There are an endless amount of ideas that incorporate the use of a mobile app. Unfortunately, quite a few start-ups with great ideas for the future don't necessarily have a briefcase full of $100 bills that they can throw down on development costs. As we've discussed before, app development can be costly. How can an enthusiastic business owner find quality app development services for a lower price?
A great way to cut costs on mobile development is to set up a part-cash, part-equity agreement with the developers. This method works particularly well if you want to 'test the waters' in the App Store on a limited budget, or if you are creating a start-up that is centered around an app.
In addition, since the developers have stake in the success of the app, you shouldn't need to worry about getting a lower quality product for your buck. Depending on your equity agreement, another benefit of partnering with a developer is that they will take care of keeping the app up to date when new software and hardware is released, as well as providing bug fixes and other issues.
The amount of split you choose can depend on a few different factors. The biggest factor, of course, is the amount of money you are willing to invest in the outset. A larger "down payment", so to speak, will greatly sway the split in your direction. In addition, a more complex app might prompt a developer to ask for more equity. The important thing is to find a split that is fair for both parties.
Equity agreements can have their disadvantages. The model may not work for every app concept. If your app isn't revenue-generating, a revenue-sharing model clearly doesn't make sense.
With an equity-based model, you also might need to work to sell your idea to the development team. The reason a developer might be interested in an equity split is because they believe they'll make back the initial loss of money in the long term. If your idea won't bring in a decent amount of revenue or relies on an expensive server infrastructure, a developer might not be interested in taking the project on board.
Another caution in pursuing an equity split is to ensure both sides receive a fair slice of the money pie. There are a multitude of ways you can split funds, but both sides need to make sure they're looking out for each other.
Finally, when approaching this model, ensure you have at least a small amount of capital to barter with. You may have the best idea in the world, but a strong development team will not be able to work at their fullest potential with no money down. While a 100% equity model might be awesome for a client, it causes significant financial strain and potential time loss for the developers. Like the old saying goes, "you can't eat equity!"
An equity split can be beneficial for both you and your development team. Clients love this model because they can invest less money up front, yet utilize the services of a top-tier development company. Developers love this model because they can still get a little money up front, yet earn their full wages back in the long haul (and hopefully much, much more).
Many development companies, including Jed Mahonis Group (shameless plug), are willing to work with you to help get your app developed within your means. If you'd like more information, give us a shout.