes you different (better) earlier on in the process will save you and everyone else involved a lot of time and energy.

Assuming there is an opportunity in the marketplace, it’s time to start collecting information. One of the first things that we want to understand is cost. How much will it take to get my idea to market? This definitely includes the product/software development costs, but also includes things like legal agreements, rent, computers, salaries, marketing, etc. More simply this can be encapsulated under Startup Expenses.

Once you’ve written your business plan, it’s time to start getting feedback from outside sources. Start with friends and family, acquaintances, potential partners, investors, advisers, etc. There are a number of things you may not have considered before and this is a great time to start getting outside perspective on the business.

Tip #4 – The quickest way to validate an idea is to see if anyone will pay for it (yes, even before you’ve got a product). In exchange for investing in your idea early they get the ability to influence the product, pay a cheaper rate than those who wait, and get the inside track on new features.

At this stage many first-time entrepreneurs want everyone to sign a non-disclosure agreement (NDA). While this makes sense in some situations, do not ask investors to sign an NDA; they won’t do it, and you’ll come across as a rookie (which is not good). Investors review thousands of plans a year. If they signed NDAs they’d open themselves up to liability and thus they just refuse to sign.

If everything is still good at this point, then it’s time to understand how much it will cost and how long it will take to actually develop your core software product. In order to give developers the clearest possible picture of your idea, it’s helpful to bring an outline of your product with you. This document is often referred to as a scope or functional requirements document.

When we help clients through this process we follow a set of fairly simple discovery steps:

1. What solution are we looking to provide? Example: We want to connect people looking to play basketball in real time
2. What high level functions do we need to provide that solution? Example: Profiles, Scheduling, Search, and Map/GPS
3. What are the specific features of those larger functions? Example: For profiles we’ll need name, email address, password, skill level and location
4. Finally, how will those features be arranged in a way that makes sense for the user? Example: First they’ll create their profile, then set their availability, and then search for other players of similar skills levels around them

The more information you can gather before meeting with a developer or product manager, the better. Consider more specific elements as well:

• What apps do I think have a good user experience (UX)?
• What color schemes, and fonts would I want to include?
• Should I create an iOS app, Android app or both?

If you want to take things a step further you could even start to create mockups of your products. Here are several great resources:

Balsamiq Mockups – Software program that will help you create wireframes of your products.
Fluid UI – Helps you turn mockups into actual interactive prototypes.

All of this information will help to give outside sources (developers, investors, employees, service providers, etc.) a much better idea of your product. Once you’ve started to put this information together and gather quotes on development costs, you’ll want to return to your startup expenses, and begin to expand this into a fully functional business plan.

At this point some entrepreneurs will choose to bankroll the project themselves; others will seek outside funding sources (angel investors, venture capitalists, crowdfunding, etc.).

Practical next steps include:

• Setting up your business entity with the Secretary of State
• Opening up a bank account once you have an employer identification number (EIN)
• Drafting legal contracts for customer license agreements, partnerships, sale of shares, etc.

Once you’ve completed all of this and your company is ready to launch, then the real work begins – sales and marketing! …but more on that next time.

Talk to our team to scope your next project.