Counting the Cost: How Much for Your SaaS App?

SaaS is a revolutionary force in the business landscape. It has transformed how we use software by providing scalable and cost-effective solutions. With its steady growth, the SaaS market established itself as a prominent player in the business world. 

Statista projects that the industry will have a 15% growth rate in 2023 and an impressive 17% surge in 2024. This dynamic industry embraces innovations, shaping the future of software delivery. 

Over the past five years, Arounda has assisted SaaS startups and companies in launching digital products from concept to implementation. With extensive experience across diverse niches, this article explores the factors influencing SaaS development costs. It provides insights into the pricing of SaaS solutions.

SaaS Development Challenges

It's essential to acknowledge the existence of hidden challenges throughout the SaaS designing process. They underscore the importance of careful budgeting and preparation to overcome potential obstacles:

• Ensuring the security and privacy of user data. Protecting sensitive information is a prominent SaaS trend in 2023. Prioritize security best practices to prevent serious consequences and build trust.
• Achieving optimal performance and scalability. Optimize application architecture, choose the right hosting provider, and streamline deployment for peak performance and scalability.
• Keeping up with evolving technologies and market trends. Stay updated with the latest trends, adapt to emerging technologies, and focus on specific sectors to stay competitive in SaaS.
• Addressing the lack of industry expertise. Understand the industry's needs, integrate smoothly into existing workflows, and provide great user experience to overcome adoption challenges.
• Mitigating budget calculation errors. Continuously update, optimize, and innovate to remain relevant, prioritize maintenance, and consider ongoing expenses for long-term success.

Factors Affecting SaaS Product Pricing

The success of a SaaS product depends on careful planning and understanding the factors that impact costs. Let's explore what’s important during the planning and creation process.

Project Scope

Defining your SaaS project's scope is crucial for estimating costs. It involves determining platform type, target audience, and business objectives. 

We recommend developing an MVP as a single tool for new SaaS entrepreneurs to lay the foundation for future growth.

Tech Stack and Functionality

The choice of technology stack impacts development timelines and costs, with feature complexity being a primary factor. To optimize costs without compromising core functionality, prioritize and address essential elements first.

Team Structure

Hiring an in-house team incurs expenses like taxes, workspace, equipment, and benefits. Partnering with product design agencies provides flexibility, allowing payment for dedicated development hours from their available teams for your SaaS platform.

Developers' Hourly Rates

Developer hourly rates vary based on factors like the country and skill level. For instance, the average SaaS app developer charges around $24 per hour in Ukraine and $55 per hour in the United States. Therefore, the startup cost for SaaS product development differs across geographical locations.

API Integrations

APIs help seamless connections between software components and third-party services. SaaS products often need internal and external APIs because they enable efficient integration and enhance user experience.

Overhead Costs: Beyond Development

Post-development, overhead costs come into play to ensure the success of your SaaS product: 

• Marketing and advertising efforts are essential to attract users. 
• Regular updates to enhance security and user experience.
• User assistance by a dedicated customer support team.
• Ongoing staff training to keep the support team abreast of new features and industry trends.

How Much Does it Cost to Build a SaaS Application?

The development team's location and project complexity impact the total cost. We base our estimation on average prices for design companies in Eastern Europe. Let's explore the breakdown of the SaaS development process and its costs.

Determining Development Costs

Your development team's location and the project's complexity directly influence the total cost of building a SaaS product. In this analysis, we have used average prices for software development companies in Eastern Europe as a basis for estimation. Let's delve into the breakdown of the SaaS development process and its associated costs.

1. Planning and Discovery

During the planning and discovery phase, a business analyst translates your business needs into a technical specification, typically taking 40 to 260 hours. This stage involves competitor research, market analysis, and feature identification, resulting in deliverables such as a technical specification, wireframes, a development plan, and an MVP plan.

2. UI/UX Design

Creating a user-friendly and industry-specific UX and UI is crucial. It ensures that your SaaS solution incorporates industry-standard terms and symbols. It, in turn, provides a smooth user experience that aligns with the client's business processes. The design takes around three weeks and costs between $15 and $40 per hour. 

3. Front-End Development

Selecting the appropriate tech stack is crucial before proceeding with front-end development. The time required varies based on project scope, with rates ranging from $25 to $60 per hour. It also helps to consider the expenses for quality assurance and project management specialists at each development stage. 

4. Back-End Development

You have two options for server-side development: building a custom back-end or utilizing a back-end as a service product. While custom back-end development provides flexibility, BaaS reduces development time. Creating a customized back-end requires up to 800 hours, with rates ranging from $25 to $60 per hour.

5. Maintenance

In SaaS, post-release maintenance requires a significant part of the initial development budget. It accounts for up to 50% of the initial budget. 

Its maintenance involves updating system components, conducting security checks, performing tests, and fixing bugs. Adding new features is considered a separate process and requires changes in both the front-end and back-end.

Analyzing Factors Affecting Costs

Considering several factors is necessary to understand the cost range for building an MVP.

These factors include complexity, development stages, team type, and geographical location.

1. Complexity. When determining a SaaS application's complexity, you should consider factors like scalability, data security, access control, payment integration, and customization. Complex functionalities, multiple integrations, and high-level customization increase development hours and costs.

2. Development Stages. The cost calculation for a SaaS product should account for the different stages it goes through during development. These stages include validation and planning, UI/UX design, MVP creation, front-end, and back-end development. Each stage's associated hours and costs contribute to the final development budget.

3. Type of Solution. Different types of SaaS solutions come with varying development efforts and costs. Examples include accounting, CRM, email marketing, ERP, mar tech, and project management.

4. Geographic location. The location of the development team impacts the cost of building a SaaS application. For instance, South Asia and Eastern Europe countries generally have lower prices. At the same time, the United States and Australia tend to be more expensive.

Let's say we build a SaaS MVP. You have chosen a product design agency from Eastern Europe with an average hourly rate of $26-44. Usually, it takes from three to six months to create a platform, and the team may consist of three-five specialists. You'll spend from $40,500 to more than $100,000 in this case. 

Summary 

Discovering the actual cost of your SaaS project might be a complex journey influenced by various factors. Initial estimates may only provide rough approximations. Confidently navigating the pricing landscape is possible by creating detailed technical specifications and obtaining accurate forecasts. 

Arounda has been in the SaaS product design game for five years. We know how to optimize your budgets and avoid unnecessary expenses. Also, we've got a bunch of real-life cases of producing designs for SaaS products: WordPress, QTalent, and Metricly. 

Feel free to contact us for an estimate and expert guidance to launch your SaaS product successfully.

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