The Business of Apps

apps

If you are thinking about starting a business building apps of any kind, don’t forget about the business part. Have a great idea, build and sell a great app for less than it costs, and profit. Some people think building an app business doesn’t apply to the rules of building a business.

A few weeks ago I read an article about Google buying one of my favorite apps, Sparrow. Sparrow is a simple, stripped-down mail client with great functionality.

The most depressing part of the Sparrow sale wasn’t the fact that they sold, but the fact that they sold out.

I was struck to learn that, although they were a critically acclaimed app and experienced success in the app store, they were a financial failure. They didn’t even make enough money to support two people full-time.

You might ask, “yeah, but didn’t they get bought by Google? That had to be a nice payout.”

That question is my inspiration for writing this. Without speculating on the specifics (because we don’t know the actual numbers), I’d like to talk about the realistic philosophy behind building and selling apps so that you can build the best plan for yours and support yourself in doing so.

There is a certain “mystique” that surrounds the world of apps that portrays this feeling of “if I could only build an app from my idea, I could make millions in the app store.”

The number of great programmers and designers that have made millions in the app store fails in comparison to the great programmers and designers that haven’t broken even on their time spent making the apps.

So, here is a realistic look at potential app strategies.

Build and Be Bought

When we think about Sparrow, we know that once they took a round of funding the business profit would no longer be sustainable. Yes, they were able to build products faster, but at what cost? In order to pay investors, they now had to sell, which leaves the users out in the cold.

The “build and be bought” strategy brings to mind apps like Instagram. A billion dollars sounds great but the likelihood of that is the same as building the next Facebook. I’m not saying you can’t do that, but don’t quit your day job.

At the end of the day, it’s business. Costs, revenue, and profit. Those are the simple rules since Adam Smith. If your app is sound business-wise, you’re looking at a better, longer, and more sustainable road to financial well-being. Which brings me to my next point.

Bootstrapping

Ah bootstrapping, a term that is all the rage these days. This term has been highlighted in the tech world recently, first by 37Signals, then reinforced by The Lean Startup by Eric Ries. The truth is that the majority of the business world has always operated like this, it’s just that the tech community lives in a world where other people’s money doesn’t matter.

The lady that started the local cupcake shop has to make every penny count and you should too.

If you keep your cost to the bare minimum, use your own time and skills as leverage, once you’re done with your app you’ll still get to make the calls. Since you’ve taken no investor money you’ll be able to do what’s best for you, the app, and your gracious users. Plus, you’ll get to see if the app was financially viable before you put your neck on the line with people who only care about making a return on their money.

Bootstrap and Get Funding to Scale

This is a great strategy for those that need to scale their infrastructure and team to best meet the needs of the user audience. The important thing to note here is that the idea and an actual working app have been tested (and profitable) in the real world.

Once you have your real numbers, they can scale up in correlation to scaling your overhead. In plain English, this means that you already know how much it costs to make $100 in profit. You know what the revenue and costs are, you just have to scale the numbers. It leads to a more predictable business model and profit.

Support Your Passion

If you’re like me, you’ve recently discovered how truly amazing and beautiful it is to be able to tell a computer what to do. To be an artist with code.

Building amazing applications from the ground up with nothing more than skill, passion and a computer is a beautiful thing. If you want to build an app that makes you fulfilled on the side and eventually turn it into a business that supports you as a single person, when has that ever been a bad business model?

Who cares? You’re building something you love and that a small number of other people love too. Being small has its rewards that some people would argue far outweigh the stress of being big. Ever heard of Instapaper or Tweetbot?

Build a Complimentary App for the App Store

Another strategy could be to do what 37Signals and my friends from MetaLab Design have done: build an amazing web app and complement it with apps in the App Store. When MetaLab rolled out their beautiful app Flow, they built it as a web app that was complimented with a menu bar app, and eventually an iPhone application in the App Store. You can even build apps with Sencha and other platforms and wrap them in Phone Gap for sale in the App Store.

This way you get the best of both worlds.

Stay Out of the App Store

This means building your own web app or mobile app and remaining app store agnostic. Amazing people are building apps everyday that will never see the light of the App Store. Apps like Basecamp, Typecast, Gridset, and many more give us the functionality we need while maintaining the flexibility they want (not to mention, they don’t have to give 30% of their profits to Apple).

Rules for App Success

These have been just a few of the strategies that are available to get you started. In order for you to practice safe “app-ing,” I’ve created a little list to guide you:

1. Scratch Your Own Itch

Build apps that you wish already existed and build them for yourself. This way, you can never lose and chances are other people are experiencing the same needs and wants. Ergo, profits.

2. Client Work

I’ve known people who have built a single iPhone app for a client that ended up more profitable than Sparrow in a month. Client work is a set job and a set price, and both are predictable and profitable if you know what you’re doing. People will pay a lot of money for you to build them an well thought out app.

3. Build Apps that are Simple

Programmers and designers alike kill great ideas by not doing the hard work of making them simple. If it wasn’t already obvious as to the value of simplicity, I’m pretty sure the recent success of Apple has driven the point home.

4. Build Apps that Challenge You

If you’re at a loss for a great idea or the next Instagram, always keep coding. Build an app that challenges you so that when that great idea hits you over the head you’ll be ready.

5. Build Apps that Get You Noticed

There are many ways to add value to yourself and other people who aren’t directly correlated with profit. Building an app that people can share, find useful, or just make them laugh can be a great way to market yourself. An app like this can put you on the radar of paying customers, teams like Instagram or Facebook, or get you the followers needed for the paid app you’ll create next.

6. Get funding as the last (and worst) case and only if you need to scale to make it better for your users.

Re-read number 6 again.

Conclusion

The road to app success has many turns, available vehicles, and bad opinions. At the end of the day, you’ll have to build a great app that you or other people will need. The business of your app will be a viable part of your success that other creators will overlook.

I would hate to see your beautiful app fail in any way, so I hope this article was another step in helping you “Turn Pro.” Feel free to dive into the specifics of this general article by commenting below. I look forward to the discussion.

Image by Adobe

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