How to Start an App Business

Benefits of Starting an App Business

Today, more than 7 billion people in the world are mobile phone users. It’s no wonder annual app downloads are rising, reaching 255 billion downloads in 2022. This large and increasingly lucrative market keeps expanding. App revenues are also growing, as more users are willing to pay for access, in-app purchases, and premium features.

How to Start an App Business Checklist

Starting an app development company and building your app takes time. You’ll need design and development expertise, time management skills, and an understanding of your specific app market.

You can keep startup costs low, especially with help from LLC filing services. Some free (+ state fee) LLC formation services can help you avoid some early expenses, but it’s still important to capitalize your startup until the app brings in steady revenue. As you develop your app, pay extra attention to how you’ll monetize it. To turn your app business dream into reality, follow this checklist of startup steps.

1. Create an app business plan

Your app’s company’s business plan is your roadmap to go from concept to release. Writing a business plan doesn’t have to be complex. A few pages can be all you need to keep your app business strategy focused and consistent.

Who are the target users for your app? Do some digging to identify and understand the market. People use apps for productivity, connection, entertainment, and more. What will your app do for them? How will it do it better than anyone else? Develop your unique selling proposition (USP) to get a grasp of how your app stands out.

Who’s on your team? Building your new app may require hiring talented coders, user experience/user interface (UX/UI) staff, copywriters, app designers, or marketing professionals. Those may be contract laborers working piecemeal or full-timers, depending on your budget. You may also consider working with partners who co-own the app business.

How will you build buzz and demand for your app? From a company website and vibrant social media presences to media attention and app conferences, the more visible your app and company, the more you may be able to drive app adoption and revenue growth.

What is your minimum viable product (MVP)? Don’t keep your app under wraps until it’s perfect. Determine the minimum features you need for production, and get your app into the world. From there, you can listen to user feedback, fix problems, and improve feature sets — but your app has to be out there before you can fix it, improve it, and grow your customer and revenue base.

2. Choose a business structure

When starting your mobile app business, the right business structure can be a key part of your success. While a sole proprietorship can be the easiest way to start, its liability and taxation pitfalls can be a poor match for an app company. Instead, consider starting an LLC or limited liability company for your app company, along with an operating agreement.

If you want to go into business with one or more partners, establishing an LLC helps you structure your app company with multiple owners, with shares divided in a way they all agree to. The LLC can also shield your personal assets from liability in the event of legal action, a benefit over sole proprietorships. Structuring your app business as an LLC instead of a sole proprietorship may help lower your taxes and taxable income, too.

3. Determine your app company’s development and business costs

If you’re building a new app, you should count on a development cost of $5,000–10,000. The typical cost range for a quality app can run as high as $250,000, depending on scale and complexity. Estimating startup costs is crucial to knowing how much money you need to get your app off the ground. Here are other factors to consider:

• Employee wages and/or fees for outsourced independent contractors
• Development process and team
• Pre-release quality assurance testing
• Office space and utilities
• Technical equipment like computers, smartphones, etc.
• Administrative fees, insurance, business registration, and licensing fees
• Google Play and Apple App Store fees, including percentages taken of app sales
• Website hosting and storage

You can build a quality indie app for under $100,000, and potentially below $50,000. But if your company will build enterprise-level apps, expect costs to exceed $100,000 and possibly even $250,000.

How can you fund your app business’s startup costs?

Your app business plan can be integral to helping you fund your startup costs. Here are some funding sources to consider:

• Bootstrapping: Savings, investment accounts, and other personal reserves could fund your app. Of course, this route involves plenty of personal risk.
• SBA loans and other government resources: Federal loans from the U.S. Small Business Administration (SBA) can help fund your startup costs. You may also find an investor through a small business investment company (SBIC) licensed by the SBA.
• Commercial loans: You’ll need a solid business plan to get a bank loan, with proof your plan will yield returns.
• Venture capital and other private investment: To interest investors, you’ll often need to offer them a stake in the company. Negotiate carefully.

4. Name your business

What’s a good app business name? The names of top app companies don’t follow a set formula, but they do reflect the values and brands of the people who make these app companies excel.

As you and your business partners decide how to name your LLC, make sure the name you choose is available for government registrations and licensing, domain names, and social media accounts.

5. Register your app business and open financial accounts

Once your app business registrations are complete, get underway on opening business checking accounts, app store accounts, and other financial accounts you’ll need for your business, such as PayPal or business credit cards.

You’ll also need to apply for a dedicated employer identification number (EIN) for your LLC, which helps you open business bank accounts, hire employees, file taxes, and more. Also, get the licenses your state or locality requires. Consider chatting with a local insurance agent about business and liability insurance you may need to protect yourself if things go sour.

6. Market your app business

In the buildup to your app’s launch, don’t overlook a sound app marketing plan. While you build your app, work on generating buzz and developing your marketing strategy.

• Implement a social media strategy. Share screenshots, articles, and other content that showcases your app and why people will love it.
• Harness the power of video. Consider demo and explainer videos that help people get familiar with your app and what it can do for them.

Build a company website that spotlights your app and shares details about your app company, vision, and how people can get in touch.

Examples of App Businesses to Start

From tools to travel, health to finance, profitable apps can take many forms, such as:

• Augmented reality for interior design
• Health, wellness, and telemedicine
• Meal planners and food trackers
• Business bots
• Map apps
• Video streaming apps
• Communications tools
• Customer relationship tools