startups · Clock8 min · 14 Jan 2021

Complete Guide on How to Start a Mobile App Business

Tatsiana Kerimova

Tatsiana Kerimova

Chief Executive Officer

how to start a mobile app business
Illustration by Amir Kerr

With small and medium enterprises (SME) closure rates reaching 20-40% in May 2020 and a slow recovery pace, starting a small business has never been this risky. Nonetheless, it’s the business idea and the implementation that makes a difference. 

When starting a business, it’s critical to come up with and market your product at the right time in the right place to minimize the risk of failure. For example, in 2021, the mobile app business is among the most lucrative businesses worldwide. 

Since people hardly put down their phones, the mobile app business is ideal for making a profit. Seemingly, the pandemic has only increased this tendency; mobile device usage has significantly accelerated in 2020 with daily time spent per user surpassing 4 hours 10 minutes, which is up 20% from 2019.

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Average Hours Spent on Mobile Per Day Per User. Source: App Annie Intelligence

As mobile device usage keeps growing steadily, revenue increases, too. In 2021, total global mobile app revenue worldwide is projected to hit $693 billion and exceed $935 billion by 2023.

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Top Markets by Consumer Spend (B USD) in 2020. Source: App Annie Intelligence

Now that we shared how profitable the app business can be, let’s elaborate on entering the market. In this article, we have prepared a plan that will help you navigate your way and avoid potential pitfalls during your adventure into the mobile app business. 

Generate an App Idea

Canadian politician William Cameron said, “Money never starts an idea; it’s an idea that starts the money.” We can’t overestimate this concept, as a brilliant idea is the backbone of any business success. 

How do you know if your idea will drive high profits? The answer is simple: your product should bring value. That’s why when testing the viability of a business idea, you should evaluate it in terms of usefulness for a potential audience. 

In other words, your mobile solution must solve a problem. Addressing a pain point is a sure way to success. 

Let’s use 2020 as an example. Due to the pandemic and economic crises, people were seeking to relieve stress. That’s probably one of the key reasons why stress-relief apps were included among Android’s and iOS’s best apps in 2020. Apple’s stress-relief app of the year was Endel, an app that offers personalized soundscapes for relaxation and concentration, and Google selected Loóna, an app that helps prepare you to sleep

Related: 12 Ways to Come Up with Great Mobile Game Ideas

Do Market Research

Once you have made your decision about your idea, it’s time for research. You can’t start an app business without an industry investigation into the following topics:

Market

If you want to look at the industry from a broader perspective, assess the market’s general trends first. For example, social media, messaging, and video apps occupied users more than other mobile solutions during the COVID-19 pandemic. However, remember that other app categories aren’t worthless. For example, besides a spike in game downloads in both major app stores, users were also interested in Shopping, Entertainment, Business, Finance, and Health and Fitness apps.

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Year-over-Year Growth in Global Time Spent in Mobile Apps. Source: App Annie

Competitors

Knowing your rival is essential to distinguish yourself in the market. Besides, you can identify their weaknesses and avoid making the same mistakes in your application. 

Target Audience

Investigating the audience is key to meeting their demands and spotting their behavioral patterns. For instance, music app users generate more sessions per day than shopping app users. Also, you shouldn’t forget about generation comparison; according to the Criteo Global App Survey, in the US, 30% of the silent generation and baby boomers say they wouldn’t spend money on in-app purchases. Comparatively, when looking at millennials and Gen Z, 85% are willing to spend money on these purchases.

Whether you have experience in mobile apps or not, proper research on current trends and historical data analytics will help you have your finger on the industry’s pulse. 

Choose the Platform

When deciding if you want to build an app for Android or iOS, first consider the potential income rather than relying on personal preferences. How do you assess potential income? It depends on your target audience. 

If you aim to market on the global arena, then Android is a better choice; Android’s market share worldwide reaches 72%, while iOS only makes up 28% of the global mobile operating system market. However, the situation is different in North America, where iOS penetration steadily increases, as there are almost 56% Apple users and 44% Android users. 

These platforms can also be evaluated in terms of potential profit. When it comes to profit, the App Store outperforms Google Play. In 2021, 65 cents of every dollar spent in mobile apps and games went to iOS.

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Worldwide App Gross Consumer Spend by Store. Source: App Annie

Make a Business Plan 

Starting an app development business is impossible without a business plan. Considering that only around 30% of startups succeed, effective tactics and strategies are must-haves to pave the way to success. Proper planning reduces the chances of falling into common pitfalls that are usually accompanied by unnecessary costs. 

The dynamic nature of the mobile app business highlights the importance of both short-term and long-term planning. During the planning process, you should mark your general steps towards a final goal that will serve as a North Star for developing your business. Also, don’t forget that a proper business plan is a must-have to raise funds.

Related: How Much Does it Cost to Develop an App

At this stage, you consolidate all the data you’ve gathered and distinguish what makes you stand out from others. An outline of a business plan may look like this:

  • Define a problem that your app will solve
  • Research solutions 
  • Select target audience
  • Outline core functionality 
  • Determine a monetization strategy
  • Select a marketing and promotion strategy
  • Set a budget

Next, let’s discuss two points from the list above that many tend to struggle with: determining a monetization strategy and selecting a marketing and promotion strategy. 

Monetization Strategy

You can drive profit in several ways by using the following monetization strategies:

Paid Apps

Although the majority of apps in the Google Play Store and App Store are free, you can still launch a paid app. App Store outnumbers Google Play in paid apps, offering more downloadable-for-a-fee applications. Here, the average price that users pay for downloading iOS apps slightly exceeds $1. 

In-App Purchases

In-app purchases mean that users can be charged for access to extra features. This monetization strategy is implemented in a wide variety of apps. For example, photo and video editors and games apps often use this method to drive profit. 

Direct Sales

Selling goods and services via an app is another popular solution. It’s not limited to e-commerce only. For instance, educational platforms that distribute courses also fall in the category.

Advertisements

Using ads is a basic monetization strategy for free websites and apps. You are likely to find many offers from brands that would be glad to promote their own products, services, and apps. 

Related: How Much Money Can You Earn With an App?

Marketing and Promotion Strategy 

Plan for promotion early to start developing your public relations (PR) campaign in advance. 

When determining your marketing and promotion strategy, you should play by this standard advertisement rule: market where your audience is. For example, if you are launching a mobile solution, it would make sense to prioritize social media marketing. 

When using social media for marketing and promotion, you need to find out where your prospects exist and market there. If we are relying on best practices, 94% of marketers worldwide use Facebook, followed by Instagram, which is popular among 76% of marketers.

Raise Funds

There are four primary finance sources:

Personal Funding

You can always start a mobile app business with your own money if you have enough for a launch. 

Pros:

  • Sole ownership, which means you control the business development 

Cons:

  • Personal responsibility for the risks
  • Lack of finances may hinder growth

Angel Funding

Angel funding means that an investor purchases a share in the startup for the sake of additional income. The angel investor can be a businessperson, group of like-minded wealthy people, family members, or friends.

Pros:

  • No liabilities in case of failure
  • Typically, angel funding includes guidance from the investor

Cons:

  • Funding can be slow and incremental
  • Possible uncertainty with the investor and founder’s roles in the decision-making process
  • Investors expect fast growth and high revenues

Crowdfunding

Crowdfunding is done when you reach a pool of investors via crowdfunding platforms like Kickstarter, GoFundMe, and Indiegogo

Pros:

  • Allows you to spread the word about and validate your idea

Cons:

  • Unknown time frame before you collect the crowdfunding

Bank Loan

Taking a loan from a bank comes with its advantages and disadvantages, including:

Pros:

  • Typically, interest rates are low
  • Sole ownership (if you manage to get your entire budget)

Cons:

  • Liability in case of failure
  • You’ll be required to prove your creditworthiness to get a loan by providing personal information and/or a collateral

Regardless of which funding source you choose, make sure you have accumulated enough finance for product development, marketing, and other additional costs. Otherwise, you risk failing due to a lack of funds, which is the second most common reason why startups fail.

Related: 10 Common Mistakes Early Stage Startups Make And How To Avoid Them

Find Developers

How do you start a mobile app business without a reliable team to implement your idea? You will need to hire iOS and Android developers, QAs, and business analysts. Here is how you can gather your team members: 

Freelancers

You can reach the pool of freelancers on platforms like Guru or Upwork. Although you may save on costs, this option will usually require a high level of personal involvement in the operation. Aligning remote professionals’ work is difficult since they may opt for different technical stacks and have individual work styles. 

In-House Employees

Getting yourself an in-house developer is a viable solution that comes with increased costs. You will need to set up a department, provide space, costly equipment, and perks to keep IT-specialists motivated and engaged. 

Development Agencies

Dealing with a development agency is attractive for those who want to have an aligned team of professionals and want to be minimally involved in the operations. Typically, with an agency, you participate in the decision-making process and regular check-ups, leaving all the dirty work for the agency’s team. Although this is usually more expensive than hiring freelancers, this option tends to be cheaper than hiring in-house employees.

Related: 9 Tips on How to Choose the Best App Development Company

Make an MVP

An MVP is an initial version of your app where you can assess the viability of your product based on customer experience. At this stage, you make sure that the app has just enough functionality to fulfill its initial purpose. Additional features should be added in later version updates.

To make data-driven solutions, you can set up a test group that tests the MVP and provides feedback. Afterward, analyze the group’s responses and make any required updates that help you to release a useful application with an outstanding user experience. 

Related: Full Guide on How to Build an MVP

To Conclude

So, how do you start a successful mobile app business? You need a brilliant idea that is supported by market analysis and addresses users’ pain points. 

Shortly after your research is complete, you need to develop a business plan that will guide your project’s development. Based on your plan, you can then accumulate enough resources and hire a professional IT-team to implement your idea. 

Although we, at Orangesoft, can’t help you with idea generation, you can rely on us for everything else. Our specialists will help you build the mobile app of your dreams. Please contact us for more information.

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