A walkthrough of the Business Model Toolbox iPad app's cost estimator. Fixed development costs of $100,000 each for iPad and web, plus $0.15 per user in server costs, automatically generate reports showing profitability and cost breakdown. The app assumes 5% market penetration and monthly subscriptions for the web version.
Questions this video answers
$100,000
$100,000
$0.15 per person
$18,000
5%
Chapters
So we played around with the revenue estimations. Let's do some cost estimations here. So let's sketch out how much this might cost. So let's put in here first the iPad app development costs. So the costs related to developing the iPad app, click the rent button here, and we'll say that's a fixed cost. We'll associate it with the key resource here of the iPad and we'll say that costs about $100,000. Now let's do the same for the web app. And type in how much it will cost us to develop the web app, which is associated to the web application. So we'll choose a different color here. Now do the same thing. It's a fixed cost. We're going to associate it with the web app and we're going to give it a number. Say that will cost us $100,000 to develop. Okay? But since we're talking about a subscription here, we also have another cost, actually a variable cost, which is related to the monthly fee. So let's call this server costs related to the web app. And here we know it's a variable cost since it's related to the number of people who are signed up. So again, we will select here, this time just the web app, and we'll say, well, it costs about 15 cents per person, so we're going to select the market segment. Remember, we said 5% will buy one time the app, but every month they will be using this app. And we can see that we get a variable cost of $18,000 related to the amount of people that we think will buy or subscribe to our web app. So immediately you can see the revenues and the cost. And here you can see we make a pretty interesting profit. We can even have a look of how profits and costs are distributed. Now, what can be interesting is if we want a more traditional view, we go on the report and we can see all our costs and all our revenues, fixed costs and variable costs, and the revenues coming from the fitness app and the revenues coming from the web app. So immediately we can see with the ballpark figures that we put in if we're profitable and the size of this potential business.
