How to start an app business

Whether you’re playing games, finding a new recipe, posting on social media, or trying to determine if that new plant in your garden is actually a weed, these days there’s an app for just about anything. And, with the app industry forecasted to hit $780 billion by 2029, there’s a lot of opportunity to tap into the action.

If you’re an entrepreneur or small business owner interested in creating a mobile app development company but don’t know where to start, this guide will break down the most important considerations, including challenges—like funding, competition, and compliance—as well as opportunities.

You probably came up with your business idea for a new app because you saw a problem that needed to be solved. Or maybe you realized a way to do something faster, easier, or in a more entertaining way. Wherever your moment of genius sprang from, solidify it so you can really pinpoint the challenge. As you progress in your app development, this will be the touchstone you should always return to, to make sure you’re on track with your original intention.

Next, dive into market research. Discover who’s already doing something to address this problem. That’ll reveal who your competition is. Don’t get too disheartened if you find someone in the same space. It’s rare to come up with such a novel idea that no one else has attempted. Instead, look for gaps in the marketplace your own app might fill and focus on that.

At this point, you’ll want to hone in on identifying your target audience. But don’t just settle for a general description or basic demographics. Try to understand your core users’ behaviors, goals, and preferences. This’ll allow you to tailor the app to fit their needs. It’ll also do a lot to enhance the user experience.

Once you’ve got these points in mind, you’ll want to validate your idea. You can do this through surveys or focus groups. While you could get valuable feedback just through questions and answers, an even more effective method is using a minimum viable product, or MVP.

This is a really scaled-back version of your app that just incorporates the most essential features so a user can get an idea of how the product works. Analyze the data you get from these interactions to determine if it’s worth proceeding or if any adjustments are needed.

Before you go headfirst into development, you’ll want to spend some time crafting a business plan. This crucial step forces you to think through (and put on paper) how you expect the business to develop.

The main part of your business plan is outlining your objectives and how you’ll achieve them. Think of it as your company’s roadmap to success. Along with short and long-term goals, you’ll also want to include your timeline and growth strategy. Key metrics will help you track your performance and measure how well your app development company is doing.

Other vital elements are the budget and revenue streams. Of course, you’ll also have to detail how you get money in the first place—what are your funding sources? Specify the monetization strategy, as well as the business model you’ll use, whether that’s free with ads, in-app purchases, freemium, subscription, pay-to-download, or B2B SaaS. When making this decision, think about what aligns best with your audience and resources. Additionally, your business blueprint should have a marketing plan for your product.

You’ll also need to determine your business structure. The main options are limited liability company (LLC), S corporation (S corp), sole proprietorship, or partnership. Each one has its own advantages and limitations, so you’ll want to think through the best way to set up your business.

Once you’ve made that decision, you can register your business. Typically, you’ll need to do this with federal, state, and local authorities. You’ll have to register with the IRS, too. When you do, they’ll issue you an employer identification number, or EIN. You’ll also want to open up a business bank account.

Finally, you should pay attention to any intellectual property considerations. Before you get too far along, it’s wise to ensure you’re not infringing on any existing trademarks or copyrights. It’s also a good idea to carefully read through the fine print in whatever app store you’re going to use. That way, as you develop your app, you can make certain you comply.

You’ve structured your business—now it’s time to actually build your app. Here are some essentials to keep in mind as you turn your idea into reality.

If you’re an app developer, great—you’ll be able to jump in and create exactly the product you want. If not, the good news is, in today’s tech environment, you don’t have to know programming languages or how to code to start a mobile app business. In fact, there are even artificial intelligence (AI)-generated app builders that can do that work for you. Development options vary based on cost, speed, level of expertise, and control over the development process. Below are some common methods, along with the pros and cons of each.

App design is a critical component of a successful app. UI and UX have a direct bearing on how your audience perceives your product. For example, if your user interface isn’t intuitive, they might get frustrated and give up. And if it takes forever to load, their user experience will be bad, and they’ll probably abandon it.

Add to this the fact that iOS and Android have very different interface design guidelines and app development rules, and there’s definitely a lot to consider. If you’re not a web designer, you’ll probably want to enlist the help of a UI and UX designer, even if they’re freelancers. They’ll make sure your app looks great, and using it is a pleasure.

Before you get too technical, you’ll want to sketch out your app on paper or on your computer. This simple layout of what your app does is called a wireframe. It takes you step-by-step along the customer journey, ultimately solving the problem your app development started with. Your wireframe isn’t about looks, it focuses on functionality.

From there, you can develop a prototype. This puts together the UX and UI design, along with the wireframe, to validate whether things are working the way you want them to. There’s still no code at this stage, it’s just a mockup of what your app will look like and how it’ll work. If you have no background with this type of work, there are a variety of tools on the market for creating prototypes.

A minimum viable product (MVP) is your way to get a basic version of your app out to the public for testing. By just including essential features, you’re able to create and iterate quickly based on feedback you receive from core audiences and focus groups.

While developing an app requires much less capital than something like opening a restaurant, it does necessitate some startup money. Here’s a look at how much you’ll need and where you can find some funding sources.

Development costs—creating the actual technology—will be a major line item. Even if you can code and do the work yourself, you still might have to invest in some equipment or tools. You’ll also have hosting fees. Beyond that, there are the normal business expenses all companies have to deal with, like marketing, legal, and insurance.

Your startup costs could vary widely depending on the method of development you use and how complex your product is. They could range from a few thousand dollars using DIY tools to hundreds of thousands of dollars for a very sophisticated, custom app.

Many entrepreneurs will tell you the best way to start your first business is to bootstrap it. While that can seem like a real grind, the sweat equity can pay off nicely, especially when you maintain full control of your company. No-code tools and AI programs can really help if you have limited technical training.

If that’s not an option, you could look for outside money. Many go the traditional route through a small business loan. Depending on the nature of your app, you may be eligible for grants, too. The big advantage of these is you don’t have to pay the money back, although you do need to use the funds in the way and manner specified by the giver.

A partner could provide finances, while you offer the idea. With that arrangement, you’ll probably be giving away some of your equity. Angel investors are individuals outside your business who provide seed money in exchange for a part of your company. Venture capital is similar, but it’s done by investment firms. Because of that, it usually involves greater sums of money, and more due diligence is required on your part.

Another way to raise capital that’s become more popular over the last couple of decades is crowdfunding. Using platforms like GoFundMe or Patreon, you can receive donations from strangers from all over the world who like your idea and want to be part of making it a reality.

One of the smartest investments you can make in your app is to immediately protect it with business insurance. Below are some of the types of policies you’ll want to consider:

This is the most fundamental insurance for any small business. It’ll help pay for costs that come from another party suing you. While as an app developer you may not have much need for things like slip-and-fall claims, an important part of general liability insurance for IT professionals is its advertising injuries coverage. That’ll help pay for lawsuits in case you inadvertently use copyrighted material in your advertising.

Errors and omissions (E&O) insurance is very important for technology companies. This coverage is also known as professional liability insurance. It provides coverage in many ways that could affect you as you build and maintain your app, such as the following:

Bad code could affect the performance of your app or even provide wrong information to your users. E&O would pay for damage and lawsuits resulting from any errors.

This covers IP issues more broadly than those included in general liability policies, which only apply to advertising. Under this coverage, any claims you stole someone else’s copyrighted or trademarked material and published it on your website or in your app would be handled by your insurance. This can be very important in app development, since software engineers can copyright their code.

Cyber liability insurance is especially important to IT professionals and app builders because it covers incidents such as data breaches, hacking, and ransomware attacks. More than likely, once it’s released, your app will require subscribers to provide some personal information.

If that data is compromised, then you could be held responsible for things like customer notification and credit monitoring for those affected. Your cyber insurance policy would cover that. It would also handle legal costs from any lawsuits associated with an attack.

Depending on the type of app you’re creating, you may benefit from third-party cyber insurance as well. This protects your business if a client suffers an online security failure because of you.

In many states, workers’ comp insurance is required as soon as you hire your first employee. This type of policy kicks in if an employee gets sick or injured on the job. It pays for the worker’s medical expenses and legal costs from any lawsuits that result.

Electronic data processing (EDP) insurance is also known as computer or data processing coverage. It insures your electronic data processing equipment against losses you might experience during a power surge, fire, or natural disaster. It includes things like computers, mainframes, data storage, media devices, smartphones, tablets, and any data contained therein.

Once your app is fully developed, it’s time to release it to the world. But before you do that, you want to make sure you set it up for success.

That involves app store optimization, or ASO. Much like search engine optimization, or SEO, is designed to get your website ranked better on Google results, ASO is meant to improve your visibility on Google Play and the Apple App Store. There are a lot of strategies you can implement to increase your listing placement. If you don’t have the know-how, you can find step-by-step guides online.

This is also the time to put your app marketing strategy to work. If you’re savvy at promoting products, you can attempt to do this yourself, or you might want to hire a digital marketing agency to help you out. They can partner you with influencers, handle your social media, and create custom content to get the word out about your release and generate buzz.

The most important thing you can do right after your app launch is to listen. Keep a close eye on all reviews in the app stores and online. Pay attention to any user feedback you receive—both good and bad. How is your pricing? Is it too high? Should it be lowered a bit? Is your Android app getting five stars, but your iPhone version is getting mostly one star?

Use those critiques and recommendations to iterate on your app. The best app builders keep pushing out new versions and updates because they see a way to improve their product. Make sure you do the same. This could be by adding new features, expanding to other platforms, or even just simplifying it. Of course, you’ll also need to keep up with the latest operating systems (OSs) to ensure compatibility.

As your app’s popularity and its user base grow, keep an eye on your team. It may mean it should grow, too. And don’t just limit expansion to software development. Make sure you have enough manpower in departments like customer support and marketing to continue to scale your business.

To make that work, though, you’ll also probably have to seek out additional money. Don’t feel like you need to use the same type of financing you used at first. For instance, if you got a loan for your startup, it could be that your app has gained enough traction you can now do crowdfunding. You may also be able to interest a partner who can add valuable skills to the team in addition to cash.

As with most everything in life these days, there’s an app for that. But there’s insurance for it, too—and it’s easy to get with Insureon. Start by filling out a quote online. Our expert agents are available to help with any questions you have. We’ll then send you options from some of the top insurance providers in the United States so you can compare.

You’ll find the rates are cheap, but the plans are comprehensive. Once you choose a policy and sign the forms, we can get it active in about 24 hours. You’ll also have access to our customer portal, where you can find your plan documents and download a certificate of insurance (COI).