Article
SaaS business

updated on:

3 Jul

,

2024

How Much Does It Cost to Build an MVP? A Guide For SaaS Founders

15

min to read

Stan Murash

Writer at Eleken

Stan Murash

Writer at Eleken

Table of contents
Share

According to a post-mortem of over 100 startups by CB Insights, 42% failed due to a lack of market need. That's why it's important to gauge product-market fit before committing to creating a full-scale product. Half of these startups spent months or even years building a product before they found out that they were wrong in their most central assumption: that someone was interested in that product in the first place. This can suck not only the budget but the soul out of anyone.

So, you do need to test your idea. Building a Minimum Viable Product (MVP) is often the first significant investment for startups. But how much does it really cost? In this article, we’ll explore the various costs associated with building an MVP – and the alternative approaches to ensuring you have that sweet sweet product-market fit.

Let's get into it! 

Much Ado About MVP

Let's get on the same page first. A minimum viable product (MVP) is a streamlined version of your product that includes only the most essential features necessary to validate a business idea. The primary purpose of an MVP is to test your core assumptions about the product with minimal effort and cost. This approach allows you to gather critical feedback from early adopters and make informed decisions before fully committing to a complete product development.

The concept of an MVP was popularized by Eric Ries in his book The Lean Startup. According to Ries, an MVP is designed to validate learning by getting the product into the hands of users as quickly as possible. This helps startups to avoid the trap of building a product that nobody wants

So, you create an MVP to test your idea. When you start up, you inevitably work on assumptions. And you don't know which ones are correct and which are not. So you identify your riskiest assumption, design the experiment to test it, and use the results to guide your next steps. Quite often, you're back to step one, and the only thing you've achieved is disproving an assumption you had. And there's still a bunch of them. So, you create another MVP and go out in the wide world again. The process of getting your proof of concept looks more like on the second image here than on the first one:

Source

You choose an assumption, you create a way to test it, you go back with more knowledge. This process is repeated until you have a product that truly meets market needs.

That's why MVP is not a product – it's a process of trials and errors. A process of testing out your idea. And that's why it should be as quick as possible and it should cost you as little as possible. 

What Factors Influence MVP's Cost

Source

Understanding the factors that influence the cost of building a SaaS MVP is crucial for creating a realistic budget and managing expenses effectively. Here’s a deeper dive into the key variables that can impact the overall cost:

1. Complexity of the product

The complexity of your SaaS product is one of the primary cost drivers. A simple MVP app with basic functionalities will cost significantly less than a complex application with advanced features. Complex products often require more development time, intricate coding, and extensive testing. For example, an MVP with a straightforward user login system will be cheaper than one that includes complex algorithms, real-time data processing, or sophisticated machine learning capabilities.

2. Number of features

The specific features directly affect the MVP app development time and cost. Each additional feature requires design, coding, testing, and possibly integration with other parts of the system. It's essential to prioritize features based on their importance and impact on the user experience. Focus on the core functionalities that solve the primary problem for your users and consider adding secondary features in later iterations.

3. Design requirements

High-quality design is essential for user engagement and satisfaction, but it can also add to the development cost. Investing in a good UI/UX design ensures that your product is intuitive, attractive, and easy to use. However, sophisticated design elements, custom graphics, and interactive components require more time and resources. Balancing aesthetics with functionality and cost is key to managing your design budget. 

Spoiler: you can actually save money thanks to design. Stick to the design-driven approach paragraph to learn why.

4. Technology stack

The choice of technology stack can significantly influence the cost and timeline of building MVP. Different programming languages, frameworks, and tools have varying levels of complexity, community support, and cost. For instance, using a well-established framework like React for the frontend and Node.js for the backend can streamline development, but integrating cutting-edge technologies might require specialized skills and higher expenses. Additionally, licensing fees for proprietary technologies can add to the cost.

5. Development team location and size

The cost of building an MVP varies greatly depending on the location and size of your team. Developers in North America and Western Europe typically charge higher rates compared to those in Eastern Europe, Asia, or Latin America. The size of the team also matters; larger teams can complete the project faster but come with higher payroll costs. Consider the trade-offs between cost, speed, and quality when assembling your development team.

6. Integration with third-party services

Integrating your MVP with third-party services can enhance functionality and reduce development time, but it also incurs additional costs. Common integrations include payment gateways (like Stripe or PayPal), email marketing tools (like Mailchimp), analytics platforms (like Google Analytics), and CRM systems (like Salesforce). Each integration may involve setup fees, subscription costs, and ongoing maintenance.

7. Compliance and security requirements

Ensuring that your tech MVP meets industry standards for compliance and security is essential, particularly if your SaaS product handles sensitive data. Compliance with regulations like GDPR (General Data Protection Regulation) or HIPAA (Health Insurance Portability and Accountability Act) requires additional development work, documentation, and possibly legal consultation. Implementing robust security measures to protect user data and prevent breaches is critical but can be costly.

8. Custom vs. off-the-shelf solutions

Deciding between custom-built solutions and off-the-shelf components can impact costs. Custom solutions are tailored to your specific needs but require more development time and expertise. Off-the-shelf solutions, like pre-built templates or SaaS platforms, can save time and money but may lack the flexibility to fully meet your requirements. Assessing the trade-offs between customization and cost efficiency is essential for budget management.

9. Project management and coordination

Effective project management is crucial for keeping MVP application development on track and within budget. Hiring a skilled project manager or using project management tools can help coordinate tasks, monitor progress, and address issues promptly. However, these additional resources and tools come at a cost. Proper planning and communication can mitigate risks and avoid costly delays.

10. Post-launch considerations

Even after the MVP is launched, there are ongoing costs to consider. These include maintenance, updates, customer support, and scaling infrastructure to handle increased usage. Planning for these post-launch expenses is essential to ensure the long-term success and sustainability of your product.

Cost Breakdown

Breaking down the costs of building a SaaS MVP helps to understand where the budget is allocated and identify areas where you can potentially save money. Here's an in-depth look at the various stages and associated costs:

1. Planning and research

Market research

This phase involves gathering data to validate the product idea, identify user pain points, and determine the market fit.

  • Activities: Surveys, focus groups, data analysis, and competitor analysis.
  • Estimated cost: $5,000 - $15,000 when involving professional marketing specialists. If you're money-poor, time-rich, you can try conducting the research yourself.

Product requirement documentation

Proper documentation ensures that all stakeholders have a clear understanding of the project scope and requirements. So the purpose here is to define the product’s functionalities and technical specifications.

  • Activities: Creating detailed specs, user stories, and wireframes.
  • Estimated Cost: $2,000 - $5,000

2. Design

Habstash screenshot

Designers create wireframes to outline the structure, prototypes for initial testing, and high-fidelity prototypes for the final product. Prototypes help gather early user feedback and validate design choices before development begins.

  • Activities: Wireframing, prototyping, user testing, and visual design.
  • Estimated cost: $10,000 - $25,000. Frankly speaking, you won't be able (and shouldn't) reduce the design costs if you want to have an MPV app that will be truly intuitive and easy to use. But there's a trick to it (yes, it's again a teaser for the design-driven approach paragraph).

3. Development

Frontend development focuses on implementing the UI designs and ensuring responsive, interactive, and accessible interfaces for users.

  • Estimated cost: $15,000 - $30,000

Backend development involves creating the logic, database interactions, and server-side functions that power the application. 

  • Estimated cost: $20,000 - $50,000

Database setup ensures data integrity, security, and fast retrieval times.

  • Estimated cost: $5,000 - $15,000

4. Testing

Unit testing helps identify bugs early in the development process and ensure code reliability.

  • Estimated cost: $3,000 - $7,000

Integration testing ensure that various parts of the application work seamlessly as a whole.

  • Estimated cost: $4,000 - $10,000

User acceptance testing (UAT) involves users testing the application in real-world scenarios to identify any final issues before launch.

  • Estimated cost: $2,000 - $5,000

5. Deployment

Cloud hosting provides the infrastructure needed to run the application, with costs varying based on usage and scalability requirements.

  • Estimated cost: $2,000 - $10,000 per year

Continuous integration and delivery (CI/CD) practices enable automated testing and deployment, reducing the risk of errors and improving development efficiency.

  • Estimated cost: $5,000 - $15,000

6. Post-launch

Maintenance and support ensures the application remains functional and up-to-date with user needs and technological advancements. This means providing ongoing technical support and addressing any issues that arise.

  • Estimated cost: $10,000 - $20,000 per year

Iterative improvements help keep the product competitive and aligned with user expectations.

  • Estimated cost: $5,000 - $15,000

Hidden Costs to Consider

When considering MVP price, it is crucial to account for potential hidden costs. These unforeseen expenses can significantly impact your overall budget and may arise at various stages of the development process. Here’s an in-depth look at some common hidden costs to consider:

1. Unexpected technical challenges

Technical debt – an accumulation of shortcuts or suboptimal code that need to be addressed later.

  • Impact: Can lead to increased maintenance costs and slower development in the future.
  • Mitigation: Invest in quality code and conduct regular code reviews to minimize technical debt.

Compatibility issues across different devices, browsers, or operating systems.

  • Impact: Additional development time and resources to ensure compatibility and optimal performance.
  • Mitigation: Implement thorough testing across various platforms during the development phase.

Performance optimization to ensure the application runs efficiently under different loads.

  • Impact: Additional costs for performance tuning and scaling infrastructure.
  • Mitigation: Plan for scalability from the beginning and conduct performance testing regularly.

2. Changes in project scope

Scope creep, or uncontrolled expansion of project scope due to additional features or changes in requirements.

  • Impact: Increased development time and costs.
  • Mitigation: Establish clear project goals and requirements upfront and use a change management process to control scope changes.

Client or stakeholder feedback that leads to significant changes in the project’s direction.

  • Impact: Additional development cycles and potential redesigns.
  • Mitigation: Engage stakeholders early in the development process to gather comprehensive feedback and set realistic expectations.

3. Legal and compliance fees

Regulatory compliance – ensuring the MVP meets industry-specific regulations (e.g., GDPR, HIPAA).

  • Impact: Costs for legal consultation, additional development, and compliance audits.
  • Mitigation: Research relevant regulations early and integrate compliance measures into the development process.

Intellectual property protection – securing patents, trademarks, and copyrights for the MVP.

  • Impact: Legal fees and filing costs.
  • Mitigation: Consult with intellectual property lawyers to understand the necessary protections and associated costs.

Implementing robust data privacy and security measures to protect user data.

  • Impact: Additional development and testing to ensure data security and compliance with privacy laws.
  • Mitigation: Incorporate security best practices from the outset and conduct regular security audits.

4. Marketing and customer acquisition costs

Pre-launch marketing to build awareness and generate interest before the MVP launch.

  • Impact: Costs for marketing campaigns, content creation, and social media promotion.
  • Mitigation: Develop a targeted marketing strategy and allocate a budget for pre-launch activities.

Post-launch marketing to attract and retain customers after the MVP launch.

  • Impact: Ongoing costs for advertising, email campaigns, and promotional offers.
  • Mitigation: Continuously measure marketing effectiveness and adjust strategies to optimize spending.

Customer support and onboarding for new users.

  • Impact: Costs for hiring support staff and developing onboarding materials.
  • Mitigation: Implement automated support tools and create comprehensive onboarding resources to reduce manual intervention.

5. Infrastructure and scaling

Cloud service costs for hosting, storage, and computing resources.

  • Impact: Ongoing costs that increase with user growth and data volume.
  • Mitigation: Optimize resource usage and choose cost-effective cloud services that can scale with your needs.

API usage and third-party services fees.

  • Impact: Costs can accumulate based on usage levels and subscription models.
  • Mitigation: Monitor API usage and consider alternative services if costs become prohibitive.

Scalability issues to handle increased user load.

  • Impact: Additional development and infrastructure costs to ensure smooth scaling.
  • Mitigation: Design the MVP with scalability in mind and conduct regular load testing.

6. Team-related costs

Training team members on new technologies or tools.

  • Impact: Time and financial investment in upskilling the team.
  • Mitigation: Invest in continuous learning and professional development as part of your team’s growth strategy.

Turnover and recruitment costs.

  • Impact: Lost productivity and expenses related to hiring and onboarding new team members.
  • Mitigation: Foster a positive work environment and provide incentives to retain talent.

So, how much does it cost to build an MVP? When we sum up the numbers here, we get

Overall cost breakdown total: $93,000 - $232,000. 

With hidden costs (although some of them are annual recurring and/or concern a more advanced stage of product creation) the number might go up to $133,000–$352,000.

Don't like the numbers? Yeah, we neither. What can you do about them?

Cost-saving strategies

1. Prioritize core features

  • Concentrate on building only the most crucial features that solve the primary problem your product is addressing. Use techniques like the MoSCoW method (Must-have, Should-have, Could-have, Won’t-have). This reduces development time and costs by avoiding unnecessary features. 
  • Adopt a lean development approach to create a functional MVP quickly and efficiently. Continuously iterate based on user feedback and real-world usage, refining the product over time. This accelerates the development process and minimizes waste.

2. Use open-source tools and frameworks

  • Leverage free resources like open-source libraries, frameworks, and tools to reduce software costs. Choosing widely adopted and well-supported open-source technologies ensures reliability and community support, leading to significant savings on licensing fees and reduced development time.
  • Take advantage of the vast knowledge base and support available within the open-source community. Engaging with the community through forums, GitHub repositories, and online groups helps resolve issues quickly without incurring additional support costs.

3. Leverage no-code/low-code platforms

Use no-code/low-code platforms to quickly create MVP and test it, reducing development time and costs. Platforms like Bubble, Adalo, or Webflow enable non-technical founders to create functional prototypes and validate ideas before committing to full-scale development.

4. Iterative development and feedback loops

  • Implement agile development practices to build and release your MVP in small, manageable increments. This allows for continuous improvement based on user feedback and reduces the risk of building unwanted features, ensuring a focused and efficient development process.
  • Gather feedback from real users early and often to guide development decisions. Conduct user testing, surveys, and interviews to collect actionable insights, prioritize feature development accordingly, and avoid costly redesigns.

5. Outsource and use remote work

  • Hire remote developers or outsource parts of the project to reduce labor costs. Platforms like Upwork, Toptal, or Freelancer provide access to a global talent pool at lower rates compared to local hires, making it a cost-effective solution.
  • Leverage the flexibility of remote teams to scale up or down based on project needs. For example, when Eleken provides team extension services, our clients can employ more designers if the project requires so and go back to working with one when the need is gone.
  • Establish clear communication channels and use project management tools to ensure smooth collaboration, reducing fixed costs and allowing for more efficient resource allocation.

Automate processes

  • Implement Continuous Integration and Continuous Deployment (CI/CD) to automate testing and deployment processes. Using tools like Jenkins, Travis CI, or CircleCI reduces manual errors, speeds up releases, and lowers operational costs.
  • Use automated testing tools to quickly and efficiently test your codebase. Integrating testing frameworks like Selenium, Jest, or Cypress into your CI/CD pipeline catches bugs early and ensures code quality, saving time and reducing the need for extensive manual testing.

Use cloud services

  • Choosing cost-effective cloud providers like AWS, Google Cloud, or Azure reduces the need for upfront investment in hardware and allows for flexible scaling based on demand.
  • Consider using serverless computing for certain parts of your application to reduce operational costs. Services like AWS Lambda, Google Cloud Functions, or Azure Functions enable scalable and cost-effective serverless applications, leading to lower costs due to paying only for actual usage rather than maintaining idle servers.

Efficient project management

  • Develop a clear project roadmap with defined milestones and deliverables. Using project management tools like Trello, Jira, or Asana ensures focused development efforts and reduces the risk of scope creep.
  • Conduct regular project reviews to assess progress and make necessary adjustments. Scheduling periodic reviews with the development team and stakeholders helps identify and address issues early, preventing costly rework and ensuring alignment with the project roadmap.

Design-First Approach

Another way to reduce the costs associated with creating an MVP is… not to create an MVP. Hiring a UI/UX designer to create a clickable prototype can provide early feedback from users and investors. Basically, you get the same quick user feedback you need to gauge your product-market fit – but without all the costs of building an app.

Here’s a breakdown of this approach:

  • Number of Designers: 1
  • Hourly Rate: $50
  • Hours per Week: 40
  • Number of Weeks: 8

Total Cost: 1 designer x $50/hour x 40 hours/week x 8 weeks = $16,000

By spending $16,000 on a prototype, you can gather user feedback six times cheaper and twice as fast as building an MVP. This means that you can receive user feedback spending 6 times less money and 2 times less time than building an MVP! Yes, later you will still need to pay for developers work, marketing, sales… But you will be sure that the investment won’t be wasted. That’s how you minimize early-stage business risk.

Can you gather the info you need with a prototype? Yes. And we can prove it.

The Populate case

Populate is a healthcare startup whose founders are business consultant Chance and his wife, a practitioner doctor Rachel. They knew very well the problem that doctors face: the sheer amount of documentation to fill in, which sometimes takes more time than actual patients' treatment.

And, as a business consultant, Chance knew that to reach success they needed to ensure excellent user experience. And they need to do it before they invest in development. That’s something that founders with a background in tech often neglect.

You need two ingredients to make a customer-centric product:

  1. Experienced UX/UI designers
  2. Constant feedback from potential customers

Populate came to our agency with a goal to make the most customer-centric product in the world. That’s our favorite type of client!

They also needed to test specific features and ideas on doctors — and they tested them all during the 2 months that took us to design the product. We got constant user feedback from users and could adjust our designs.

Here are some mockups. 

Populate app screenshot

If you have an award-winning designer take a look at these, they might give some critics from the aesthetical point of view. For example, twenty dropdowns that occupy half of the screen. They won’t recommend it as a best practice at a design school. But this design saves doctors’ precious time. And that is what matters most for the doctors and the client.

You know, fashion designers could also critique doctors' shoes, but these shoes are what allows them to do their job well and fast.  

functional vs aesthetic design illustrated by shoes. a meme

Our design got approved by users. In 2 months only, Populate had market-validated and ready for development design.

This case demonstrates well what is the true business value of design for startups. It is not just about improving usability, keeping users engaged, and reducing churn (though I’m not saying that all those things are not important).

Final thoughts

Building an MVP can be a costly affair – and quite often you just lose money only to learn the market doesn't have demand for your solution.

So, you should think outside the box.

A Reddit user shares an anecdote of a founder who was considering the idea of an app to deliver groceries at a doorstep with AI-driven meal plans and recipes. "The founders' MVP was going to their customers' doorstep delivering the food they got from the grocery store based on a meal plan they wrote for that customer by hand. At the same time they picked up the subscription fee and feedback on how they did last week." So, their MVP cost them basically $0 – at least in terms of the costs we've been discussing. 

This approach might be a bit extreme and won't work for all product ideas. But design-first approach allows you to create something users can actually interact with – without spending thousands of dollars for it.

If you want to design an MVP, drop us a line and we'll be happy to discuss your project. 

Top Stories