Considerations when budgeting for your MVP

A MVP enables businesses to test and validate the core concepts while minimising the investment of time and resources.

Budget plays a crucial role in determining what you can offer early adopters.

But how do you set an appropriate budget for your MVP? What are the challenges?

To help, we’ve put together some key factors you should consider when budgeting for your minimum viable product. We’ll also look at some examples of low cost and high cost MVPs.

MVP budget considerations

1. Scope and complexity

2. Feature prioritisation

3. Available resources

4. Development approach

5. Timeframe

6. Tech stack and infrastructure

7. Testing and validation

8. Market research and marketing

1. Scope and complexity

Clearly defining your MVP is essential to accurately estimating associated costs.

As the product owner you’ll have a sound understanding of the specification, scope and complexity of your MVP, and how this will impact your budget.

If your MVP isn’t very complex then it will generally demand fewer resources compared to a more complex one that includes intricate functionalities.

2.    Feature prioritisation

It’s really important that you identify and prioritise the essential features of your MVP. It must be minimum and viable.

This involves understanding the core value proposition and determining which features are necessary to demonstrate it.

By prioritising features, your budget can be allocated to the elements that are most critical for your MVP. This will allow for a leaner development process.

3.    Available resources

What resources do you have at your disposal?  Do you have what you need to deliver your MVP? Are you a start-up with limited resources?

Whatever your position, having the available resources within your budget to take your MVP to market is essential. The more resources, the higher your budget.

4.    Development approach

The size of your project team impacts the cost of development, thus affecting your MVP budget. A larger team will be able to develop your digital product faster, but with that comes higher costs

The development approach you opt for is therefore crucial. You can go for in-house development, outsourcing to a third-party development team, or a combination of both. Each approach has its advantages and associated costs.

For example, in-house development may require up-skilling or hiring skilled personnel. It may also involve investing in infrastructure with associated ongoing maintenance costs. Whereas outsourcing your development involves budgeting for external services.

Whichever development approach is suitable, you’ll need to ensure that effective communication, coordination and collaboration between all parties is maintained.

5.    Timeframe

How long do you have before you launch your MVP? It may be time sensitive. You may want to launch at an event or during a particular time of year.

Balancing your timeline with available resources to meet your deadline is vital for budget planning.

Your allotted timeframe for developing your MVP impacts your budget in various ways. A shorter timeframe may need more resources to speed up the development process, potentially increasing costs.

Conversely, a longer timeframe could mean more resources and potentially higher overall expenses.

6.    Tech stack and infrastructure

Your choice of tech stack and infrastructure plays a significant role in your MVP budget.

There are a lot of technologies and platforms out there. Making the right choice that delivers all elements of your MVP is crucial.

Some tech or platforms may require licensing fees, while others may need specific hardware or infrastructure investments.

Consider scalability, security, and maintenance requirements. These are crucial technology foundations that influence the fundamentals of your digital product MVP.

7.    Testing and validation

An essential aspect of an MVP is testing and validation. This is done to gather user feedback and to iterate your product feature development.

Budgeting for user research, feedback collection methods, data analysis tools, and any required changes based on user feedback is vital to your MVP.

Allocating resources for this process ensures that your MVP can be refined and improved. This will align it more closely with customer needs and expectations.

8.    Market research and marketing

Effective market research and marketing campaigns can help generate early traction, awareness, and ultimately, demand for your MVP.

Budgeting for market research will help identify your target markets, assess the competition, and refine your product's positioning. All of which are essential for a successful MVP launch.

Plus, marketing activities like branding, advertising, and user acquisition strategies will only help in strengthening your proposition.

Examples of real-world low-cost MVPs

Low-cost MVPs are perfect for startups and small businesses with limited budgets. These are developed quickly and cheaply. They help businesses test their product idea in the market without investing too much money.

Dropbox, a cloud-based file-sharing service, developed its MVP for less than £5,000.

The company created a video demo of their product and posted it on a popular tech forum. The video quickly went viral, and Dropbox received thousands of sign-ups before the product was even developed.

Another example is Groupon, a popular deals website. The company started with a simple WordPress blog that offered daily deals to subscribers. The site was developed for less than £15,000 and generated £3 million in revenue in its first year.

Some considerations to bring prices down include:

• Open source software: There are loads of open source software projects that can be used to develop your MVP. Going open source may save you money on development costs.

• Cloud-based platform: Cloud-based platforms can also be used to develop your MVP. They can save you money on infrastructure costs.

• Hiring a remote team: Working remotely has now become the norm. There are many remote teams you can look into hiring to help develop your MVP.

Examples of real-world high-cost MVPs

High-cost MVPs are typically developed by larger companies with bigger budgets. These MVPs include advanced features and require more time and money to develop.

For example, Tesla's Model S was developed as an MVP for the company's electric car line-up. The vehicle included advanced features such as a touchscreen display and self-driving capabilities.

As you’d expect, the Model S MVP wasn’t cheap. It cost Tesla $500 million to develop it. Since then the company has generated billions in revenue. It has also kick started the EV revolution making Tesla one of the most popular EV manufacturers in the world.

Another example of a high cost MVP is Apple's iPhone. This was developed with a budget of over £100 million.

The phone included advanced features like a touchscreen interface and mobile web browsing capabilities. Today the iPhone is one of the most popular smartphones in the world generating billions of pounds for Apple.

Working with Codehouse

The cost of MVP development can vary. Ultimately, your idea can only become a reality if you have the budget to build a quality minimum viable product.

At Codehouse our Product Development team is available to discuss your digital product and get your business idea off the ground in the shape of a lean startup. Get in touch to find out more.