How much should custom development cost?

I remember when my parents took me to get my first car. Like many teenage boys my list of requirements for a car looked something like this:

Things I want in a car

Unfortunately the budget at hand meant that I could have few of those things.

I also had another requirement that was a little bit unique. I played drums in a band and I needed something that would allow me to move my drum set.

My parents recognized that this was the single most important requirement for this new vehicle. In order to make sure that I stayed on task they had me load up my drums set and we took it to the (used) car dealership. Every time that a vehicle caught my eye the very first thing that we did was move the drum set from my parents car into the new candidate to make sure that everything would fit. Much to my dismay, this process immediately ruled out a wide range of fast/sporty/cool cars, but it ensured that I never had any chance to get the least bit emotionally attached to any option that wouldn't fulfill the primary goal of the purchase.

Knowing what really matters

My original list of requirements were almost all based on what I thought would make for a "cool" car. I wasn't even that into cars, but still wanted to have a cool one. This was strictly about status. My parents knew that I needed to focus on utility instead. They also knew that budget was important.

Had I gone to the dealership on my own I'd have described wanting a Porsche and then been shown a Pinto based on my budget. Car dealers know that it's very common for a person to have desires and budgets that are at odds with each other (I mean, who doesn't?), so the very first question that they ask is: "What is your budget?"

The available budget is the single most important factor in the first step of narrowing down which cars are realistically in play. It's a waste of time for everyone involved for a dealer to show and test drive a car that is significantly lower or higher than the target budget range. (You might think that ones significantly lower would be a safe bet, but that's most often not the case. That's due to people seeking both utility and status in a vehicle.)

Now to bring us to the original question:

How much should custom development cost?

To continue with the car scenario, we might ask :"How much should a vehicle cost?"

The question itself doesn't contain enough information to be answerable. We need to know much more about the intended use of the vehicle to even begin to answer that question.

Are we talking about a car for a family or some sort of business use?

Any family buying a car will almost certainly have a budget in mind when they go to buy a new car.

If we assume that it's for a business then the real question is "How will this vehicle help the company make money?" Only after answering that question will we be able to start to decide on a reasonable budget for this vehicle.

For instance, if the business is a bicycle messenger service, then the budget for a new vehicle is drastically lower than if it's a moving van company. Likewise the moving van is drastically less expensive than a big rig for hauling cargo long distance. Or maybe the business plans to race this new vehicle in a major stock car tournament.

In each of these cases the use to the business and the expected return on investment dictates a budget range that is reasonable to spend on a new vehicle. There may be wide variation within that range, but the range itself is set by the expected return to the business by incurring that expense.

The variations in price within the available options will represent a variety of factors including:

Custom development is very much like this.

I sometimes hear from business owners, or people with an idea for a business who ask me to give them a quote on some custom development project. They want to spend a few minutes describing their idea to me and then have me tell them what it should cost.

Often they describe a Porsche of a project, but then have sticker shock when it comes to building their custom Porsche. Many times this is due to focusing on features and status signals more than utility.

I recommend that business owners do two things to make things go smoother.

1. Understand and group your requirements.

As with most things, a project of this sort ends up being a series of trade offs and compromises. More than just having a set of requirements you also need to understand which business objective each requirement is trying to accomplish so that you can make the most effective trade offs. I'd recommend grouping your requirements (and the business justifications for them) into 3 main groups.

Thinking of your objectives and requirements in this way allows you to more easily resolve any conflicts that may lurk in competing objectives and requirements.

It also means that you can be shooting for varying levels of success that might be characterized as "Good enough", "Pretty damn good" and "OMG Home Run!!!".

2. Develop a budget. At least just a ballpark.

I know that it's tempting to just throw requirements out there and get proposals, but the truth of the matter is that if you looked hard enough for almost any project you'd be able to find somebody who'd propose it at $500 (you don't want that person), and you'd be able to find somebody to quote it for $500k (you probably don't want that person either). Having a ballpark budget in mind helps to avoid wasting anyone's time (most importantly, yours!).

Ideally you'd want your budget to structured in 3 parts, to match the 3 groups of requirements.

Obviously your budget should be related to the business objectives you have for this project. For instance if your plan is for the project to generate $1 million in sales over the first year you'd obviously want to have a much different budget than if you only expect it to do $100k.

What's your project?

Do you have a business or project idea that you'd like to get off the ground? Do you know whether you need a Porsche or a cargo van?

I can help you assess your true needs and lay the ground work to make your dream a reality.

PS. I ended up with a 1984 Dodge Duster hatchback. :)

1984 Dodge Duster