5 Ways to Reduce Product Development Costs in Your Startup

Sandra Petrova

Sandra Petrova

Remote Work Researcher

In this article, you'll discover how to reduce product software development costs and create a high-quality solution without compromising on quality.

It's the biggest challenge most tech startups face today: building working software with a limited budget. On average, one in six projects sees a budget overrun of 200%. 

And the main reasons for budget overrun? Poor planning and lack of communication, and sometimes even technical incompetencies or unrealistic requirements. 

So, is there a way to develop your product successfully without losing all your money? Absolutely! 

Here are a few tips for how to manage costs with a limited budget!

Reduce Product Development Costs in Your Startup

How much does custom software development cost?

If you're trying to understand how much money is being spent on any specific project, let us break it down for you:

A competent team of people.

People are the most significant part of any software development project. When you have experienced and dedicated individuals with excellent technical and soft skills, you are half-way to developing a project successfully. 

Here are some people aspects that are directly related to the cost of a software development project:

  • How skilled are your employees?
  • What's your employees' hourly rate? 
  • Are your employees working remotely, or do you have an in-house software development team?
  • Do your employees possess soft skills, such as time management and accountability skills?
  • Is there trust between team members? 
  • Are your employees aware of the nature of your business?
  • Is your team cohesive?
  • Is there a high level of communication and collaboration within your team? 

Putting together a development team requires time and money. You need to locate great talent, pay for onboarding and training costs, and in some cases proper equipment. Additionally, if you're building a new team, it'll take some time for people to become acquainted with your business, technology, and the product they're developing. 

The scale of the project.

Costs are related to what you're trying to build. Is your software:

  • Basic? This type of software can be built rapidly as its functionalities are quite simple.
  • Medium-complexity? This type of software has more complicated features, meaning it requires more time and people to build it.
  • Complex? Complex projects are time-consuming and pricey as they have a complex architecture, multiple integrations, security matters, etc. 

The technology you'll be using

You may be an open-source startup or a small business startup, but technology will be at the heart of your company.

The technology you'll be using to develop your product is directly related to the cost of the project. What tools will you be using? The tools include tools for testing, project management, version control, and communication.

What framework will you be working with? For example, many developers are skilled in PHP, but fewer developers are experienced in C++. Meaning, if you'll be working with C++, hiring such developers will be more costly. 

delivery problems in software development

How can project costs be reduced?

Below are a few practical tips to help you reduce product development costs while building your product. 

Ensure good planning

According to statistics, the #1 reason for delivery problems is unrealistic expectations. Unrealistic expectations are followed by estimation and a lack of clearly defined deliverables. 

Software development runs much smoother when you plan it correctly from the very beginning. Not making a thorough planning outline before you start building your product is a guarantee for failure. You'll oversee a lot of relevant project details that will eventually come back to bite you. 

And you know what they say, the devil is in the details, especially in software development. 

Before the start of the project, you should:

  • Define the goals you're trying to reach
  • Set metrics
  • Track progress
  • Measure success

So, after you outline the primary goal of your project, you may want to divide it into smaller pieces. If using the agile approach, these are known as sprints. Set up metrics such as timely delivery, number of completed tasks, etc. After each sprint, hold a meeting with the team. Discuss whether those metrics were met and if team members were faced with any issues.

Slowly progressing can be frustrating, but going back to fix errors after the project is completed is a waste of time and money. Plan wisely, and you'll reduce the need for costly iterations, revisions, and improvements. 

Build a great team

If you want to build a successful technology startup, you’ll need more than just a great idea. You’ll also need a great engineering team. A great team can help move your company forward. 

You'll need to hire skilled software engineers who will turn your idea into a product. They need to be experienced, professional, and committed to your vision.

However, finding seasoned and committed engineers who can help you build your product has become time-consuming, expensive, and not exactly a walk in the park.

From our experience, there are a few tips we can offer:

  • Assess your engineers. There are many tools available that can help you hire the best talent, including HackerRank, Code Interview, and Pymetrics. 
  • Hire from good sources. Consider hiring engineers from your personal networks. As an alternative, marketplaces and communities of developers are a great alternative for locating skilled talent fast and cost-effectively. 
  • If you work remotely, hire wisely. If you're managing a distributed software development team, you need to make sure you hire the right people. Apart from technical skills, your employees must possess good soft skills. Skills like teamwork, time management, and communication can ensure the team collaborates and communicates effectively. 
  • Consider a smaller team. The larger the team, the more difficulties you have managing it. Having many people on the team means more disagreement, more communication issues, and ultimately reduced productivity. 
  • Avoid adding new people. It's best if you build your team before the project starts. If you're continuously adding new people throughout the development process, you'll decrease your team's performance and delay the progress of the project. 

Communicate well

A developer should be able to communicate efficiently with other people. After all, their job doesn't only entail coding. A part of their job includes collaborating across IM, email, reviewing code, and going to meetings. They'll be working with users, project managers, and other team members.

Especially if you work remotely, communication is critical. As your team won't be spending in-person time, you have to inform the team of the collaboration tools you'll be using on a regular basis. Many high-performing remote teams have grown fond of collaboration tools such as Slack, Google Hangouts, and Google Drive. 

When building your engineering team, you have to hire developers with good communication skills and invest in the improvement of the communication skills of your existing employees. 

Finally, make communication a part of your company culture. Start practicing communication all the time, so people can’t help but improve at it. Consider giving regular feedback, doing daily standups, keeping documentation, having weekly presentations, and if possible, monthly social events. 

By doing so, you'll ensure a smooth collaboration, avoid possible errors, and have a timely delivery of the product. 

software development funny

Start testing in an early stage

To avoid errors or bugs, you should start testing early in the software development process. By performing regular testing throughout the development process, you'll identify issues before moving on with the other parts of the project. 

If errors accumulate and you reach the end of the development process, you'll need to go back and rework it. Rework requires time and money. It'll also push your release date back. You'll be left with a low-quality product, extra expenses, and mental stress. 

Focus on the main features

Your imaginations about what features your product should have may be limitless, but your budget is not. To avoid exceeding the budget for the project, start with developing the basic features. Once you're certain that the existing product with its basic features is high-quality and profitable, carry on with adding the extensions. You'll reduce software development costs and save time to conduct market research to test how your target group is embracing the product.

Key Takeaways

To sum up, in order to reduce development costs you need to:

  • Ensure good planning.
  • Build a great team.
  • Communicate well.
  • Start testing early.
  • Focus on the main features.

All in all, when there's a good plan laid out, when the right people are on the team, and communication is smooth, software development can be more affordable than you have imagined. 


Sandra Petrova

Remote Work Researcher