Category Archives: App Business

How much money should you make?

Do you have a Fear of Money? Conquer your Fear Episode 1:

Recently this has been a hot topic of conversation around our house. My wife and I have been discussing that there is a high degree of fear in many small businesses when it comes to how much to charge for the services that they provide.

OneHundredTrillionDollars

I have heard a lot of noise, yes noise, from people about how they can’t charge higher prices for their service because others charge less. While I am a firm believer in the power of the free market and allowing competition to foster a culture of efficiency, if you charge less than what your product is worth then you are going to go out of business. I do understand that there are times when you are going to charge less, for example when you are trying to rapidly grow your market share by undercutting the competition. Here’s the point: that is not a sustainable long-term strategy for a profitable business, in particular when your service is of the low-volume, high specialisation kind.

So here is one of the easiest and most telling measures used in businesses (regardless of the size) to determine how efficient they are: The Cost-to-Income ratio (did you feel excitement as you read that?)

This is very easy to work out and it tells you a whole lot about your business, some of which is going to scare you. To work out the ratio, all you have to do is take all of your costs and divide that number by all of your income. As a practical example, a business with annual costs of R4 000 000 and an income totalling R4 900 000 (looks good to begin with) will have a ratio of 0,82 or 82%. I can hear the small business owner in the back of my head saying ‘R900 000 is quite nice’ but is it?

Consider two things:

1. Most major South African financial institutions have a heart attack in the board room if their cost-to-income ratio exceeds 0.60 or 60%

2. Most small businesses are not making a surplus of R900 000, many are making small or nothing (sobering thought)

So what does this mean practically? If you have high costs and low volumes of transactions or sales, you had better have a very good cost-to-income ratio or your business is going to close soon. If your business does 40 transactions a year with costs of R20 000 per transaction, you should be making 35-40% on top of that to maintain a healthy ratio that in reality means you can pay yourself a salary.

I hope that I have made you think about your business and what you should be making (if you have not yet done so, please take out your calculator and figure out your ratio). Use the big-business ratio as your guide and remember that the costs include salaries (yours too). Use this as a guide to understand how you should be pricing your services and if you are not, ask yourself why.

Next Instalment of do you have a Fear of money? Conquer your Fear Episode 2:  The Price is the Price

6 Rules for Building an App

At the outset I have to say that I LOVE talking to people about apps that they want to build, I could do it all day long. There is however a lack of understanding about how to go about taking an idea and making it real so here are a few of my most important pointers to get you started.

Rule 1: Begin with a Pencil

Truly one of the best ways to begin is with a pencil and a piece of paper. Write down some ideas about what the app should do, who would use it and most importantly WHY they would use it. If you have a picture in your head about how you think the app could look, sketch it (If not don’t worry too much, this can be developed later). This will start to form the framework that you can discuss with us to develop.

Pencil

Rule 2: Understand the Business Case

By yourself or with our help I insist that you know how you will make money out of the application. I am a big believer in making money from the work I do and I assume that you are the same. The business case will help to guide not only marketing plans etc, but will very often influence the design and the features of the application. If you intend raising funding from another source then this step is a must. They will not fund you without it.

Rule 3: Know your Market

Wow, have I learnt some big lessons on this one. If you have a vague idea who you are going to market to but have not yet developed the market or even put together a plan on how to connect with them, you are going to have an issue. The best app in the world will die a slow death on the shelf if no-one knows it is there so please, please, please put at least as much effort into marketing as you will into the rest of the app. Cost wise, whatever you spend on building the app you should be spending 50% – 100% of that on marketing and connecting with your future user base. Additionally, don’t wait until your app is complete before you engage. The earlier you connect, the more interest you will be able to generate which ultimately increases your user base.

Rule 4: Build what is Most Important

Build the core of the application and make sure it does that very well. It is easy to get carried away with all the extra features but if the reason why people download the app is not slick, you won’t have repeat users. Getting the first version right will keep your costs and effort focussed which, if you have your business case right, will start to earn you money to help pay for the add-on features that you want to bring in.

Rule 5: Everyone must Win!

This is critical so I am going to say it again: everyone must win. When you design the app you need to make absolutely certain that you understand how the end user, your investors, your advertisers, other involved parties and yourself are going to benefit. Not only will this add value to your sales pitch and your marketing plan but it may very well influence the design of the application to make sure that everyone wins in the end.

Rule 6: There are lots of other rules

Building an application is about building a service, a game, a user experience and a sustainable business. There are a lot of other things you will have to do to make it successful but this article is about how to start. If you get these right you are 98% further than everyone else who has an idea but does not know where to begin.

So get in touch with us and let us help you to make your app a success.

Everyone needs an app

The world has changed thanks to Apple, Google and a few others and the realm of awesome technology has been made available to businesses in a way that it never was before.

I am of course speaking of the power of the simple app.

In the past, business systems have been expensive to create and maintain and even basic off-the-shelf packages have been very costly. Building bespoke applications that suite a specific businessneed was seldom undertaken by anyone apart from large companies due to the cost.

photodune-5420399-many-words-lApps have changed all of that with their relatively low cost of development, maintenance and far greater flexibility. There have been many examples and there will be many more in the future, of how small companies have used applications to expand and grow and become significant companies in their own right. It is a trend that is increasingly driving the world forward.

TwentySix TwentyEight was founded on the principle that every small to large business should be able to access technology and enable their businesses through the development of systems that suit their specific needs. More than that we believe strongly that spending money on building systems must bring a return on the investment.

So that is where we come in. We love working with our clients to figure out how spending money on application development can make them money and become a proper source of revenue in the future. Knowing that there is a way to make almost every idea a good business proposition, how can you not have an app?