What does it actually cost?

When we built DropSend, it was our first enterprise level web app and I had no way to predict how much it would cost to build. Frustratingly, no one would share their figures with me either. So we had to learn the hard way. Yuck.

In order to help you avoid this pain, I’m going to walk you through, step-by-step, the costs involved in building an enterprise web app, on a budget. I’m going to be 100% honest about what we spent so you’ll have a good idea of what kind of budget you’ll need to set.

What’s the big deal?

Why is it only recently that small companies (Carson Systems is only two full time employees and a set of 3 part-time freelancers) are able to build large scale web apps? Here’s why:

Broadband is widespread so your potential audience is larger Average people are comfortable with web apps (Gmail, Online banking, etc) Hardware is dirt cheap Open source platforms are virtually free

Definition of the terms

As I’m talking about "Building enterprise web apps on a budget", I need to define two things:

"Enterprise" - This is debatable, but I’d define it as a mass market product for 1,000+ users "On a budget" - Under £30,000

I’ve heard some comments about my £30K figure not being "on a budget". Please keep in mind that this article is aimed at small companies, not freelancers. Most small companies will be able to allocate £30K, over a period of time. It may be possible to bring an enterprise web app to market for less than this, but it will probably be lacking in quality.

DropSend - Enterprise and on a budget

I’d better know what I’m talking about, if I’m offering advice, right?! Well, all of this advice is based on us building DropSend, a truly enterprise level web app that was built on a budget: Here’s a bit about it:

Used for sending and storing large files that you can’t email

13,083 worldwide users (March 6, 2006) and growing

6 servers at 365 Main

Desktop apps which use our API

Built using PHP, AJAX, MySQL and Linux

The most important thing

Before you get started, the most important thing is to make sure your idea is financially viable. How can you do this?

Use common sense. Would you actually get out your credit card and pay for it? Be cautious about your projections and then cut by a further 45%. Are you still in business? Don’t rely on being acquired. It’s unwise to base your financial future on something you have zero control over. (In other words, it’s stupid.)

What we actually spent

Branding and UI design: £5,000 - We worked with Ryan Shelton on this. He’s amazing.



Development: £8,500 - We worked with Plum Digital Media, who are crazy talented developers.



Mac and PC desktop apps: £2,750



XHTML and CSS: £1,600



Misc hardware: £500



Hosting and maintenance: £900 per month - We work with BitPusher for all of our hardware infrastructure and maintenance. I can’t recommend them enough. They helped us define the hardware architecture, procure the boxes, install, and set everything up. Now that we’re up and running, they do all our hardware maintenance.



Legal fees: £2,630



Accounting: £500



Linux specialist to setup the dev box: £500



Misc: £1,950



Trademark: £250



Merchant Account: £200



Payment Processor: £500 - We use Secure Trading - they’re fab!



Total: £25,780 (Approx $45,000 USD)

Yikes. £25,780?

If you’re a small company and £26K sounds like a lot of money, don’t despair. You will be able to spread these costs out over many months. If you don’t have that kind of cash right now, don’t feel bad. It took us almost a year to get the financial stability and save the cash for DropSend.

How to build your team on a budget

One of the most expensive parts to building a web app is the team. Here are some of our tips for keeping your costs down:

Don’t go for rock stars - go for quiet talent. They’re cheaper, more fun to work with, and they’ll actually listen to you. If someone is too expensive, but you really want to work with them, offer them 2 - 5% of the product equity in exchange for a cheaper price. Ask your friends to recommend people they trust. If you pick a bad apple, it will cost you time and money. Outsource. We tried India initially, and it proved to be a disaster. I think this was because I had never managed a project long-distance before. If you already feel comfortable with this, it can save you tons of money.

Scalability on a budget

One of the trickiest parts of building an enterprise web app on a budget, is scaling. How can you start with a little bit of hardware/capacity/CPU/backup and scale infinitely?

Here’s what I’d recommend: Don’t start worrying about that until you have to. If you throw a bunch of money at the problem and your app fails, you might as well have burned the cash at the race track.

For DropSend, we almost bought a bunch of IBM Blades and hooked them up to SAN storage. I’m SO glad we didn’t go this route.

So here are three basic tips regarding scalability on a budget:

Buy just enough hardware to launch Build your app so it easily scales. DropSend is a great example of this. When we need more diskspace, we just add a line to the config file, plug in another box, re-deploy, and BAM, we’ve got more diskspace. Plan for scaling, but don’t obsess

Next time …

In Part 2 of this article, I’ll be covering:

Tips for staying on budget The importance of pessimism Budgets for legal costs How to save money with free tools How to do marketing for free Why venture capital doesn’t usually make sense for web apps

Thanks for reading. I hope we’ve saved you some of the pain and suffering we went through when we built DropSend. On a side note, I’ve just finished 37signals new book Getting Real, and it’s got some more excellent ideas on how to build on a budget.

As always, feel free to agree or disagree below. See you next time!