How much does it cost to develop a SaaS in 2022

What are the costs involved with starting a SaaS company? Our lead developer breaks down the typical costs... read on to find out!

How much does it cost to develop a SaaS in 2022

Cost breakdown to start a SaaS company

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:

  • The complexity of your product (usually ties in with the timeline it will take to develop)
  • The skill level required for your development team and the team size (ties in with the complexity)
  • The location of your development team

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.

How much does it cost to develop a SaaS by hiring a developer (in-house or freelance)

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:

  • Frontend development work - 240 hours
  • Backend development work - 560 hours
  • Quality assurance and launch - 80 hours

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.

SaaS development costs breakdown
SaaS development costs breakdown

How much does it cost to develop a SaaS by hiring a development agency

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.

Should you hire a developer in-house or an agency to develop your SaaS product?

Hire a developer vs agency advantages and disadvantages
Hire a developer vs SaaS development agency advantages and disadvantages
"If you aren't experienced in managing a software development team, hiring a software development agency will save you from many headaches."

When you should hire a developer (in-house or freelance)

  • If you have a technical background
  • If you can create in-depth technical requirements for your SaaS product
  • If you are able to choose the ideal tech stack to use for your SaaS based on your requirements
  • If you have experience in vetting, hiring and managing developers
  • If you have experience in managing software development projects
  • If you have the time and skills to oversee the work of your developer and review code reguarly
  • Ability to ensure the quality and security of the code and software
  • Have the time to find the right developer and are not in a rush to start the development — it can take months to find the right developer for your SaaS company.
  • If your developer is unavailable, you should have the technical skills to be able to fix bugs and resolve software issues yourself in case of an issue occuring.

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.

When you should hire a SaaS development agency

  • You are a non-technical SaaS founder (or don’t have the time to manage the project yourself)
  • You require professional assistance with creating a technical specification for your SaaS                    
  • You would like the agency project manager to manage and oversee your project (and communicate with yourself and the team)
  • You would like to launch your SaaS quickly (Agencies can typically assign multiple developers to work on your project at once)
  • You would like to develop your SaaS product in one place (from planning to design to development and beyond)
  • You require quality assurance specialists to review the security and reliability of the software developed
  • You require more guidance on how to navigate the SaaS development process
  • You have the budget to pay agency rates - SaaS development costs are typically higher when working with an agency.
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Design is crucial: The costs of hiring a SaaS UI/UX designer

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.

SaaS design costs image
SaaS UI/UX design costs

Other SaaS costs #1: Running costs

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.

Server 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.

External services (APIs)

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.

Other SaaS costs #2: Developing new features

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.

How to minimize the cost of starting your SaaS company and launch in 90 days

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.

What is SaaS MVP image
What is a SaaS MVP

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.

Cost benefits of developing a SaaS MVP
Cost benefits of developing a SaaS MVP
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