Software Development Costing: A Guide for Startups

Are you ready to start planning the development of your startup idea but don't know how to deal with software development costing? The fact is that even experienced teams are faced with uncertainty in the calculations, and for beginners, this task can become a tough nut to crack. However, there are still ways to solve the problem of cost for software development calculation: we will discuss them below.

4 Factors You Have to Consider First

The first thing to start with before proceeding to calculations is to assess the factors that will directly determine the cost of development.

Project’s scope

Probably the most apparent factor determining a startup development cost is the awareness of the upcoming project’s scope to implement the intended functionality and its complexity. This is directly related to the technology stack and to-do list for your team.

Project’s urgency

Before you start to calculate software development cost, you should estimate the project’s urgency. For instance, some startups may require launching to market as soon as possible. This, in turn, may need the participation of additional specialists to increase the speed of development, as well as overtime, which usually implies an additional percentage to pre-determined rates.

Types of specialists you need in the team

Some projects imply the participation of highly specialized experts, whose rates may differ significantly from their colleagues with a more basic list of skills. This data can also affect the final budget and be helpful when using a software development cost calculator.

Maintenance

When calculating software development costs, you should understand that the project budget includes not only the cost of services for its implementation. These are also regular payments for server capacities if they are needed, technical support, updates, etc.

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5 Ways to Assess Project’s Budget

Now let's look at methods for estimating software development costs.

Expert advice

This approach for estimating software development costs will suit you if you already have some experience in project evaluation, and your current startup is somewhat similar to projects you’ve already launched before. In this case, if the salary of each of your team members has remained the same, you will be able to understand what numbers you will have to start with to calculate the budget for the project to be implemented.

On the other hand, if you are going to create something innovative that has no analogs on the market and even more so in your portfolio, it will not be easy for you to understand how much it will cost. 

Therefore, in such cases, it’s better to resort to the services of a third-party expert (or rather, to get a more objective estimation, several at once) who, based on their experience, will be able to provide you with an accurate assessment.

Top-down approach

This method to estimate software development cost has some overlap with the previous one, as it also involves the use of data from previously implemented projects. However, in this case, you have to estimate individual features of your ready-made solutions, and if they are repeated in a new project, you will need to add up these numbers (or subtract if they are absent there). In turn, to calculate the rest of the functionality, which for your experience is unique, it will make sense to involve a third-party expert.

Note that this approach can be applied only by startup owners who already have some experience in launching software solutions and can use a specific cost estimation of software project example for calculations.

Bottom-up estimation

If the previous two software development cost estimation methods don't work for you, you can try creating a roadmap for your startup. Thus, you will be able to understand exactly what tasks your team needs to complete. The more detailed the list of tasks is, the more accurately you can get a calculation for these specific tasks. 

However, it is worth remembering here that the software life cycle is, first of all, a cycle. Therefore, some tasks can be repeated a large number of times (for example, testing and performing reworks). This means that it will incur additional costs. It is often used for projects that don’t yet have exact requirements or they can be changed over time. That is why this method is often used for startups.

Case points approach

This approach will suit you if you are at the stage of identifying the functional requirements of your software product. In particular, you will need to define complete scenarios for the interaction of end users with your product and, based on this, make a list of tasks that your team will need to implement. Thanks to this approach, you can understand common patterns that can be minimally adapted for different scenarios and thereby save your costs. 

Three-point estimation

The Three-point estimation method includes three separate estimates at once:

• optimistic;
• pessimistic;
• medium, or most likely.

After that, you will need to calculate the arithmetic mean of these values to get a rough estimate for your new project. This method of calculation will help you if you do not have many details about the future project.

Final Thoughts

Now you know what evaluation methods exist and what they consist of. If you need a team that could effectively apply these techniques for your software project cost estimation example, feel free to contact us.