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How to Save Costs on Custom Software Development for Startups

Building a software product from scratch may seem costly for a startup on a small budget.

In reality, expenses vary significantly depending on the solution, experience, and your partner's team.

In this article, we will discuss our key findings to bring down the cost of software development.

Create a detailed business plan

Be clear about the main objectives you ultimately want to achieve. Bear in mind the wide range of business goals based on your particular product.

To begin with, define who your target audience is and set a pricing strategy. Who are your competitors? What advantages do you have over them? To achieve success, you have to dive deep into the details.

As you write down each of the elements, you will be able to reach the finish line more quickly and easily. This approach will also highlight areas where cost reduction is possible.

An example below by Instamojo depicts essential elements that a business plan should include.

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As all elements have been set, the question of progress tracking arises. Use the right key performance indicators (KPIs) and metrics that reflect startup dynamics.

You have to stick to the indicators that are meaningful for your startup. If you’re not sure about the best starting point, you could begin with the following KPIs:

  • Customer Acquisition Cost;
  • Customer Churn Rate;
  • Customer Lifetime Value;
  • Monthly Recurring Revenue;
  • Daily Active Users.

Build an MVP first

By the time you have summed up all plan details, you can take a look at the minimum viable product. It may cost too much for some startups to build a fully-featured product at once. For this reason, you need to know what level of “minimum” is ok for your MVP.

Since an MVP has only basic functions, developers will need less time to deliver measurable results. Consequently, the development part becomes less expensive.

Importantly, in this case, the users will adopt your solution much earlier. Apart from the cost reduction, a huge benefit of building an MVP is shorter time-to-market.

Proof of Concept vs Prototyping

There are two more things we would like to mention in this section, namely the proof of concept and a prototype. Let’s take a look at the differences between those terms.

Both of them describe a version of your future product, albeit in different ways.

Proof of Concept (POC) describes whether you can realize the idea or not — it’s a test of certain functions. This is where you need to step aside from such frills as performance and usability.

A prototype, in contrast, offers you a graphical presentation of the final product. It gives you a basic idea of crucial design elements, including layout and navigation.

In our examples below, you can see the prototypes built up by Codica team.

The first one is an e-commerce prototype selling online courses for children.

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The second prototype is for a trailer marketplace.

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Start testing as early as possible

You can reduce app development costs by avoiding the need for redevelopment.

It is recommended that software is tested at the early development stages. Otherwise, you can risk accumulating bugs, which will need a considerable budget to get fixed. Performing regular tests, in contrast, will allow you to fix all emerging errors.

Another thing is that continuously reworking the project will delay the release date. Thus, ignoring the test results at the early stages can turn out wrong. For example, you risk skipping the right timing to attract customers.

Speaking of testing, we have to underline the importance of early adopters. The sooner you reveal your MVP to the audience, the faster you will get valuable feedback, and use it to develop a full-featured product.

Use the Agile approach

The strongest side of the Agile methodology is that it leaves room for a rapid turnaround. Thus, it's possible to add new features to an ongoing project with no delays or extra expenses.

In our experience, the Agile approach is the best one for startups because it is:

  • Flexible
  • Cost-effective
  • It helps mitigate risks

The Agile approach ensures that your partner works only on the required functionality. A product manager, for its part, bridges the gap between the development team and a client.

Overall, Agile deepens the collaboration between the software developer and a client. As a result, you increase your chances to complete the project on time, on budget, and with high-quality results.

Hire a proven software company

Now It's time to think about a dev team that will provide you with a software solution for a startup.

You may go for sourcing freelancers. It's getting easier every day due to a large number of freelance marketplace websites. But keep in mind that it has certain risks. For example, the low hourly rates can lead to the poor quality of services.

Alternatively, you can build an in-house development team. In this case, you will get high engagement. Still, this option can be fairly pricey. When creating an in-house team, be ready for the following expenses:

  • Salaries and compensations
  • Software licensing
  • Taxes
  • Holidays and sick leaves
  • Hardware

Finally, partnering with a company experienced in software development for startups helps you reduce many expenses. You don’t have to recruit, train, and retrain software engineers. Similarly, there's no need to deal with downtime costs or finding an optimal replacement.

If a development agency provides full-cycle development services, their team will include developers, UI/UI designers, project managers, and QA engineers. Therefore, they will be able to cover all your needs on custom product development.

What is more important, specialized MVP development agencies have accumulated expertise in building multiple Minimum Viable products. This means that you will get not only the product itself but recommendations based on best industry practices. As a result, this team will help create your MVP within a short timeframe and reasonable budget.


Custom software building can be challenging. It is, however, not a stop sign if you choose the development approach that suits your product best. Hopefully, the tips we have uncovered will be impactful to your future startup.

Top comments (1)

victoria_mostova profile image
Victoria Mostova • Edited

Custom software development is crucial for startups because it allows them to tailor solutions to their specific needs and scale efficiently. The cost-saving tips you've shared in your article are indeed valuable, but it's essential to remember that investing in customized software ensures long-term competitiveness and adaptability, which is why custom software development is important.