Archive for Financials

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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The idea and the model

Our new business is called TrickyTix. It is a web based ticketing solution aimed at small businesses and will exist online at event organiser or company will have the ability to visit the website and create a ticketing account for themselves. This account will allow them to then create events which people can purchase tickets for.

The tickets for any event will be available for sale on the TrickyTix website, as well as on the website of the event organiser. Customers will be able to purchase a ticket using a credit card, and have the ticket sent to them via email or SMS.

The money for the tickets sold will be received by TrickyTix and held for a defined period of time. After deducting bookings fees and charges levied to the ticket purchaser, the remaining funds will then be electronically transferred into the Event Organisers nominated account. The fundamental business model is therefore one in which TrickyTix takes a small fee from the cost of every ticket sold.

That is about as complex as it gets. There are a few small to medium companies out there offering a similar service, and one 900 pound gorilla.

We believe our approach has a number of fundamental differences which position us to capture a previously untapped segment of the market, but I will go into much greater detail in future postings. Suffice to say, we are excited about the potential.

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