Top 6 Factors To Determine How Much You Should Spend On A Custom Application For Your Business

Determining the price to spend on custom software solutions for your business truly is unique per business. However, this list should give you insight as to what the appropriate cost to spend on an application is.

Core Strategy of the Business

The first factor to consider when planning a new application is ‘what is the core strategy of the business?’ If this new piece of technology, whether it be a new web app, SaaS, mobile app, IoT, etc., is directly in line with the core strategy of the business, then keep moving forward. If it’s not in line with the core strategy of the business, then an off the shelf option would be the right move.

Value Added to the Business

Rate of Efficiency:  

The next factor to consider is the value added to the business. When businesses develop software that automates the way they operate and improves their efficiency, realizing instant value added. Businesses are now able to complete more work in the same amount of time because items don’t fall through the cracks. This way, consumers have an improved way to interact with the business. Which in turn lead to more sales and an increased net promoter score.

Proprietary & Patentable Technology:

Another Value factor is if the software is proprietary, and even better if it’s patentable. Proprietary software adds monetary value to your business, as it automates the workflow, but also is an item that can be sold and licensed out. Additionally, a software patent protects your software for 20 years. Meaning you are able to compete without competitors in the market space, to read more about software patents check out this article.

Revenue Generation:

Another value added reason for custom software is using your software as a method to generate revenue. When an application can interact with consumers in a new manner it can improves outreach. An improved outreach may lead a consumer to purchase your items or your service. This is a great reason to make a custom software solution. However, it might be smart to start off using an existing platform like Shopify to test out and confirm your idea is valid.

Risk analysis:

When developing Software Risk analysis is always a major factor to consider. The most important risk to consider is determining if the value that is being added is worth the monetary risk. The traditional Risks that need to be assessed are: What if we develop features that consumers don’t need? What if the requirements aren’t translated to the developers properly? What if there is a new generation of technology in the future? Do we build a multi-tenant system or a single client system? These questions are often answered and discovered through a discovery period, which mitigates the risk.

What if we need it and the cost is too expensive?

Financing:

Our friends at Jules & Associates finance custom software development projects. We’ve worked with them across multiple deals, which have worked out for our clients and us at Grata. Please let us know if you have any questions about developing and project financing!

Accounting Methods Depreciation terms:

Another way to determine the cost of your software, depending on the use of the software and the costs, you can depreciate it at as a capital expense, as well as depreciate over 5 years to reduce the costs.  We would recommend using your internal financial analysis team or work with an accounting partner, in order to effectively depreciate a software.

To determine the price to pay for a custom software, it help to go through this checklist. Considering this checklist will help you find out what the complete cost will be. Working your way through discovery, conducting market research, completing an internal analysis of the increased amount of work or value added to the consumer, ensuring it lines up with your strategy, and the different methods of accounting will lead you down the path to success.

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Jason Senter
Jason Senter
Executive Director of Sales & Product Management

After finding my footing in the world of technology, I joined Grata Software. I focus on identifying opportunities within your business where technology or processes are lacking, and how we can improve them. When I'm not playing sports or in the kitchen cooking, you can find me here at Grata Software, as the Head of Sales and Product Manager.