Introduction
The proposed project, namely, an app for building online startups, will require a financial framework on which it will rely during the project implementation. Since building the app will imply taking substile costs, it is vital to arrange the financial resources and develop the budget that will allow containing the expenses. Moreover, the opportunity for coordinating the price-quality ratio must be pursued to ensure that the expenses to be taken will be used to increase the efficacy and the function of the app. By introducing a framework based on a contingency budgeting strategy, one will be able to leverage key costs and ensure that the process of developing and launching the application will occur without any major impediments.
Economic/Financial Fit
The opportunity to evaluate the feasibility of an online startup and ensure that it responds to the needs of the target market, filling an important gap, is vital for ensuring that the service or product to be designed is going to be popular and competitive in the target economic setting. Therefore, a digital app that will assist in determining the viability of a specific idea for entrepreneurship, as well as identify the first steps toward implementing project in the selected economic environment is likely to be an important addition to the current market setting (Nicholas & Steyn, 2020). Therefore, the application to be designed is likely to be of a rather impressive the economic fit as a product that will be used actively and assist a range of entrepreneurs in building SMEs.
Moreover, the app will fit into the financial capacity of the organization quite nicely. Although the costs of the project development are likely to be quite high due to the need to contract a range of experts for developing the app and ensuring that it runs perfectly, the expenses to be taken align with the capacities of the organization in question. Namely, even with the current financial risks emerging due to the impact of the pandemic, the organization will be able to allocate $100,000 for the development of the app and its further promotion. Currently, the app project fills an essential and well-defined niche of assisting with business startups by introducing an opportunity to determine project goals, an appropriate plan, and key resources (Nicholas & Steyn, 2020). Moreover, the financial fit of the app is quite sufficient given the opportunities for minimizing costs and identifying key risks effectively.
Company Valuation
The project in question might seem as quite costly; however, it is likely to lead to impressive returns given the high valuation arts. Namely, given the projected operational costs and the expected benefits that the project will return, it is believed that the investments and the resources to be used in the development of the app will be compensated within a year (see Fig. 2). Specifically, the service development costs will involve reimbursement offered to the experts to be involved in the project, as well as the use of the software and the related resources to build the app (Nicholas & Steyn, 2020). Furthermore, indirect costs such as the payment for hosting the website and the expenses associated with the business setup will have to be integrated into the general range of requirements for the project (Appendix A).
In turn, assessing the company’s range of assets and the capacity of supporting the project in question, one must mention that there are strong opportunities for implementing the project flawlessly. Specifically, the company has been experiencing impressive success in the global market, having expanded into both Europe and the U.S. furthermore, the diversification of products and services has allowed the organization to attract new investors and gain additional leverage in the target market, having increased its profit margins by 4%. Therefore, the company can be considered completely fit for introducing the application into the range of its services and offering it as a product to its target audience (see Appendix B).
Benefits
Additionally, it is expected that the project will return benefits within the next year. Specifically, the introduction of an effective promotion framework and the focus on the promotion campaign for the product, as well as the enhancement of the quality assurance process, are expected to lead to a triumph. It is believed that the app will attract at least 15% of the target audience within the first month of its launch, with a gradual increase in customers to be observed in the following months. Specifically, the projected total revenues are believed to amount to a total of $250,000 within the next month, with at least $2.00 per user.
To calculate the benefits that the project will deliver to the organization, the total costs must be subtracted from the projected revenues. In other words, the project benefits are expected to reach ($250,000-$100,000) = $150,000 within the next month. Furthermore, with the increase in the number of users and the further global promotion of the app, the increase in the revenue rates is expected to be observed regularly, which is why the app is believed to represent a crucial business opportunity.
Additionally, it is expected that when introduced to different platforms, the app will produce different responses and, therefore, enjoy different levels of popularity among the target audiences. Namely, it is currently planned to develop an app that can be installed both on Android and iOS. However, given the overwhelming prevalence of Android users in the target market, the app is likely to be downloaded mainly for Android-based devices (Asfour et al., 2019). Consequently, the average revenue per each device is expected to show different results (see Appendix C).
Costs Justification
Since the development of the application will imply the need not only to develop a technologically impeccable tool that will offer the target audience a chance to plan and make future projections, but also invest in extensive market research, the costs are going to be excessively high. Moreover, given the risks associated with the project and the complexity of the services that it will provide to the target audience, one must admit that the costs for the project are fully justified. Specifically, the fixed costs, namely, the salaries for the experts to be hired for the app development, represent a vital part of the current project budget since the specified costs will define the value of the service and the quality of its performance (Nicholas & Steyn, 2020). Namely, by increasing the remuneration to be offered to the project participants, specifically, the experts to be outsourced to develop the app, one will be able to ensure that the product quality will remain high.
Moreover, covering the developmental cists will allow keeping the end result satisfactory. While a substantial amount of costs is required to develop an app, an even greater range of expenses is typically needed to support its further use. Specifically, the maintenance of the app, as well as its constant update and the removal of newly located bugs, will be vital for its further success in the target market. For this reason, a significant range of indirect costs will be required along with the fixed ones, specifically, to analyze the market situation and introduce regular update to the product (Nicholas & Steyn, 2020). Thus, opportunities for keeping the target audience attracted to the service and gaining the supported appreciation of new audiences will be possible. Therefore, the use of a combination of a cost-efficient approach and the framework based on the idea of contingency budgeting will be required.
Financial Assessment and Resource Planning
Resources
Equipment and materials
App Maker
This app will be based on the most popular operating software platforms smartphones in the U.S and across the world. Therefore, the specific platforms are Google Android, Apple iOS, BlackBerry, and Windows. The idea is to ensure that the app is available to as many people as possible, regardless of the type of gadget they use and the operating system therein. The project will develop a hybrid rather than a native app based on this concept. Creating an App requires several materials that should be in place before the project starts. It is worth noting that these materials and equipment are obtained from suppliers at a cost, which varies with developers.
The first tool necessary to complete the project is the App maker, a software system that the team will use to develop the app. In this case, the team has settled on GENWI, a tool designed to create personalized apps that are easy and quick to use. It includes location-aware GeoRSS, JavaScript, pushes notifications, and custom CSS features. This tool also allows the developer to create and manage its presence on all mobile devices, including Android, iPhone, iPad, and HTML apps. It is helpful for the project as it can deliver rich audio, video, graphics, photos, and other forms of interactivity.
Moreover, GENWI allows the developers to revise the apps as often as possible. In addition, it includes various revenue-generating capabilities for the business, such as coupons, ads, and in-app subscriptions. The app costs $250 for activation on an iOS platform, $200 for Android, and a hosting fee of $780 per year.
Analytic Tools
The importance of analytics is to allow that the app generates events as the users navigate and apply them to achieve their objectives. It allows the users to generate events based on button presses, list selections, screen transitions, and other user activities on the app. On the side of the company, it will be possible to track customer browsing, application, and purchasing events, which will help make marketing plans as well as strategies for continuous improvements. The developing team has settled on Google Analytics, New Relic, and Localytics as the analytics tools for the proposed app. Background research shows that these tools will cost about $5,000 per year.
Hardware
Developing the app will require the team to have the necessary hardware to facilitate their work. In this case, the plan is to have six computers from different manufacturers to ensure that the app works on multiple platforms and systems. Specifically, the team will acquire Apple MacBook Pro, Acer Predator Helios 300, Dell G5 15, Asus ZenBook 13, Microsoft Surface Pro 7, and HP 15 varieties from the respective manufacturers. The total cost of these computers is estimated to be $8,000, which includes installing the individual software systems needed to support the work of the team.
Secondly, the team will require an effective and highly efficient server, and it has been decided that Mattermost Server will be used for the project. In addition, the team will require on-premises integrations and custom systems, databases (MySQL), file stores, file notification systems, Internet provision in the office, and mobile devices, including smartphones running on all of the four identified operating systems. From online research, the total amount of money needed to cover all these requirements is about $6,200.
Staffing
The overall head of the team involved in the entire project is the project manager with deep and diverse knowledge of the specific business industry. The individual will be well-versed in development methodologies, business and team management, and mobile development. In addition, the project manager will have an in-depth understanding of the business line, a solid technical background, the ability to multitask, a high sense of responsibility, and the ability to inspire, manage, and lead the team.
A team of designers will be involved in the project whose responsibility will include documentation, processing the requirements, devising the navigation mechanics of the app, and creating basic wireframes. They will be involved in working on the look and feel of the product, replicating identical UI/UX for specific platforms, and making the stand-alone for the hybrid app. The team will have two strategists, two navigation planners, three visual designers, and three content planners based on these responsibilities.
In addition, the team will have three developers whose function is to process the finished UI/UX layouts and implement them in the actual application. They will have experience working and operating with different platforms and programming languages and systems, including Java and Kotlin for Android, Objective-C, Swift for iOS, and other languages if necessary. In addition, there will be two quality assurance experts whose job is to test the mobile app and decide when the project is ready to be presented to the company and delivered to the market. Finally, the team will have five sales and marketing specialists whose responsibilities include communicating with customers, branding, sales and marketing, and advertising. In total, the team will have 18 members as the staff responsible for developing the app. As shown in figure 1, the salaries and wages of each job category have been researched and presented based on annual remunerations.
Table 2: Total number of staff in the project and respective wages and salaries per year
In addition to the annual salaries and wages, the staff is also entitled to other benefits that arise from their work during the operations. These include such benefits as food and beverages, holidays and other allowances. Noteworthy, these are indirect benefits to the staff but which account as normal costs to the company. It is estimated that the value of staff benefits is 3% of the salaries and wages per year. Therefore, the company estimated that the total value of these costs is $10,663.20, which is 3% of the total amount of salaries paid to the staff per year ($355,440).
Costing
Cost of Developing the Product
Developing the product requires various stages, each of which will be handled by different specialists within the team. However, some services such as hosting will be outsourced rather than in-house. In this case, hosting is done by a well-established organization under a plan that will allow the organization to pay for the service annually. As table 3 shows, the web development process will occur in different stages- pre-research, UI/design, development, testing and deployment, hosting, monitoring, engagement and marketing, updates, and licenses. It is also worth noting that the relevant authorities provide licensing, and the company will have to pay annually. It is important to note that hosting, hosting, monitoring, engagement and marketing, updates, and licensing are the costs associated with the maintenance of the product. In addition, the company has estimated these costs based on background research about the current prices and plans that different organizations provide. The study was done online by investigating the providers’ fees and methods, as shown on their official websites.
In addition, analytics will be an essential element of costs, given the nature of the business and the dynamic nature of the app technology. A large part of having a successful enterprise app is collecting data about the intended users and applying it to support decisions the company makes as part of its corporate strategy. Therefore, it is essential for the company to continuously use mobile enterprise analytics to understand the user behavior behind the product. Most outsourced analytic packages include data collection, predictive analysis, data mining, and decision management systems. As part of the ongoing enterprise mobile strategy, the company will have the capacity to determine whether it is necessary to optimize the product when it is already in use.
In the same way, the app’s security is a critical aspect and requirement for the project. While mobile apps for businesses have several immediate financial benefits, they are also prone to security issues that may affect them and the organization in general. The company must develop a comprehensive strategy for security. Since the app’s development is in-house rather than outsourced, there will be security support within the developing team. The team will have the authority to secure the system, including email management for implementations, security audits, active intrusion detection, and other security capabilities.
It is also essential for the company to use cloud hosting, which benefits from a cloud-based supportive infrastructure. Ongoing cloud support and making it an integral part of the business will allow the company to scale the app infrastructure dynamically. In this way, it will help support new features in the future, including new apps, new users, and new regions where the company will decide to expand in its growth strategy.
Cost Associated With Supportive Operations
Accomplishing the project will require multiple supportive services set to cost the company. Therefore, these costs will be accounted for in the cost-benefit analysis. Specifically, these services include consultations, travel, insurance, training, and others. In the cost-benefit study, these costs will be categorized as “supportive costs” and entered into the project cost in the template. It is worth noting that these costs are just estimates based on research and the current trends in the market. Furthermore, the project uses benchmarks based on studies in which some companies have already published the costs they underwent as they developed apps of similar nature.
Table 4: Summary of costs associated with supportive operations and their estimated costs
Analysis
Notes on Costs
A cost-benefit analysis is developed based on the total costs shown in the Ms. Excel document. However, it is essential to make notes on the charges. In this case, it is worth noting that the costs shown in tables 1 to 4 indicate what the company will pay in the first year of operation. Noteworthy, all costs cannot remain the same each year, considering that the value of services and products is dynamic and experience changes every year. In addition, most online-based services change in value due to frequent updates.
Moreover, the company takes the possible inflation rates per year. All these factors, when combined, have been assumed to have an annual change of about 2% of the initial cost paid in the first year of the project. However, this does not apply to the cost of developing the app. The app will be developed in the first year of operation. Minor changes are expected, especially in updating the product to meet the changing market needs.
After the first year, only updates will be done on the product, which is expected to cost about two percent of the initial cost each year. Furthermore, the team will be assigned to conduct research every year, which is necessary for the highly dynamic industry. Research on market needs, customer preferences, technological changes, and other aspects of the business and the app will be a continuous process that the team must execute. The research results will be considered in updating the app to ensure that it addresses the needs in the market and achieves a competitive advantage.
Benefits
The investment’s net present value (NPV) has been calculated based on the MS Excel formula (NPV). The table shows that the investments’ NPV has been calculated based on each cost element. In addition, a discount of 5% per year has been assigned to each cost element, as shown in the table. Moreover, the calculations have been done for the second to the fifth year of operation. By the third year, this investment in the project is expected to break even, as shown in the table. At the end of the five years, the cumulated project costs are expected to be $2,256,631. On the contrary, the accumulated project value at the end of the same period is expected to be $438,996.67.
Based on the cost-benefit analysis shown in appendix 2, it is clear that the company will be receiving revenue worth $250,000 per month. In a year, the payment will be $3,000,000, which implies that it is above the expected annual cost of $$2,256,631. The difference between the two figures is $743,369, which means that the company’s profit for the first year will be equal to this figure. Moreover, it implies that the profit accrued from the sale of services is 33% of the total amount of costs incurred by the project. Theoretically, this is a highly acceptable rate of profit, given that it will be achievable in the first year of operation. Furthermore, it is expected that the company’s profit will grow by 15% per year, which means that in the subsequent trading periods, the project will improve its performance to over $4 million by the third year of operation. Consequently, the project will be profitable, given that the costs are expected to rise at the assigned value but lower.
Table 4: Cost analysis for the project in five years of operation
Table 5: The net present value (NPV) calculation for the project investment
Conclusion
With the help of a framework designed with the principles of contingency budgeting in mind, the project will receive enough flexibility for the app to be introduced into the target market successfully. In this case, the integration of the contingency budgeting principles coupled with the focus on risk management and a cost-efficient approach will allow the project to thrive and gain an opportunity for a quick boost in the target market. Furthermore, the sue of the cost-efficient framework for budgeting based on the concept of contingency will allow addressing possible risks that may occur when developing or promoting the app. Developing the apprequires various stages, each of which will be handed by different specialists within the team. However, some services such as hosting will be through outsourcing rather than in-house. In this case, hosting is done by a well-established organization under a plan that will allow the organization to pay for the service on an annual basis
Though the proposed approach will not guarantee that the project will be entirely shielded from possible losses, it will create a means of minimizing the possible damage and maintaining a strong and competitive presence in the market. Accomplishing the project will require multiple supportive services that are also set to cost the company. Therefore, these costs will be accounted for in the cost-benefit analysis. Specifically, these services include consultations, travel, insurance, training, and others. In the cost-benefit analysis, these costs will be categorized as “supportive costs” and entered in the project cost in the template. It is worth noting that these costs are just estimates based on research and the current trends in the market. Furthermore, the project uses benchmarks based on research in which some companies have already published the costs they undergone as they developed apps of similar nature.
It is recommended that the app be available in all popular platforms in the country. In this case, app will be based on the most popular operating software platforms smartphones in the U.S and across the world. Therefore, the specific platforms are Google Android, Apple iOS, BlackBerry, and Windows. The idea is to ensure that the app is available to as many people as possible, regardless of the type of gadget they are using and the operating system therein. In the same way, it is recommended that the design and appearance of the app be uniform across all operating systems and platforms to avoid confusing the end users. Also, this will ensure that the app is recognizable as the single brand for the company, especially during its startup period. It is also recommended that only updating be done on the product, which is expected to cost about two per cent of the initial cost each year. Furthermore, the team will be assigned the roles of conducting research every year, which is necessary in the highly dynamic industry. Research on market needs, customer preferences, technological changes, and other aspects of the business and the app will be a continuous process that the team must execute. The results of the research will be considered in the process of updating the app to ensure that it addressed the needs in the market and achieves a competitive advantage
Reference
Asfour, A., Zain, S., Salleh, N., & Grundy, J. (2019). Exploring agile mobile app development in industrial contexts: A qualitative study. International Journal of Technology in Education and Science, 3(1), 29-46. Web.
Nicholas, J. M., & Steyn, H. (2020). Project management for engineering, business and technology. Routledge.
Appendices
Appendix A: Operational Costs
Appendix B: Cost Analysis
Appendix C: Average App Revenue per Each platform
