The cost of an MVP varies so much because different things are often understood as MVP.

MVP (short for minimal viable product) is a product that has minimal functionality but can already solve the main need of users. The minimal product is made to get feedback from customers as soon as possible, understand what product users really need, and check the viability of the idea.

Generally, MVP most often implies the first "cut-down" version of the product, which is wrong. This understanding has arisen from the following common practice.

A business gets an idea for a product, for example, an application. The business comes to a studio, orders its development, learns the prices and deadlines. They want to make the best application, with a chatbot, messenger, blogs, and many other features.

The studio tells the client that such an application for iOS and Android will cost from 5 million, and development will take at least six months. This is expensive and time-consuming for the client. So the studio suggests first developing an MVP, which will have the key functionality, and releasing the application in three months.

Then the painful process of design begins, with disputes between the project manager and the client about what to cut from the application, which technology stack to choose, whether to make a simple design or with animations.

As a result, in the eyes of the business, the MVP is a product with the functionality that the budget allowed.

The application may take off, but most likely it won't. According to the Startup Genome Report, 93% of projects close in the first year. The client is left with the thought that this product is not needed and abandons work on it.
But in fact, after the launch, the business gains knowledge that the selected functionality is not needed. The client approached success minus one hypothesis.

Now they might want to start improving the application, but there may not be enough funds left because they were spent on beautiful animations that, unfortunately, didn't attract users.

The goal of an MVP is to test a hypothesis and gather feedback. It doesn't necessarily have to be user reviews. First sales also serve as feedback, showing the viability of the product.

On the way to a sought-after product, there will be many hypotheses. To create a product that is valuable to users, you need to establish hypothesis testing as a continuous process and understand that the MVP version of the application is created as a tool for testing them.

Therefore, if we accept creating a sought-after product as the desired result of launching a project, then MVP can be considered as a process, in which there will be many iterations of "set a hypothesis - make - gather feedback from users - set a new hypothesis". And so on until you create the very product that is needed and valued by users.

When it comes to MVP, it usually implies an initial version of an application. So, when we talk about expenses, we're mainly focusing on its creation: design, development, and planning.

But if we understand MVP as a means to test hypotheses rather than a goal as such, then two other expenses come into play.

To figure out which hypotheses we want to test, we first need to develop and prioritize them. Some hypotheses might require research before we can test them, which adds to the expenses.

Once the MVP of the application is ready, gathering feedback from users becomes crucial. But for users to give feedback, they need to know about it. Maybe you already have loyal users, and you can interview them for free.

However, in most cases, you'll still need funds for promotion and engaging users.

Overall, working on an MVP involves 5 stages:
- Research
- Planning
- Design
- Development
- Marketing

The cost of creating an MVP largely depends on how you organize the work.

Let's consider the three most popular options:
- setting up an in-house team,
- working with freelancers,
- partnering with a development studio.

Each option has its pros and cons.

FREELANCE
Freelancers offer a relatively cost-effective option. You save on setting up workspaces and taxes. Plus, you only hire freelancers for specific tasks, so you don't have to worry about their full-time workload.

However, the downside is that freelancers may leave you hanging at any moment. Not necessarily because of money, they might simply get another project offer and abandon yours. Finding a freelancer is easy – there are many platforms, or you can post on Facebook. But finding a specialist willing to join mid-project is much tougher, nobody wants to deal with someone else's code.

IN-HOUSE
In-house development seems more appealing amidst these issues. Here, you have control over your employees. But at the launch stage, you can't guarantee whether the project will take off (and therefore whether the team will have ongoing work).

Moreover, besides labor costs, you need to take into account one month's salary per specialist. Finding specialists is an additional expense. On average, recruitment agencies charge 12% of the employee's annual salary for filling a vacancy.

High expenses aren't the main downside of in-house development. The risk lies in your expertise. Without a partner with strong IT competencies, your project might not take off not because it's unnecessary in the market, but because you've mismanaged the work process.

OUTSOURCING
An alternative is working with a development studio. Studios have IT expertise, take responsibility for their work, and you only pay for the required work.
However, the hourly rate of a specialist in a studio is usually higher than that of an in-house employee.


In this article, we'll explore this option: starting MVP work with an experienced team – approaching a studio. And as the project progresses, assembling a team within your company.

When working with studios, tasks are usually estimated in specialist work hours. So, we'll further calculate in hours. For MVP development, 5 specialists will be involved: a product manager, a designer, a frontend developer, a backend developer, and a marketer.

Besides paying for specialist work hours, consider your own work time.

The goal at this stage is to determine the minimal set of features that will be included in the MVP application. The set of features should be necessary and sufficient to test the core business hypotheses.

Neglecting this stage and attempting to cut costs on it will lead to the scenario depicted earlier — instead of an MVP, you'll have an application with trimmed-down functionality.

Thorough research is crucial at this stage, which may encompass:
- Analyzing existing solutions or counterparts.
- Developing a unit economic model of competitors, breaking down the entire process into sequential stages.
- Conducting a series of qualitative interviews with various user types.

As a result of the research, you will definitely gain insights that will help you formulate hypotheses more accurately and understand which functionality should be integrated into the application.

Perhaps this expense item will be the only one, as 80% of hypotheses can be tested without development. For example, creating screen layouts of the application, assembling them into a prototype, and conducting user testing.
Therefore, articles about how to make an MVP for free or at a minimal cost are not deceptive.

A Middle Product Manager can handle this task in 2 weeks of work, totaling 70 hours. We calculate 70 hours instead of 80 because in practice, to deliver 80 effective hours, you need to work 90. On average, the hourly rate of a product manager's work is $75.

Once we've outlined the fundamental tasks the MVP needs to address, we delve into fleshing out the primary usage scenarios (user stories) and mapping the user flow.

This stage will require approximately a week of work from a product manager.
For our further calculations, let's assume that after planning, you've determined the application will comprise 10-15 screens. These could include registration and login screens, a payment system, functional screens, and more.

A Middle UI/UX designer will need 3 weeks to design all the screens for the upcoming application.

Based on our experience, a proficient specialist who handles both product and UI/UX design aspects can typically charge around $60 per hour.

Let's estimate that the output of the designer's 3-week effort can be implemented by two mid-level (Frontend and Backend) developers within 1 month.

Additionally, a week of work by the PM for management, application testing, and acceptance. The hourly rate of a mid-level developer is approximately $50.

Marketing expenses will be split into two parts — payment for specialists and a budget for promoting the application.

Marketing is a marathon, but let's assume it will take 2 months to develop and launch advertising campaigns.

While target users come through organic traffic, organic growth is rather slow, and startups can't afford to wait. Hence, allocate a budget to attract users from other platforms. Suppose you're not TikTok and can't spam all social networks. In that case, you choose only one channel and run targeted ads on Facebook.

The hourly rate of a mid-level marketer is $75. It will take approximately 40 hours to set up and manage the advertising campaign. The advertising budget is limited only by what you can afford.

However, it's prudent to start with modest amounts to test audiences and discern whom to target the ads toward in the future ($20 per day, running ads for a month, totaling $600).

An additional $100 will be required for creating promotional materials.

Before embarking on a startup journey, clarify your objective: do you aim to materialize your idea or develop a product that fulfills people's needs? If it's the former, be prepared to invest your resources, but chances are, they may go unused.

If it's the latter, keep in mind that this is a long-distance race where you will need a lot of time, desire, and financial backing not only for product development but also for research and marketing. Plus, the mental resilience to persist until you achieve success.