How Much Does It Cost to Create an MVP?

To a simple question like ‘’how much does it cost to create an MVP’’, you may get answers that differ from each other tremendously. If you hire a freelancer, you may end up paying something like $5000 to $15 000. But why did Facebook pay $500,000 in 9 months for MVP only? What’s the difference?

Before we proceed to the cost of MVP, let’s see what it is and why you need one.

What is a Minimum Viable Product?

Minimum Viable Product or MVP is the initial product released in the market with the aim to receive feedback from early adopters. After MVP is completed, you don’t have the final product but the initial version of it with basic features. The feedback received from early customers makes it possible to improve the product and see what is lacking or needs to be changed.

Why Does an MVP Pay Off?

To answer this question, let’s look at statistics. Go-Globe studied the reasons behind the success and failures of startups.

As you see more than half of startups fail due to premature scaling. The figure 74% is high enough to make you think twice before you scale up.

And how to mature before scaling? The answer is MVP. You test the product in the market and collect information about its strengths and weaknesses.

Here are 4 reasons you may think about when considered an MVP.

After completing the MVP stage, you can tell the investors ‘’hey, I have a great idea and it works’’. You may need some improvements based on received feedback. And most importantly, you don’t risk big money as it is a small-scale investment. Finally, you may generate initial income from early adopters.

How Much Does an MVP Cost?

To get an answer to the question ‘’how much does it cost to build an MVP’’, let’s look at the cost of MVP of some well-known companies.

As you see, the price ranges up to $500.000. But that is not always so.

If you are a mid-sized startup and your project is not too big, you can end up with something like $5,000 to $50,000 while hiring a software company with experienced developers.

The cheapest way to build an MVP is to hire a team of freelancers. You will need a full-stack developer, a designer, and a tester. The whole project may cost you something like $15,000. E.g. a full stack developer may charge you $6,000, a designer — $5,000, and a tester — $3,000.

Here is a chart of average freelance developers’ cost by country.

If you don’t want to hire a team in-house, the second option is to outsource to a software development team. This option is chosen by many startups as it is more reliable and less costly. The average price is $30 per hour. If you hire 4 persons, you will end up paying $120 per hour. This is far better than paying $70 per hour per specialist in the United States.

Here is a chart on global outsource rates.

As you may have noticed, the prices for developers in Eastern Europe and Asia are quite reasonable. This does not mean you will compensate on quality. If you do good research, you can find very talented developers in both Eastern Europe and Asia.

Having said that, let’s look at some factors that determine the cost of MVP.

What Does the Price Depend On?

You may have noticed that the prices vary tremendously. Why is it so? The answer is that some freelancers confuse the whole package of MVP with a prototype. You may end up paying something like $10,000 to a web freelancer if you need just a prototype.

But think of giant companies like Facebook that invested $500,000 in MVP development. Uber funded with a quarter of a billion just for the operations & marketing-related costs, not to mention backend supporting revenue sources, APIs, artwork, copywriting, etc.

So, what does the price really depend on?

First and foremost, it depends on how much work you want to do. A full package of MVP includes a research phase when you identify business needs, find the opportunities and decide what features to include in the final product. Then and only then you can translate your MVP functionality into a plan of development and do the actual work.

Some startups just ignore the research phase and hurry up to develop a prototype resulting in poor design and incomplete final product. According to studies, as mentioned earlier, 74% of failure for startups is due to premature scaling.

The second factor that determines the price of MVP is the location of developers. As shown earlier, developers from Asia and Eastern Europe price reasonably whereas the price for a developer in the USA and Canada may be twice as much.

Finally, the complexity of your project and the number of features are also determining factors. The more complex your project is, the more hours it will require, and consequently more money will be spent.

How to Start off With an MVP?

There are several steps to take to build an MVP.

1. Research the idea and market demand

According to CBI reports, more than 40% of startups fail because of no market demand. Yes, you have a great idea but it may not work in the overcrowded market. To add value, you need to be clear on these questions.

a. What value am I adding to the existing brands?

b. Why would customers want to buy my product or service?

c. How am I different?

2. Decide on core functionalities

You don’t need to have all nice-to-have features in your MVP. This will be just a waste of resources. Focus on basic ones and if the market accepts them, your other features will only add flavor to your product.

3. Build and launch

At this point, you should have a strong foundation for building a prototype. You know whether there is market demand, what the pain points are, and what core functionality you need. Now that you are clear about all these, you are ready to test your idea in the real market. And don’t think that you need just anything for a test. Outsourcing to a qualified team is as important as it is when building the final product. After you launch the product in the market, you are ready to collect valuable information about your product. This is the time for feedback collection and analysis.

4. Feedback collection and analyses

Make sure to keep open the channels for collecting feedback. These may be the contact information of early adopters or even your personal contacts. Surveys may also do well but they are a bit more costly.

After you collect information about the strong and weak sides of your product, it’s time for analysis and adjustments. Don’t ignore any single opinion and try to find the optimal line between your budget and customer needs.

While collecting feedback, you may come up with a new idea based on user behavior research. It’s important to continue to test until the product is finalized.

MVP is Optional

Having said all these, we would also mention that you may want to go without an MVP if you are 100% sure about the efficiency of your product idea. However, experience shows that the market is unpredictable. You may have a great idea that it may not work in real life. Our recommendation is to allocate at least 10–20% of your product development to building an MVP. Only then you can be sure that you are not wasting your money.

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