Given how strongly smartphones and other mobile devices are now entrenched into our lives, even more so during this time of the pandemic, launching a mobile app for your business has become a necessity. There are hundreds of applications published on the App Store and Google Play daily, challenging every new app to be even more valuable and of even higher quality than any of the existing ones. Additionally, creating such a competitive product is only possible when starting with a well-crafted mobile app business plan.
From different services to payment systems and mobile games, there is a huge variety of apps available nowadays. An average smartphone user has around 40 mobile apps installed, and the industry as a whole is predicted to generate over USD 935 billion in revenue by 2023. However, even though the industry is booming, it doesn’t mean that every released mobile application is successful too. On the contrary, 77% of users abandon mobile apps within the first three days of installation, and within 90 days this figure rises to 95%. This is why, of the millions of applications available on the App Store and Google Play, only a few thousand can be considered successful.
Creating a mobile application is a complex process requiring a lot of time, energy, and certain investments, and those who decide to dive into practice straight away without a proper mobile app business plan in hand, end up drowning in the sea of other quickly abandoned applications (however great their idea might have been). Furthermore, trying to generate demand by creating a genuinely high-quality product is an even tougher task.
A mobile app business plan is the very first step in development; it empowers the idea and makes it viable and ready for implementation. It also builds a proper understanding of the financial side of the process — the development, marketing, and after-sales support, helping to evaluate whether “the game is worth the candle”. However, before we start walking through the components of the business plan, let’s first have a look at its main benefits.
Why Do You Need a Mobile App Business Plan?
Below you see the three main benefits of any business plan that will influence how successful your project will be.
- Reducing the Risks. In business, spontaneous actions are risky and risks often translate into additional costs. Whereas a business plan outlines the whole journey of new app development, providing great insights into some likely risks, as well as securing investments and loans.
- Defined Strategy and Clear Perspective. When knee-deep into the process and continuously encountering obstacles, it is easy to lose the vision of the big picture and the original goals. This is the importance of the said business plan: it educates you about the new market and prepares you for the upcoming processes and potential obstacles, while also serves as a reminder of the goals, priorities, and critical aspects that serve as a foundation of your business.
- Attracted Investors. No one wants to invest money into something they don’t believe in or know nothing about. A business plan is exactly the way to encourage investors into providing any necessary capital quickly and effectively by clearly presenting the vision in combination with practical data, whilst exhibiting the full potential of the mobile app idea.
Business Plan Components
A good mobile app business plan should prove the viability of the product, its value to the customer, and its measurable benefits to the founders and investors, and this is all done by covering the following five main elements:
1. Executive Summary
This section serves as an introduction to the business plan, briefly describing the idea, the goals, and how the success will be achieved. This part is especially important in the case of looking for investors as it gives the first impression. An executive summary should be easily comprehensible and concise, without going into the details on how the product functions. It is essential to create a Unique Value Proposition (UVP) to make your business stand out. The following four questions should be answered in this part:
What is the problem that your mobile app is going to solve? Even with the millions of mobile apps available for the users, they still always face various issues, complications, and interruptions, either due to the right solution being non-existent or due to not high enough quality of this solution. Therefore, as part of the business analysis, you need to identify what is the problem your target audience is facing, whether there are any existing solutions, and, if yes, why they are not enough to meet customer’s needs.
How will it solve this problem? Now that the problem is identified, it is time to present how your mobile app will solve it, prove that it has the capability to do so. However, do not mention any details on its future functionalities, only intrigue the potential investors.
What difference will your mobile app make on the market? There is a high chance that similar solutions already exist, however, this is when the UVP comes into play, describing how the new mobile app will be different from and better than any existing solution. This has to be based on facts and statistics, making the message as profound as possible.
What goals are you pursuing? At the end of the day, the return on investment and profitability of the future mobile app is what matters the most to the business. Therefore, including metrics and collected data indicate the vision for the product’s future — the number of users and downloads it is expected to attain, when and what kind of profit it will bring.
2. Business Description
Now it is the time to introduce your company — the products and services you provide, the corporate value, who are the founders and members of the team, who are your customers. The best way to introduce your business is from the perspective of the mobile app concept and the goals set in the previous section, whilst covering the two following points:
Overview of the Organization. Mission and vision, legal and employee structure, location, and history of your company presented in a catchy, however, transparent way. Let them know your achievements, issues, improvements, and processes, as well as why the new mobile app is an attractive next step.
Team Introduction. Introducing the team that will be working on the future mobile app is crucial for clearly setting up the roles, as well as creating a more personalized experience for the potential investors. In fact, for many investors, the founders and management team who are passionate about the project and have a record of previous successes might be an even more important factor than the product itself. Moreover, it is also a good idea to introduce the advisory team, who will be helping investors in decision making.
3. Market Analysis
Before launching a new mobile app, it is essential to deep-dive into learning about and understanding the industry and the market you are about to enter. It is also necessary to evaluate existing businesses and products, as well as their strengths and weaknesses, and analyze how you can do better than them. These are the several aspects to look at:
The Size of the Market. Three following metrics can help with measuring how big the market is:
- Total Available Market (TAM) —the total market demand for your mobile app or, in other words, overall revenue opportunity;
- Serviceable Market Available (SAM) — the percentage of the TAM, which the future mobile app can reach;
- Serviceable Obtainable Market (SOM) — the segment of the SAM that the new mobile app is expected to reach in the first six to twelve months.
Market Alterations. How has the market changed in the past five years and what is the amount of revenue it is predicted to achieve? How many businesses have succeeded and how many failed? This analysis serves as a good prediction of your future app’s potential.
Target Customer Personas. This part is supposed to demonstrate how well you know and understand your target customer, as the success of the mobile application is fully dependent on its purpose matching the users’ needs.
Your Competitive Position in The Market. How is your product going to fit the market? One of the most common frameworks that helps to answer this question is a SWOT Analysis. SWOT stands for:
S — Strengths
W — Weaknesses
O — Opportunities
T — Threats
This technique allows looking at your situation from every direction, building the understanding of your strengths and opportunities, as well as pointing out the weaknesses that need to be worked on, this way reducing future risks.
4. Marketing Strategy
A marketing strategy is imperative in reaching out to potential customers. Therefore, it is crucial to make an overview of the step-by-step process as well as describe how the strategy may change over time to fit new rising needs, as the mobile app will keep evolving. The following aspects should be covered in this section:
Defining Target Audience & Competition. Knowing well your target audience, their behaviors, and habits define the functionalities your mobile app needs and the strategy of approaching them the right way, while knowing your rivals allows you to focus on the features that are unique from theirs. Thus, this knowledge defines how successful the app will be.
Acquiring Customers. Now that the user persona is defined, it is possible to develop an acquisition strategy based on what you’ve learned. While targeted social media marketing is one of the most influential these days, it is still necessary to understand which channels would be the most effective for your target audience and whether this strategy would be enough. Referral programs, app store optimization, email, and event marketing are only a few of the various strategies that can be considered.
Selecting the Metrics. In the beginning, success cannot be yet measured with financial revenue, however, it is vital to provide some qualitative data to the investors and business owners on how well the app is doing. Thus, the decision on which metrics will be relevant (e.g. Customer Acquisition Cost (CAC), Retention, Conversion Rate, etc.) needs to be made.
5. Financial & Monetization Strategy
29% of startups fail due to running out of cash — the second most common reason for failure. For both you and your potential investors, it is imperative to know how much funding is needed to bring the mobile app to life and how frequently the payments will need to be made. The financial plan should reflect the forecast of the costs for the next three to five years, also leaving room for unexpected extra expenses or possibly a backup financial plan. Some of the types of costs that should be mentioned are:
- One Time Costs — costs that only need to be paid once;
- Periodic Costs — regular repeatable costs;
- Fixed Costs — no matter the state of the business, these costs stay unchangeable;
- Variable Costs — these costs change with time (e.g. salaries).
Finally, while the amount of money that will be spent is significant, what matters, even more, is how to get this money back. Monetization strategy is the revenue model for your mobile app that should convince investors that the application is going to be profitable. Some of the most common ways to monetize a mobile app include:
- Installation Fees
- Subscription Plans
- In-app Purchases
- In-app Adverts, etc.