The fundamental problem with the valuation of applications
You want to create your own SaaS, improve your company with an internal tool or you have an idea for a startup. So you ask a simple question: “How much will it cost?”. And you hear the worst possible answer: “It depends.”
While searching the Internet you will find every possible solution: from a student who will make an app for €500, to software houses that won't start working on a project for less than €30 000. The difference is gigantic. How do you know who's right? Is the cheaper just a bargain, and the more expensive one wants to pull you in?
The truth is uncomfortable: Most of the valuations you get at the “loose idea” stage are worthless.
In this article, we will explain to you why valuing an application design based on preliminary specifications is asking for trouble, how much a business application of low, medium and high complexity really costs, and how not to drown your budget in a tool that no one will use.
What pitfall awaits you when you want to know the cost of creating an application?
Before we talk about money, let's figure one thing out. No one starts the application development process for the application itself (unless hobbyist). As a rule, motivation is the desire to solve a specific problem - your own or someone else's.
The most common reasons are:
- Acquiring new customers (niche spotting).
- Retention of existing customers (improving the quality of service).
- Cost reduction (increasing work efficiency).
It often seems to us that our problem is universal (“if I have a problem with booking with a hairdresser, so do others”), but without verification it is only a hypothesis. The problem is that very often as an investor you don't know how the app is supposed to work yet. You only know what your problem is. And this leads to a trap.
Trap of up in the air specification
You come to software companies with a wish list written on one sheet. “I want to create an app like Uber, but for plumbers, and it had this and that.” And you ask them the question: how much will my business mobile app cost?
Company A values it at €5000
Company B gives a valuation of €20 000
Company C for 40 thousand €10 000.
Do you choose an offer for €20 000, because it seems a safe choice? It's a mistake. This is a classic comparison of apples to pears. Without precise technical design, each of these companies valued something completely different. One understood the “notification system” as simple mails, the other as an advanced mobile application with a push system.
Acting in this way leads to disaster. Why? Because often what you ask for is not at all what you need. We will show you this with some examples from our experience.
Example 1: the “Scraper” trap
A client came to us. He asked for a quote for a web application that automates scraping, which will pull the prices of materials from the websites of different suppliers and collect them in reports sent to email.
What would a typical company do? It would value a scraper.
What have we done? We asked, “Why do you need this data?”
It turned out that the client needed current prices for materials in order to be able to reliably prepare quotes for services for their customers. His problem was not the lack of reports in the mail, but the time-consuming process of creating offers. Instead of building an unstable scraper (which will stop working as soon as the provider changes the layout of the page), we proposed a bidding automation system that automatically sends queries to suppliers through integration with external APIs, analyzes their email responses with AI, retrieves data from there and immediately bases it into a calculator from which nice offer PDFs are generated for the client. So we solved a real business problem, Instead of blindly fulfilling technical request.
Example 2: Mobile application for builders
Another example. The client wanted to get a quote for a dedicated mobile application for construction managers. Purpose of the application: photos of work progress, reports, CI records, attendance list.
The cost of the native mobile application (iOS + Android) is slightly 10-20 thousand euros + endless fun with updates and fixes. But will a tired construction manager sit down to fill in the application after 10 hours of work? No.
The solution? Instead of an expensive mobile app, we connected WhatsApp to a simple server system. The manager records a voice memo and takes a picture. The system processes this and puts it in the report.
The cost of implementing the project? 15-20% of the price of the application.
The effect? People actually use it.
In addition, the client dropped the need to maintain the mobile application — he is not the owner of the software, the maintenance is handled by Meta (owner of WhatsApp) for him.
So what is the actual cost of the application? The price range
Now that you know that preliminary specifications often mean asking for a problem, let's get down to the numbers — that's what you're probably looking for since you came across this article. The amounts below are market estimates.
1. Start-up budget/Micro-tools: €2500 — €5000
Evene 5 years ago nothing meaningful could be done in this amount. Today it is different. With modern tools (No/Low-code) we are able to create a working micro-solution or a simple Minimum Viable Product (MVP) within this budget.
What will you do in such a project amount:
- simple dashboard for managing a single process (e.g. course enrolment),
- smart form,
- automation which will linki the two systems.
Risks: You have to accept some compromises. It will not be an extensive enterprise-class system, but a concrete tool that solves one pressing problem here and now.
2. Business application of low/medium complexity (MVP): €5000 — €12 000
At this price range we begin the discussion about dedicated systems on which you can base huge part of the operation of the company.
What will you do with this budget:
- digitization of Excel,
- tailor-made CRM,
- B2B Customer Panel,
- document workflow system.
Risks: In this budget, the margin of error is still small. Doing it without a plan is a gamble.
3. High complexity business application/advanced product: €19 000 — €35 000
Here we enter the stage of “piece of good software”.
What will you do:
- marketplace,
- “Uber for X”,
- extensive B2B systems with difficult integrations (accounting, warehouses),
- native mobile features.
Where is the catch: with such amounts, starting without a thorough technical analysis is a business suicide.
Knowing the cost of developing an application without analysis is like building a house without a project
Imagine that you go to the construction crew and say: “I want a house, around 150 square meters. How much will it cost?”
One will say 200 thousand, the other 1 million. And they're both right, because you don't have a plan. There are no counted loads, it is not known whether the roof is supposed to be made of tile or sheet metal.
With applications it is identical.
Comparing offers for 5, 10 and 20 thousands without a technical workshop, during which the mockup, the user journey and the architecture of the system are created, is pointless.
The fact that someone made an offer for 5 thousand, does not mean that the cost of building an application will not be bigger. But this may mean that:
- the company did not understand half of your requirements (because they were unclear),
- in the course of the work there will be “additional paid changes”, which will double the budget,
- you will receive a product that will not be suitable for further development.
Can you afford such a risk?
If you plan to spend 20 or 50 thousands on an application, ask yourself: can you afford to act without a plan? Investing in a technical workshop is not an additional cost — it is the only way to control chaos. It is at this stage that:
- We divide the project into phases and define the MVP: analysis allows you to “slim down” the design. It often turns out that many functions that seemed necessary can be postponed for later and thus reduce the initial cost of developing an application. This allows us to build a Minimum Viable Product (MVP) — a version of the application that contains only what is essential to test your idea in the market. This drastically reduces not only the budget needed to start, but also your business risk.
- You get hard data: with ready documentation and mock-ups after the workshop, you can go to us, or to five other companies to implement the project. Only then do you compare real offers for the same scope of work. Thus, you gain control over the process.
You can skip this stage and trust the quick valuation of the application. But you have to reckon with the risk of being left with an unfinished system and used up budget.
Fair play approach: how we share risk with our clients
At Sagiton, we understand that the analysis phase is an expense that you have to actually incur before the start of work. Therefore, we have a simple rule:
If you decide to carry out a technical workshop with us, and then commission us to implement the project — we will reimburse you part of the cost of the analysis (usually 50%) at the final invoice.
Why? Because a well-conducted analysis makes our work easier too. Thanks to this, you have a lower entry threshold and a professional plan, and we ensure that we build exactly the application you need.
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