The cost of building a web application in Australia

One of the great things about the Internet is that people have started sharing some great information about their products and processes. It is now possible to find out what some of the leading web applications cost to build, and therefore make a good guess as to what it is going to cost you to build one.Some costs of other web applications are shown below (US$), with the numbers taken from Read Write Web.

Dropsend: $48,012
Freshbooks: $20,000
Maya’s Mom: $70,000
Mobissimo: $60,000
Wesabe: $200,000

The numbers above suggest that angel financing (or your own cash) should be all that is required to get a prototype out the door. Anyone asking for 7 figures off a VC without having anything to show for it is trying to run before they are walking. Any VC happy to give out that kind of money without first seeing a prototype, well my contact details are here!

If you ask Guy Kawasaki however, building a web app can be done even cheaper. In a tribute to that post, the following numbers are supplied from our experience in building TrickyTix. All financial figures are in Australian dollars.

  1. 2 – The number of external developers we added to our existing team of 5 in order to create the right set of skills.
  2. 0 – The number of finalised business models we had before commencing development (although we did have a broad understanding of how we intended to make money)
  3. 0 – The number of documents (functional specification, scope of work, business requirements, business plans, change management requests, risk registers,) we wrote before starting building our app.
  4. $6,500 – Legal costs for trademarks and terms and conditions (x 2). We didn’t skimp on this, and went and found ourselves a firm that specialises in IT, IP and fast-starting companies.
  5. $500 – We spent approximately $500 registering domain names.
  6. $2,500 – Accountant fees to be spent on setting up two new companies. One to run operations, the other to hold the IP.
  7. $60 – We used Basecamp to project manage the entire development, as well as manage task allocation.
  8. 4 – By the time we push the prototype out to test, 4 months will have been spent building the app.
  9. $1,000 – Time spent developing the logo, colour palette and typography. All done in-house.
  10. $4,200 – Money spent on User interface and the design of both the website and the application. Again, all done in-house.
  11. $6,500 – Development costs for the front-end of the application. As with any modern web app a significant portion of that was spent on javascript, with 1 specialist contractor brought in to assist where required.
  12. $9,000 – Where there is a front-end, there is usually a backend. Think databases, think scripting, think geek. Half the costs here were spent getting in a specialist contractor, and the other half completed in-house.
  13. $0 – When you use open source software, the license fees are pretty sweet.
  14. $450 per month – Dedicated server to host the application. There are cheaper options, but this should suffice for now.

There are other fees still to come (merchant account for one), but it won’t be much higher than what is listed here. In the final wrap up, we end up with:

$30,710 to develop a prototype web application in Australia.

I have tried to account for in-house development at wage cost rather than actual consulting prices, but to be honest there is probably still a lot of “sweat equity” unaccounted for.

So what do you think – has the price come out lower or higher than expected? Anything you think we have failed to take into account?

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4 Comments »

  1. Based around most conversations we have with entrepreneurs, there seem to be three golden rules to new product (including web app) development…

    1. Calculate the cost…

    Then double it.

    2. Calculate the revenue…

    Then halve it.

    3. Estimate the development time…

    Then triple it.

    I look forward to reading about your progress. 🙂

    James

  2. James – couldn’t agree more with those 3 points!

  3. Murray said

    I haven’t got a lawyer yet. Do you really need one? Why? Can you give me your lawyer and accountants contact details?

  4. I think you do need a lawyer at some point in your venture. When will depend a bit on what stage you are at, as well as what kind of business you have.

    For us it is a no-brainer. We are selling tickets on behalf of others, accepting money and holding it on behalf of others, so terms and conditions that are rock solid are a must. We also used the lawyer to apply for and receive the trademark of our business name. Moving forward, we will use the lawyer to bounce ideas off, expand into other countries, traverse the fund raising and charitable red tape that exists in Aus and elsewhere, etc etc.

    If you are seeking funding then a lawyer on your side is also a must.

    Having said all that, if you were self-funding a prototype of an app that didn’t transact…you could probably get away without using a lawyer for quite a while.

    BTW – will email you seperately with my accountants and lawyers details!

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