How to Price Your Project When Shopping Around For Developers - BuildFire
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Daniel Hindi, CTO Daniel Hindi, CTO

How to Price Your Project When Shopping Around For Developers

Do you have an app project in mind? If you don’t have an internal team at your disposal to work on it, you’ll need to shop around for developers.

While you’re shopping and getting quotes, you’ll likely encounter some that seem really cheap, while others seem super expensive. Is one price gouging you? Is the other one even qualified to work on your project?

You need a way to find a happy medium between the two.

There are other factors to consider as well. Should you hire a developer? Agency? Find a partner? Where do you begin pricing out your app development project?

If you’re lost, you’ve come to the right place. I’ll teach you different techniques, tips, and best practices to use while shopping around for developers.

How to Price out your App Development Project?

 

What You Need For a Development Project

You’ve decided you want to build an app, and you’re looking for a developer. So you start to look around for different options.

You might consider using Upwork to find a developer and just send your idea off to them. Or maybe you’re looking for an agency, but you’re unsure if it’s worth the extra cost. You could be looking for a partner or a potential pre-existing solution. What’s the right fit for your app and development project?

The first thing that you need to understand is this; when you’re shopping around for a developer, that’s all you’re getting—a developer.

Do you need anything else besides a developer? Generally speaking, yes.

You’ll need a designer to design the app. You need a QA engineer to test if the app is working properly. Someone has to be the project manager as well to ensure that everyone is hitting their deadlines, whether that’s you or someone else.

So at the end of the day, you need a team to work on your project—not just one developer.

Without the right team in place, the quality of the solution and the quality of the final product will ultimately suffer. If you just hire a developer, this is not their fault. This person isn’t a designer or a QA engineer.

Here’s an analogy to explain what I mean.

Let’s say you’re building a house. But you only hire a painter. Then you’re upset that the kitchen wasn’t built properly and the plumbing has problems. Whose fault is that? You just hired a painter. You need a carpenter and plumber to handle those other jobs.

For app development, you must understand that there are multiple dimensions to your project, and each dimension needs to be satisfied.

Should You Hire an App Development Agency?

Agencies might seem like an appealing solution because they should provide you with a comprehensive team. From developers to QA, designers, and project management, an agency will have it all.

However, agencies are in the business of selling you man hours. Agencies sell time, so they’re going to give you lots of billable hours.

An agency will do exactly what you tell them to do. However, they may not challenge you the same way that a partner would.

Sometimes a partner looks like an agency, but they bring more consultancy into the mix.

While an agency can generally be compared to a contractor, a partner is more like a consultant. They come in and challenge your business model. Partners will give you suggestions on how to do things better, even if it’s less work for them.

That’s because a partner is invested in a long-term relationship with you. They want your company to grow so your relationship can last longer.

Fundamentally, that’s what you should be looking for when you’re shopping around. Whether it’s from an agency, a developer, or a partner, you want someone who can be more of a consultant to you.

I’ve been on both sides of this equation.

Earlier in my career, I was shopping around for developers to work on some of the projects I had. Right now, I have customers coming to my businesses asking me to develop their apps, and I need to justify my own value.

The truth of the matter is this—the common mistake that everyone makes is they just look at dollar amounts. I know this sounds difficult, but you need to look past that.

Obviously, money is the most important thing on your mind. It’s tangible, and it’s really the only metric you have to measure and compare between companies.

But let me give you another analogy to explain why you need to look past the dollar figures.

Let’s say you are comparing two vehicles. One is $5k, and the other costs $50k.

The first might get you around for six months or a year before it breaks down. But if that’s all you need, there’s nothing wrong with that. The $50k car would be overkill if you just needed a beater car for a few months.

But the more expensive car might be hybrid or fully electric. It could save you money on things like gas, maintenance, and time. Plus, there is the opportunity cost saved for every time the old car would have broken down. If your car breaks down on the way to work, you can’t get paid for the day.

When it’s all said and done, the $50k car could actually save you money in the long run.

I’m not saying one is right and one is wrong. I’m saying you need to assess what’s right for you based on your unique situation. This goes beyond the price tag.

5 Techniques to Use When Shopping Around For Developers

Now that we’ve covered some of the basics and preliminary information, I’m going to show you some actionable techniques to use while you’re shopping around.

Whether you’re dealing with agencies, developers, or potential partners, these tips will help you make the best decision for your project.

Technique #1 — Get a Quote That’s Broken Down by Line Items

Your quotes don’t need to be super detailed, but each quote should explain how the developer or agency arrived at their price. The best way to do this is with a quote that’s broken down line item by line item.

If you ask someone how much your project would cost and they say $100k, wouldn’t you be a little puzzled? That’s a very round number. $100k exactly? Not $97k or $102k? I’m sure you’d like to know how they got there.

The idea here is to make them justify the price.

If they can’t justify it, they are likely just shooting from the hips to see what sticks. They are trying to price anchor you. Here’s an example of a quote with line items.

When a quote is justified by line items, you still need to be fair. If you’re not fair with the agency’s justification of the price, it’s going to be difficult for you to find the right value. What do I mean by this? Allow me to explain using an analogy.

Let’s say you ask me to make you an omelet.

To make this omelet, you’re paying for my time, the pan I need to fry the eggs, the stove, some oil or butter, and the eggs. Simple, right?

While I’m cooking, you ask me to add bacon. The incremental cost of adding bacon is very minimal. There is some added cost for the goods and additional labor. But incrementally, it’s nothing compared to the entire piece. Then maybe you ask for cheese or something else. At each incremental step, there’s an additional cost incurred, but it’s minimal.

Now let’s say you ask me for two eggs alone, bacon alone, and grilled cheese alone. These are three individual projects that require their own setup time, separate pans, different stove burners, and an oven. You can’t compare the price for adding bacon to an omelet to a dish of bacon on its own—that’s not how it works. Bacon alone will obviously be more expensive.

There is a certain amount of setup time that will be incurred for every project, and everything above that is incremental.

So be fair to the partner, agency, or developer that you’re talking to when they break down prices “à la carte.” Understand the difference between the incremental costs of adding a feature to an existing project vs. treating every feature as a separate project.

The other thing you need to understand is scale.

Back to the omelete analogy. Let’s say you ask me to make an omelet for you, your wife, and two kids. I already have everything out. I can add a few more eggs, more bacon, more cheese, and easily feed all four people.

But what about two families? I could use all four burners on the stove, with four pans going at once. No problem.

How about ten families? I can do it, but people will probably have to wait. Not everything will be ready at once. Some people might have hot food while other people might have cold food.

What about 1,000 families? 10,000 families?

As you can see, you’ll face different problems logistically at scale.

It’s no longer a question of how many eggs we need or how many pans are going. One person can’t manage all of this on their own. Customers will be waiting, and a backlog of orders will be coming in. These are bigger problems logistically.

So when you get a proposed solution from a developer, partner, or agency, make sure that it fits the context at the scale you’re looking for.

You don’t want a hypothetical scale. If you aim to small you could outgrow your project in a few months after the launch. You want to make sure the project has a shelf life that will last so you can reap the benefits and reinvest.

Technique #2 — Compare Quotes Side by Side

After you get quotes from multiple people, it’s important for you to compare each one side by side.

Look at each line item individually on every quote, so you’re comparing apples to apples.

Figure out if an estimate is able to scale with your business. Factor in any ancillary services that need to be added.

For example, you’ll need to factor in hosting costs for your backend data. There are push notification servers, analytics servers, servers for user notifications, and user authentication.

All of these services will be added on top and may not be included in your initial quote.

Remember, whenever you’re talking to an agency or a developer, they have the tendency to quote out only what you asked for—not what you need.

Technically, they’re not necessarily at fault for this because the quote includes everything you asked them to do. But once you’re neck-deep involved in development, how will you react when you need more stuff? I’m sure you won’t back out of the project; you’ll keep investing.

That’s why a partner is a better solution for the long run.

Partners will help you determine what’s missing in your initial ask from the beginning. That way, there won’t be as many surprises down the road.

Technique #3 — Be Methodical When Comparing Line Items

Make sure that you’re very methodical in how you compare line items together. What do I mean by this? Allow me to explain.

You received multiple quotes from different developers or agencies. Everything is broken down exactly how you asked. You’re comparing everything line item by line item. Are you with me so far?

Now, you need to put a weighted value on every feature that’s critical to your business. This will allow you to make a data-driven decision as opposed to an emotionally driven decision.

For example, one salesman might have been a bit more charismatic than the other. But that’s no reason to choose an agency; you’re letting your emotions get in the way and cloud your judgment.

Make a simple 0-5 scale for different categories like:

  • Longevity
  • Time to market
  • Number of features

Just find any way to have weighted values for everything that matters surrounding the launch and completion of your project. Only then can you be more data-driven with your decision and not just be swayed by the final dollar amount.

Again, the final price could end up costing you more at the very end if it undercuts your entire project. Trying to save $10k now could cost you $50k or $100k in two years.

Technique #4 — Products vs. Solutions

Ask yourself this—are you buying a product, or are you buying a solution?

A product is generally some type of widget that you’re purchasing. It could be software or something physical. When you’re buying, you can assess the cost of the item plus some margins. This will work fine if that’s the size of your problem.

But with larger problems that exist within companies, you’re not necessarily looking for a product to solve your problem; you need a solution.

Let’s refer back to one of our previous analogies comparing a consultant to a contractor.

The consultant will evolve with the problem as it changes shape. At the time I’m writing this guide, we are in the middle of the COVID-19 global pandemic. For business owners out there, you’ll need to find ways to think and strategize for the coming 6-12+ months on what to do with your investment.

These problems are hard to anticipate at the time of inception. But if you have a partner, they can help you evolve and adapt to changing markets. A partner can help you strategize on your minimum viable product (MVP).

You might need a new strategy to get to market. Here’s a visual example to show you what I mean.

If something changes in the market, you want to make sure that you can still release a functional product. A contractor won’t be able to strategize with you, but a consultant will have ideas.

Maybe you need to cut back on some features to get to market sooner? Or maybe you should wait three or six months later than you anticipated, so you have the opportunity to grow feature sets in your project.

Or maybe you need to reshape the feature sets based on the growing needs of the market.

The idea here is that you should be looking for a solution instead of a product. Solutions are better when they come with a consultant that can evolve with emerging changes or problems that you’re faced with.

Technique #5 — Challenge the Quote

Challenging your quotes is the best way to get a better sense of the agency or developer’s intentions.

Ask them what they would do differently if you were able to invest another $100k or $200k in a year?

They might say that your servers don’t have any security right now, so they recommend securing them with encrypted data. Or maybe they recommend scaling up the servers so your app can accommodate more than just a few thousand users.

A developer or agency could unknowingly start to uncover all of the weaknesses in the quote that they initially gave you.

So listen carefully. Are they adding new features? Or are they trying to fix weaknesses that were already baked into the quote?

Another way to challenge the quote is by doing the opposite. Now find out what they would do if you have less money. If they had to cut three things from the quote, what would be eliminated?

By asking the agency or developer to reevaluate their initial quote, you can see if any “fat” needs to be trimmed.

Is every feature mission-critical for the product to get to market? Is it the MVP? This is the way you should be thinking.

If right away, they come up with three or four things that can be cut out, you know that there is probably a lot of fat in the quote. But if they only offer to slightly modify or adjust things, you know that the fat is minimal.

Challenge the quote both ways. First, see if greed comes out and skeletons are exposed if you offer more money. Then see what would happen if your budget was less than you initially offered.

Conclusion

All of these techniques will help you better assess the kinds of quotes that you’re getting.

Whether you’re dealing with agencies, developers, or partners, you’ll be equipped with a lot more tools and metrics to make your decision. This will help you find the best solution without just looking at the dollar amount and final cost.

I hope that you found this guide helpful for pricing your app development project and shopping around for developers.

Let me know if you have any other questions or need assistance. Good luck!

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Daniel Hindi, CTO
Daniel Hindi, CTO

BuildFire CTO. Successful serial entrepreneur, author, patent holder, award-winning industry expert, and technology guru.

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