Starting a SaaS company today is easier and more rewarding than it has ever been.
Entrepreneurs globally are starting SaaS companies as they provide recurring revenue and are significantly easier to scale than other businesses.
Additionally, once you have built up your userbase, SaaS businesses are typically valued multiples higher than traditional businesses due to the recurring revenue and high profit margins.
However, for non-technical SaaS founders budgeting for the development of your SaaS can be a difficult task — I get asked about development costs extremely often so I will explain the typical cost breakdown for your average SaaS!
SaaS products usually will cost between $20K and $200K to develop.
This is referring to the first version of your product.
The main factors which will affect the development costs are:
In this guide I will provide a detailed overview of the key SaaS development costs, how to minimize your costs, reduce development time and avoid the most common mistakes SaaS founders make.
The average SaaS app developer charges approximately $60/hour - depending on location and experience.
Here’s a typical breakdown of the time required for each stage of developing a SaaS product:
The total amount of time required to develop a typical web-based SaaS product would be approximately 880 hours.
Based on a 40-hour work week, the development process would span approximately 6 months.
To hire a developer for your SaaS development, requiring 880 hours of development work at a rate of $60/hour, the total cost would be approximately $52,800.
Development agencies typically charge more than hiring individual developers, but provide many advantages over hiring an individual developer.
Firstly, agencies tend to have more experience as they have completed many more development projects (especially SaaS-specialized agencies) and a more sophisticated process.
You will also find that agencies can self-manage and therefore you will not need to micro-manage and oversee an individual developer’s work. They will usually assign a project manager to your project to oversee the development team and to communicate with you.
This is great for those without experience in managing a software development team or busy entrepreneurs.
You should expect to pay about 50% more when hiring an agency over an individual developer.
Based on the the example of hiring an individual developer, you can expect the total cost to be approximately $80,000 for the development.
If your SaaS requirements are particularly complex, development costs could be in excess of $100k.
A minimum viable product is a version of a product with just enough features to be usable by early customers who can then provide feedback for future product development. A focus on releasing an MVP means that developers potentially avoid lengthy and unnecessary work.
"If you aren't experienced in managing a software development team, hiring a software development agency will save you from many headaches."
If you aren’t experienced in managing a software development team and project, hiring a software development agency will save you from many headaches and set your project up for success.
The user interface design of your SaaS is more important than ever. Users expect modern, sleek and easy-to-use software products and apps.
We strongly recommend budgeting an additional $8,000 - $15,000 (depending on the size and complexity) on top of your SaaS development budget to hire a UI/UX designer who specializes in SaaS product design.
An experienced designer should create high-fidelity designs of each page of your SaaS app and produce a user flow so you can visualise your entire SaaS product before the development has even started.
This can aid the success of the development significantly too as it provides extra clarity to the developers when they can visualise the requirements. This can also help reduce the cost of the development itself.
The user experience is what will make your product superior to your competitors’, win customers over and bring in revenue.
Normally, UI/UX design is priced based on the number of screens (pages) that your product requires. Design rates would vary between $250 to $1,000 per page that requires designing.
If you are working with a SaaS development agency, they should be able to assign a designer to your project rather than needing to find a designer yourself.
When starting a SaaS company, most founders are thinking about the costs to initially develop the product.
However, you should ensure that you are also budgeting for the other important costs.
Initial costs will be minimal as you will have a small userbase, however as the usage of your SaaS increases, you should expect the costs to increase.
Your costs should be approximately $30-$50 per month for your server costs when you launch.
If your SaaS product is a file management software for example, where you will need to pay for file storage costs, you will likely incur higher costs.
Many SaaS products will utilize external services to increase the functionality of the product. For example: Agora for video and voice calling, Intercom for customer support, Auth0 for enterprise login and much more.
These services will most likely cost to use, and therefore you should ensure that you’ve budgeted for these in addition to the development costs.
Ideally, the pricing of your SaaS product should ensure that you are covering the cost of the user’s usage at minimum.
Your users are paying monthly or annually to use your product, so users have come to expect regular updates and product improvements.
Your competitors are also developing new features, so it’s important to create a roadmap of features. This way you can constantly develop new features, improve your product and get ahead of your competitors.
The more well defined your feature roadmap is, the more accurately you can budget for the development costs.
It is crucial for SaaS founders to budget for new feature developments and regular updates (including security updates).
At this stage, ideally, your SaaS product should be generating enough revenue to fund the development of new features and the ongoing maintenance.
The longer it takes to develop your SaaS, the higher the cost of development.
If you reduce the number of features you start with for your SaaS product, the quicker it can be developed and therefore the lower the cost.
I strongly recommend that you look at all your desired features and decide whether that feature is really necessary, or just a ‘nice-to-have’ and can be developed after your initial launch.
There's a lot to consider, but you should carefully consider the importance of each feature to reduce the cost of developing your SaaS.
This is called the MVP: Minimum Viable Product.
Importantly, developing just the core features allows you to launch quicker and start generating revenue quicker. This revenue can then be used to develop the next version of your SaaS product.