How To Write A Mobile App Business Plan
The market for mobile applications is continuing to grow. More and more businesses and entrepreneurs are trying to get into the game before the market gets too saturated. Venturebeat expects it to grow 270% to $189 billion by 2020. More than 50% is held by gaming apps, which continue to prove to be the most popular kind of mobile apps.
As appealing as it sounds, creating a valuable and profitable app is not as easy as it may sound. Creating a business plan for your application should be the first step to a successful launch. Neglecting this step may result in unexpected monetary losses and setbacks in promotion when the application is released. Even if you are not afraid of extra cost, taking a moment to prepare and evaluate the risks won’t hurt your business and on the contrary, might be very beneficial for it.
A comprehensive mobile app business plan serves as guidelines for everyone involved in the project and gives insight on how it should be introduced to the market in order to make money, that is after software developers have worked their magic in the technical department.
Coming up with a good mobile app business plan is fairly straightforward. It’s not rocket science. A business plan will provide you with a clear vision of your app along with marketing and financial logistics. The cost of building a mobile app can range from $30,000 to $250,000 depending on complexity.
Whether you decide to bootstrap development or not, a good business plan usually contains the following:
- App overview
- Unique selling proposition
- Market analysis
- Estimated marketing costs
- Revenue projections
- Marketing plan & launch strategy
- Projected profit/loss statements
- Break-even analysis
- Cash flow projection
This post will give you the tools and resources necessary to complete your business plan.
Validating Your App
If you are confident that your app is a unicorn like Airbnb or Uber, you’ll probably skip this and I’ll wish you the best of luck.
Before investing in the development of your mobile app you want to make sure that your idea will have demand in the market. Creating a mobile application requires both time and money and early idea validation will ensure that you are investing in the right project.
Start with researching the market and getting feedback from industry experts, potential final users to get an idea of how viable your idea is, and what are the points that you might want to change in order to make it a better fit.
There are multiple ways to validate your app. Here are a few ways:
1. Google/Facebook Ads
If you already have a landing page set up, you can get straight to work. With a small budget, you can test a targeted audience and evaluate the response.
2. Google Trends
Google trends allow you to compare keywords for relevancy. If you are entering a growing market then you can validate the market potential based on search volume. This tool won’t work for apps that are novelty ideas though.
3. App Store
In the app store, be sure to check out the category that aligns with your app. You will see other apps that are competing. Download a few of them and learn their strengths and weaknesses. This will help you come up with your unique selling proposition.
More importantly, read the reviews to see what users like and dislike about the app. It would help if you asked your self the following questions:
- Why do people like the app?
- What makes the app stand out?
- Does the app work the way it should?
- How are they marketing their app? (Check out the screenshots, icon design, and descriptions)
- What is their competitive advantage
- Does the app have any traction outside of the app store?
4. Third Party Analytics
Companies like App Annie and Sensor Tower provide market data to help drive growth for applications.
5. Primary Research
Surveys and questionnaires can be very insightful if done correctly. This method will give you the best insights about customer behavior which can make or break your plan. All for the better, of course.
How you choose to go about it is up to you. Some people are comfortable asking strangers on the street. Others tap into their social networks and ask their friends and acquaintances. Finally, there are polls, which you can leverage to help make package your questionnaire in a presentable format.
Building Your Marketing Plan
The creation process of a memorable mobile application is not limited only to software development - no matter how awesome your app is you need to know how to introduce it to the market, making sure that it reaches the right audience and starts generating revenue from the first days. Don’t get me wrong, building a user-friendly optimized application is crucial for the project's success, but without knowing how to market it will take you much longer to reach your business goals.
The marketing plan shows that you understand your audience and market needs as well as you know your product. It combines promotional strategies with understanding the values and purpose of your application and how consumer needs are met.
A good marketing plan addresses at least the following points:
1. Unique Selling Proposition
What makes your app different and/or better than the competition? Knowing what differentiates your product will help create the proper positioning and brand messaging in order to market effectively.
2. User Persona
Who are you targeting? What are their interests? This answer can contain one or more types of people, but you must outline them as detailed as you can. Creating a user persona often puts together the following demographic information:
- Marital status
Psychographic data is also important. This allows you to understand the mindset of your target. Here are some examples:
- Challenges (personally or professionally)
- Personal/professional goals
- Favorite sites/apps
- Use cases
Think of developing a user persona as if you are creating a character for a story. Only you want them to be as objective and realistic as possible. In the beginning, you will define your user personas based off of your own perception. It’s important to know that your perspective is subjective and that to truly make a great user persona actually requires research.
However, most people can get by with forcing themselves to be as objective as possible. After all, we tend to make things that we think others like us will use. Cultural similarities allow you some leniency in your thinking, though it never hurts to be mindful.
3. Marketing Channels
Depending on your target, you will tailor the channels used to reach out to them. If your potential user base is on Instagram, then you should market on Instagram. Don’t waste your time on LinkedIn.
A common pitfall people make when marketing is to do everything. In theory that sounds great. It’s a no stone unturned approach that will spread you thin. Get to know your target audience and find where they congregate. Think like a fisherman.
The hot technique these days is growth hacking. Growth hacking is a pretty way of saying rapidly trying out new methods to increase brand awareness. It’s great for ideas with very little funding that are looking for creative ways to market.
As far as marketing channels go, here is a list them for you to consider:
- Social Media ads
- Search engine Marketing
- Content marketing
- Email marketing
- Event marketing
- App store optimization
- Mobile ads
- Organic or Incentivised downloads
A good way to get ideas is to study apps that have become successful. Find out what they did in their early stage to move the needle.
This is can be a little tricky because it’s all speculative. The best way to think about creating a sound financial picture is to model your app in an ideal environment.
Consider the numbers you come up with to be well-informed guesses about various key metrics.
1. Customer Acquisition Cost
In the context of mobile, the metric would be called cost per app install or CPI. If possible, you can go further to find out the cost per activation.
Since this type of information doesn’t exist yet for you, you will have to rely on industry benchmarks. Companies like Fiksu can give you information on CPM from month to month.
2. Lifetime Value
Ideally, you will want to know how much money you can make on average from a single user.
A low LTV will be considered a yellow flag, and if your acquisition costs are high then you’re going to have a hard time breaking even.
3. Burn Rate, Runway, and Cash Flow
Your burn rate is essentially your business costs. That ranges from fees, hosting charges and other variable and fixed overheads.
Like any good business, you will want to keep these down.
To calculate runway, use this formula:
Runway = (Total funds) / (Burn Rate)
Your cash flow will be determined by your monetization strategy, which we will cover next.
4. Monetization Strategy
Otherwise known as your business model. It addresses the most important question of all: how will you make money?
The classic growth model apps use is to develop a user base and then monetize them later. But that is not the only path to success.
Consider other options such as:
- In-app advertising
- Incentivized advertising
- In-app purchases
To validate your strategy, check out what competitors are doing. What strategies are they using and what are they charging?
5. Profit and Loss Statement
Finally, you should project your profits and losses over a period of a year. This section identifies liabilities and assets you might gather.
When estimating your possible earnings it makes sense to look at the situation from different angles - a best-case scenario, a worst-case scenario and, well, realistic conditions. Analyzing the 3 different possible outcomes will give an idea of where you might want to cut costs- to prevent going bankrupt during the first few months in business, and when you might meet the breakeven point. If you are able to recapture the expenses during the first year in your worst-case scenario on paper, that gives a lot of promise for your app in the market.
By now it should be clear why a business plan is important. It addresses the granular details that will keep you focused. Every move you make comes from this plan. Without one, you will literally be taking shots in the dark.
Frequently Asked Questions
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A comprehensive mobile app business plan serves as guidelines for everyone involved in the project and gives insight on how it should be introduced to the market in order to make money, that is after software developers have worked their magic in the technical department. A good business plan usually contains the following: App overview, Unique selling proposition, Market analysis, Estimated marketing costs, Revenue projections, Marketing plan & launch strategy, Projected profit/loss statements, Break-even analysis, Cash flow projection
The cost of building a mobile app can range from $30,000 to $250,000 depending on complexity.