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As a software development partner for a few big-deal SaaS companies, we get quite a bit of inquiries in our inbox asking how much it costs to build a SaaS product. You know the story: someone has a brilliant idea about how to make an app like Uber/DropBox/Shopify—but better—and wants to know how much and how quick.
So, we decided to write an article that explains the basics and intricacies of this popular subject.
Are you considering building a Software as a Service product, too? Looking to find out what goes into a SaaS budget?
Let’s deep dive into the complex one-size-doesn’t-fit-all matter.
Cost of SaaS Software Development: 5 Load-Bearing Pillars
These factors will define the final cost of your software as a service project.
1. Founder’s Experience in Software Development
If a founder is a serial SaaSpreneur, the practical experience gained in their previous projects, failed or successful, is invaluable and will help cut costs and find efficiencies every step of the way. Such a founder will watch their burn rate from day one, ensure the marketing hires early to drive traction on launch, offer lucrative pricing for robust MAU, and will probably spend time on the customer service team to ensure low attrition.
The less mature founders need to narrow the gap of subject-matter ignorance by reading up on the topic, watching SaaS gurus’ YouTube videos, and visiting TedTalks and F%ckUpNights. Of course, reading this article is a great start.
One-man show SaaS: Rick Blith shares his journey from a developer to a micro SaaS founder.
2. Market Saturation: Blue Ocean Vs Cut-Throat Competition
If you are entering a saturated market, you will have to win on one of three fronts: pricing, customer care, or offering a unique feature that addresses an existing glaring pain point that other tools neglect. Each costs a lot of money. Usually, this scenario means that you will have to spend as much as your competitors—and then spend even more to enhance one of the app’s chosen facets.
When offering a unique solution, you can get away with a basic MVP to attract investors’ attention as well as a flood of early adopters to try your product. A blue ocean product means you can have high investor interest and a user unspoiled by competition, so you can save on literally every budget cost center while having loads of funding to spend.
3. Feature-ation*: Single-Feature Product Vs Multiple Features
The scope of work matters a lot. The more work that needs to be done, the more expensive it’s going to get. And the infrastructure servicing a bigger team also drains a lot of the budget: you have to provision for the office, hardware, tooling, systems, recruitment costs, taxes, welfare benefits, etc.
As the SaaS product development process is inherently continuous with ongoing updates and releases, your SaaS MVP product development costs should be your major concern at the beginning.
If you can single out one feature that will make your ICP buy your product, limit yourself to accruing for the development of the single-feature tool first and see if it produces positive results.
A serial entrepreneur may have the business acumen to mentally embrace and successfully develop a software product with multiple functionalities, hiring different teams working on various microservices in a loosely coupled environment. At the same time, such a savvy business person would also approach the matter with clear expectation of costs and exit price tag.
*feature-ation [AKA featuration] – an extent of saturation of a software product with features
Proudly coined by Dev.Pro
4. In-House Development Vs Dedicated Team of Developers
Now, this aspect works for both smaller and bigger SaaS startups.
In the era of remote jobs and with most young professionals in software engineering jobs being also English speakers, failing to take advantage of the efficiencies offered by outsourcing your SaaS development is somewhat counterintuitive.
A few of the key benefits of getting a software development partner to help build a product are:
- Saving on recruitment costs [average cost-per-hire is $4,700 in the US]
- Office rental saving
- Welfare benefits savings
- Saving on potential litigation issues
- Tax savings
- Lower rates compared to the US
- Access to a bigger talent pool with rare skill set
The models you can work with requires one of these two major engagement models:
- Per project billing, in which case you need a very good idea of what needs to be built, usually done for smaller projects with finite, limited well-defined features. This is when you carry little responsibility for the process, shifting all the accountability for the tool’s functionality to a vendor.
- Hourly pricing for software engineering talent, where you have more control over the project’s flow and use a vendor to hire your technical talent, as an extension team to your in-house developers.
While rate is an important selection criterion for your outsourcing partner, relevant cases and company reputation are of comparable importance. Dev.Pro proudly originates from Ukraine. Even though we are now a global company, many of our software engineers are still based in budget-forgiving Eastern Europe, making our pricing attractive for our partners.
5. Deadlines and Time Frames
We have all seen the priority triangle of quality, speed, and price when a client has to put up with the idea that they cannot have all three in one project. So, this means that the more pressure you experience on the launch deadline, the more expensive the product is going to end up costing.
Go-to-market marketing strategy for a SaaS project is best with at least six months in pre-launch activities, which should be enough time to develop a single-feature MVP with a development team of 4–5 people. If you need a more robust solution with higher featuration, you are likely to need to hire more to withstand the pressure of the closing deadline, which impacts your burn rate.
Technical Factors that Influence SaaS Development Costs
If we go into a more granular split of the budget for building a SaaS tool, these factors also play a role. The rule of a sum will be to try and select easily scalable solutions and not get into vendor lock-in situations early in the process. Try to find an open-source or cheaper solution for minor technical tasks, with the possibility of easy migration to a better pricing plan down the road if all goes smoothly.
- Scope of works
- IAM and user management
- Application architecture
- Cloud service providers
- Development platform and frameworks
- API integration
- Billing and pricing module
- AppSec
- Extent of communication capability
- Analytical tools and dashboards
This limited list is for items whose cost of development is rather significant and should be forecasted with detail.
That said, UX / UI app design has a critical role in creating a positive first impression on both investors and users alike and in having a high-ROI impact on the success of a SaaS startup. While seemingly minor, we advise that you try not to save budgets on design.
Estimating the Cost of SaaS Software Development
Depending on the complexity of the solution, a SaaS MVP cost may range from $10–15K to $150–200K.
| Average SaaS MVP Development Cost [Complexity-Based] | |
| Complexity | USD, Thousands |
| Micro SaaS | 10–20 |
| Basic SaaS | 30–40 |
| Run-of-the-mill MVP | 50–70 |
| Advanced SaaS MVP | 150–200 |
However, let’s break down the process into smaller parts for a better understanding of what to expect during each stage of the entire SDLC.
Idea Validation
With a startup failure rate of 90%, and 10% failing in the first year, a properly done idea validation may save you a lot of hassle and wasted funds. You can DIY at this stage, but the general rule of thumb is to hire an external agency to get a less biased assessment of the business idea.
We estimate that a basic project discovery phase may cost you anything from a $1000 fee paid to a freelance BA student to $7–10K for a proper due diligence and idea validation package with multiple market and user persona deliverables.
If you are bootstrapping your micro SaaS startup and your budget is symbolic, make sure to discuss this idea with any person in your network familiar with the subject for a second unbiased opinion. “Asking for a friend” approach works.
Planning
This stage is the fundamental phase of the SDLC, so it does not include the “asking for a friend” budget-friendly version. But planning should include a development team, with a solution architect, a designer, a developer, and a product/project manager as the best-case scenario team composition. QA and DevOps input can also be handy for a more accurate estimate.
The better planned your SaaS is, the smoother the project is going to go and the greater the likelihood of success.
It’s safe to plan anything from 20 to 100+ hours for planning, depending on the complexity of your tool.
UX Design Pricing
Your low-fidelity wireframes as well as high-fidelity prototypes need a lot of design expertise to be produced. The aesthetics as well as intuitiveness of the navigation is critical for good traction and funding.
On the other hand, a clickable high-fidelity prototype will make a developer’s job easier, quicker, and more efficient.
How much should you budget for a UX/UI of a basic SaaS solution?
A professional designer can produce the required output in the range of 30–80 hours for basic functionality.
As hourly rates for all key product team members differ widely based on their experience, residence, and contracting, we only provide rough time estimates for your basic understanding.
Cost of Development Phase for a SaaS Product
Below are just the basic variables that will reflect on your SaaS development cost structure, on top of major factors like complexity:
- Backend + frontend / vs full stack engineer
- Mobile vs desktop vs both
- Architecture
- Programming languages, frameworks, and app development platforms chosen
- Experience and skill set of the software engineering talent
- Level of engagement and motivation [contract terms]
- Maturity of planning and design stage
The most basic set of features that go into a SaaS solution include:
- Onboarding module
- User management
- Permission management
- Pricing and payment module
- Tool-specific module [marketing, inventory, delivery, etc.]
The build stage will take you anything from 50 hours for a mono-feature micro SaaS to hundreds and thousands of hours for advanced SaaS tools.
Quality Assurance and Testing
According to last-minute DevOps best practices, testing should be implemented into the SDLC early and should be continuous. This will help ensure smooth functioning of the application for early adopters.
Neglecting the security threats and risks of downtime early in the process will also be a big red flag for potential investors.
Accruing about 10–15% of the entire software product development budget for testing is a healthy practice.
Updates, Maintenance, and Technical Support
Continuous product evolution and updates is normal for most commercially successful SaaS systems.
Just the updates and maintenance of the existing software will cost at least 10% of the development budget, as most of the mobile gadgets get frequent releases, the OS’s get updates, and the compatibility across browsers and devices alone are already a significant liability. And add to the list the healthy percentage of bug fixes that emerge as the product gets scaled vertically or horizontally.
Integrations and API management is another facet of SaaS development that needs to be considered when budgeting.
Other: Marketing, Legal and Licensing, Customer Support
Marketing, licenses, and customer support are all mandatory components of a SaaS product launch.
And you may have guessed that the budgets differ across the board, from a hundred dollars for a freelancer developing a privacy policy for you to hundreds of hours in consulting for the top legal firms that charge that same hundred dollars per hour.
In the ideal case scenario, you will start with your marketing activities on the day you kick off your ideation session. Legal compliance may wait until after the MVP is okayed and customer service should be in place by the launch day.
The Total SaaS Development Budget Estimate
All in all, a single-feature SaaS tool will cost from $30K and developing a SaaS platform will start at $70K. But these are modest estimates. You can multiply the figures by 4X or even 5X for advanced products or for the privilege of building your software with US-based talent.
Wondering if it is possible to optimize the process and reduce this price tag?
5 Battle-Tested Ways To Reduce SaaS Software Development Cost
What we know from 11 years of developing software for US clients is that these techniques will help you better control your SaaS startup budget:
- Prioritize Your Features for MVP
Keeping your featuration to an absolute minimum will allow you to focus on your USP and develop it to the form and shape that’s attractive and clear to both users and investors. Don’t get distracted with the dozens of shiny ideas circling in your head. Keep it simple and fundamental.
- Automate Tests
Testing will save you lots of time and customer satisfaction. And automating your tests will aid a smooth launch.
You need to make sure that your automated testing scripts are written in the calm period long before the chaotic launch, doing their job seamlessly with every new feature release.
How come testing and its automation will help save costs? Downtime is expensive. Poor rankings will cost you… investors in the worst-case scenario. Who wants to deal with the founder who allowed such a basic hiccup to ruin their brilliant idea?
- Embed FinOps Principles Early: Cloud Cost Optimization
Cloud services provider selection is not so hard since you will likely be choosing between AWS, Azure, or GCP.
But the technical options inside of those providers’ ecosystems are limitless. You need to identify the most befitting zones, tools, types of instances, database storage, etc., etc., etc. Moreover, you will be optimizing your cloud cost as on the way, too, depending how your scaling goes [if its vertical or horizontal, which loads go idle, how much archiving your need to do, etc].
The right sizing and right costing techniques need to be employed early in the SaaSDLC. Cloud cost optimization allows businesses to scale in a planned manner without huge spikes in cloud cost bills—planning for your billed consumption to closely follow the actual compute capacity used.
- Outsource SaaS Product Development
Hiring an external software development vendor to build your SaaS is not only commercially viable but also can be a trampoline to success for your product’s technical features.
If your outsourcing company of choice has had similar projects in their portfolio, the team has invaluable experience. Getting access to that market-tested expertise can be the make-it-or-break-it factor for ultimate success of a software-as-a-service startup.
- Document to a Dot
Starting a SaaS company is always a chaotic process, but a product owner can bring more order to the journey with a strict documentation requirement.
With multiple teams and vendors, a mixed pot of talents and backgrounds trying to find their common language and understanding of the product, having documents to refer to is priceless. This discipline brings about accountability, observability, ownership, and ultimately planned progress.
Keeping Cost of SaaS Software Development at Bay
SaaS budget planning is not rocket science, but investors do pay attention to specific metrics to identify a budding star. Yet a negative EBIDT on its own is not one of the signs of a failure, not at all.
SaaS product development costs are a significant share of the overall business cost structure on one hand—and the quality of the development a critical success factor for the entire endeavor on the other.
Being realistic about your business idea helps you to approach the mission with some caution and a calculative mindset.
It’s safe to assume that a local US-based software development company will be the priciest when outsourcing agencies from Eastern Europe and Latin America can offer the same quality of engineering talent at rates 20–40% cheaper.
Hiring a freelance developer is also a budget-friendly alternative. But a rigorous selection process with portfolio checks should take place to avoid major disappointments.
Dev.Pro offers the best of both worlds: the assurance of the high quality of delivery from a US-based company as well as the reasonable rates for highly skilled talent due to a global remote presence that enables hiring outside of the US.
Want to get a taste of what cooperation with Dev.Pro is like? These are next steps:
- Check the use case of one of our SaaS clients SalesLoft [2 mins].
- Contact our team with a brief project outline [2 mins].
- Jump on a 15-minute intro call with our chief revenue officer [15 mins].
- Send us your NDA for signing followed by an RFP with as much or as little detail as available [15-XYZ mins].
- Get a detailed estimate for your project with team structure, rates, and timeframes [up to 2 business days wait for a detailed proposal].
We do recommend reaching out to a few vendors with solid reputations and extensive portfolios to line up a few companies to choose from.
FAQ
These cost centers will need to be included in the SaaS budget: cost of software development [includes validation, planning, design, development, testing, and maintenance], marketing expenses, legal and licensing, recruitment expenses, and administrative costs.
Successful SaaS companies can be profitable when they manage to get to sustainable MRR growth combined with low churn. Major cost is in product development and marketing, while subscription-based cash flow and solid addressable markets allow for recurring revenues. It’s not uncommon for SaaS to turn a profit in a few years.
Prioritizing only load-bearing features;
Choosing the right software development vendor with proven expertise and reasonable rates;
Embedding DevSecOps and FinOps principles early as preparation for smooth scaling.