iOS The business side of iPhone apps

[wizard]

Hi Guys & Gals;

I'm interested to know what the independent producers of iPhone software are doing with respect to the business of iPhone software. That is are you setup as a DBA, a corporation, or something else?

I ask because I'm thinking seriously about getting into business focused on iPhone software. The big problem here is the size of the market for the apps I have in mind, that is can they sustain a business. So comments from people that have more targeted apps would be appreciated.

I've recently attended a few SCORE meetings focused on small business startups and frankly it has left me with as many questions as answers. The big problem is that the whole business of iPhone apps is rather new.

Thanks
Dave

 

[cpatch]

I would suggest starting out as a DBA (or LLC if you think there's any chance a bug in your app would be serious enough to potentially generate a lawsuit) and creating your first app in your spare time. That way you can see how well it does and decide whether or not there is the potential for enough income to do it full-time. It's my guess based on personal experience and talking with other developers that while there is still potential to make a decent income off developing for the iPhone, the days of $250,000 in two months (as with Trism) were limited to those who got their apps into the App Store when it launched. There may still be the opportunity for quick money, but it's the same chance as earning an seven-figure salary playing professional sports. More likely you're going to bust your butt for $60-90K a year (with each year getting harder as more apps compete for attention). Depending on where you live this may or may not be worth the effort. And, of course, the potential to make more always add extra incentive!

 

[forcesteeler]

If there is bugs in your software you cannot be sued. As you will have to agree with Apples Terms Of Service Agreement when you setup a Itunes account that they are not responsible.

Unless you write a virus/trojan horse hidden in your application they yes you can be sued but that's also highly unlikely as Apple Checks and reviews your application and also that you signed your application with your Keys (Keys= linked to your social security, contact, etc...

 

[netslacker]

If there is bugs in your software you cannot be sued. As you will have to agree with Apples Terms Of Service Agreement when you setup a Itunes account that they are not responsible.

Uh, not quite. It's Apple that cannot be sued and it is Apple that cannot be held responsible for bugs/errors in your app. There is absolutely nothing in any terms and conditions that indicate that you cannot be sued or that you are not responsible or liable, if anything - it is the exact opposite.

Also, to assume that Apple's quick review of your application will abstain you from liability for bugs/issues in YOUR application couldn't be further from the truth as well. They (Apple) offers no warranty or guarantee to customers for applications that you submit.

It is all you and only you that is responsible/liable (in a dba or sole proprietorship scenario).

 

[admanimal]

Personally I'd be more afraid of being sued for some kind of copyright or other intellectual property issue than because of a bug in my code.

 

[JWBlue]

Personally I'd be more afraid of being sued for some kind of copyright or other intellectual property issue than because of a bug in my code.

QFT. We have already seen this happen with trademark issues with several apps already. Setting up some kind of entity to limit your liability is essential.

 

[rendezvouscp]

Hey wizard,

Although I’m actually using my sole-proprietorship for more than just an iPhone app, I’d definitely suggest it for a new business that’s just getting off the ground. It’s cheap and easy (1.5 hours downtown was much shorter than the 3 hours it took me for my trademark application), and probably easier to manage tax wise (haven’t done taxes since I got my DBA).

If you feel the need for protection against lawsuits, you can always include your own EULA that states that you’re not liable for the use of your product, there aren’t any guarantees, and that any dispute will be resolved in your jurisdiction. While this isn’t a complete list of things to cover your ass, it’ll get you started.

As for admanimal’s concern about patent/copyright infringement, most companies won’t file a lawsuit unless you don’t comply with their initial requests. It’s certainly not something that you need to be overly concerned about (in the sense that common sense about it will probably go a long way).

Hopefully this info is useful. I’m not a CPA, lawyer, or have a BS or BA in Business, but I speak from setting up my own business just a few short months ago.
-Chasen

 

[robotspacer]

I started up an LLC... It's fairly simple and cheap to do and gives you a bit of protection. I bought this book: http://www.amazon.com/Form-Limited-Liability-Company-CD-Rom/dp/1413307086/ A lot of the info won't apply if you'll be the only owner of the company, but it was still pretty helpful. My accountant was able to answer the couple of tax-related questions I still had. In the end the process was simpler than I expected, but it was nice to have the book to reassure me and point out things that could be problems down the line.

I agree with cpatch about the potential money to be made... It's easy to do some quick math with the Trism numbers and think you could rake in a million a year, but I'm sure the reality is even the Trism guy(s) will have a hard time keeping sales that high for a full year or more. Not to say that it won't be worth it (especially for them!), but my feeling is most people that work hard at it will be making about the same as they'd be making at some other programming job. You might spend less time working on software but you'll spend that time answering support emails, marketing, and other day to day business stuff.

One thing I will say is that the App Store makes it much easier to get started, assuming you have a decent app. It's pretty amazing how relatively simple it is to submit an app and start selling it all around the world. But keeping up that business is still going to fall on you.

So I think the big thing you'll want to think about is just if you really want to run your own business. For me I feel like I barely have a choice—my brain just seems better suited to working this way. For the past several years I've run my own graphic design and web development business, and dabbled in software on the side. My iPhone app will be the first time I've made a significant amount of income from software, and if it goes well I may transition to doing software (web, Mac, and iPhone) as my main business.

Running a business certainly has its ups and downs. For me the big positives are being able to set my own schedule—if I feel like taking a day off I can usually just do it—and having the freedom to do the work I want to do. If I want to spend more time writing software I can do that without looking for a new job. The biggest downside is often money. If business is slow it may be tough to pay the bills. (I'm struggling with that a bit right now since I put off my regular design work for a few weeks to work on my iPhone app.) And while it's easy to take random days off now and then, it's hard to take a real vacation any other time than the end of December. With my design work it's inevitable that a client desperately needs something done before I go, with software it's support emails piling up. Since I work at home it can also be tough to just plain stop working at the end of the day or over the weekend.

Overall though, I've found both running my own business and creating iPhone software pretty enjoyable and rewarding so far. I think it's definitely worth considering, and the App Store can be a big help in getting your business of the ground. Just make sure it's what you really want, and make sure you have a plan—if your software doesn't sell as well as you'd like, you don't want to get stuck unable to pay the bills.

Good luck!

 

[liptonlover]

I don't really have business tips per se, but this'll probably help.

1. Make sure your app is original, especially if it's a todo list or something like that. You'll be safe from copyright issues hopefully, and it gives you something to market. There's a big difference between "I made a todo list and it's great" and "I made a todo list and it's great because X".

2. Look for marketing opportunities on other sites. Macupdate, versiontracker, and probably others are accepting iphone listings, with a link to the itunes store. It's free, if you've been coding for the mac you probably already have a dev account, and it'll get you that much more exposure. Also think about advertising. Get friends to tell their friends to tell their friends etc. about your apps in 3rd person. Post on random sites if you're not afraid to spam random places. Or get real advertising, either through one of the above mentioned sites or google. In the end, get the word out.

Good luck!

 

[kimabg]

Sales of targeted apps

Just yesterday I published the sales figures from the first three weeks of sales of my two applications. With no marketing effort what so ever the sales are not enough to support a business, but may make a nice side income to help pay for Christmas gifts.

The Evil Boss - Analyzing App Store Sales Data

 

[wizard]

Thanks for all the info guys!

Sorry its taken so long to get back to this thread. I've become a bit overloaded and have struggled with other issues. So thanks again for the responses.

As to the setting up of a LLC, what did this run the people that went this route? I'm getting quotes of around $2500 for a lawyer to do so. This in NY state. SCORE mentioned that on line sources might lower that to around $800. Trouble is that is a lot of money right now! The idea with the LLC is to limit liability obviously but I don't think it is an issue for the APP I'm working on right now. It certainly could be for future ideas.

The biggest problem I see is that I have no idea (zip nada) as to the apps potential in the market place. This is not a game app and frankly I see very little in the app store that even hits the technical side of things. At this point I can't even ask someone about their apps success in this domain because nothing is on app store. So I'm not convince that this is a feasible business. I suppose the DBA route might work but that would just make the introduction of new products difficult.

In any event right now I've seemed to have stumbled onto a strange bug in Apples code for disclosure indicators. Back to the grind stone. By the way I blame all defects in my code on Apple until proven otherwise. Seems to work well for the iPhone SDK


Dave

 

[jstanier]

I just sell as "Antis", although it's essentially only being used as a trading name. I haven't "officially" set up a business, or anything. I just chose a name!

 

[Pring]

I just sell as "Antis", although it's essentially only being used as a trading name. I haven't "officially" set up a business, or anything. I just chose a name!

I presume you've registered as a Sole Trader with Inland Revenue though? If you don't do it within three month of starting trading then you can get hit with a fine.

 

[caveman_uk]

I just sell as "Antis", although it's essentially only being used as a trading name. I haven't "officially" set up a business, or anything. I just chose a name!

As Pring said, you need to tell the Inland Revenue you've done this as you can be fined for not doing so. You also will need to pay income tax on your earnings and NI contributions (you should see if you can get a SEE cert if your self-employed earnings are low). You will also have to fill in a self assessment form every year so make sure you keep very good records and don't throw anything away like receipts. On the plus side you can claim a fair bit of stuff back against tax.

As a sole trader you are personally liable for your business and all claims against it. The alternative is a limited company which involves more paperwork and account filing but usually is more tax efficient as well.

 

[Greencardman]

Wizard, you might want to think about setting up an LLC yourself in the beginning, and going back later and paying a lawyer to redo it. I think its under $200 to do it in most states, plus the price of a good book.

Its really all about tradeoffs. If you have a lot of personal assets, like a house, car, or are married, it would be a good idea to do the lawyer thing and protect yourself properly. If not, you may just want to spring for the $200 and do it yourself. Or you can do like other people and not do it at all.

Its somewhat a game of chance. If you don't sell many copies, you won't make any money, but at the same time there will hardly be any disgruntled users to sue you. If you do make money, you can put it towards hiring a lawyer and redoing your LLC documentation.

Its all about how serious you are and how well you think you'd do. If you've done market research on your app idea and think it will sell well, then you might want to protect yourself.

One last thing, not to be rude, but you're putting the cart before the horse a bit here. Until you have an app in the store and selling, you're not really at risk. So build your app first and hire a lawyer second. Its useless to waste time thinking about all of this stuff before your app is done and submitted to Apple. Know you can execute on building an app before you waste money on a lawyer or even an LLC.

 

[Greencardman]

Hey Kimabg, what application did you use to generate those charts on your website?

 

[wizard]

Thanks for the well thought out response!

Wizard, you might want to think about setting up an LLC yourself in the beginning, and going back later and paying a lawyer to redo it. I think its under $200 to do it in most states, plus the price of a good book.

I suppose that is a possibility.

Its really all about tradeoffs. If you have a lot of personal assets, like a house, car, or are married, it would be a good idea to do the lawyer thing and protect yourself properly. If not, you may just want to spring for the $200 and do it yourself. Or you can do like other people and not do it at all.

This is the biggest concern I have. It is not like I'm rich in any sense of the manner but I'd not want to loose what I have! The problem is the first app I'm working on is just a reference and not likely to be a concern. Some of the other ideas I've had though would result in liability concerns.

Its somewhat a game of chance. If you don't sell many copies, you won't make any money, but at the same time there will hardly be any disgruntled users to sue you. If you do make money, you can put it towards hiring a lawyer and redoing your LLC documentation.

This is the next big concern, the current app and some that I've imagined will have a very small audience with respect to the iPod/IPhone population as a whole. In fact I'd be surprised if I got serious money on just one app. the only good thing is if done well they ought to sell for a long time.

The big concern is that hiring a lawyer after the fact is that it might actually be more expensive than just going to a good lawyer in the first place.

Its all about how serious you are and how well you think you'd do. If you've done market research on your app idea and think it will sell well, then you might want to protect yourself.

This is part of the problem that is market research! I don't think that market awareness will be easy to achieve without advertising and drawing in people to the technology.

The problem with protecting yourself is that you really only need to make one sale to the wrong person to have legal problems. The product could be a terrible seller but still a legal liability, it really has nothing to do with selling well.

One last thing, not to be rude, but you're putting the cart before the horse a bit here. Until you have an app in the store and selling, you're not really at risk. So build your app first and hire a lawyer second.

If it wasn't for all my other things going on the app likely would have been done by now. This isn't a full time job yet and I simply don't have the option right now of diving into a business full time.

In any event I'm not far from finished and that is why I started to inquire about business issues associated with app store. It wouldn't make much sense to have an app ready and then spend months working on the business angle. Just trying to multitask here.

Its useless to waste time thinking about all of this stuff before your app is done and submitted to Apple. Know you can execute on building an app before you waste money on a lawyer or even an LLC.

Well the above I have to disagree with, the worst thing one can do is to submit an app before you have the legal issues resolved. It is not just the formation of a company but insurance for errors and omissions and the other things of modern business life.

In any event I have to figure out if I can eventually get enough annual income to cover the annual expenses of a business. That is the key in my estimation and frankly it is a lot harder than programming.

Dave

 

[Greencardman]

Dave,
I haven't heard of anyone having legal problems with their apps that weren't related to easily identifiable problems. I haven't heard of anyone being sued yet (for any reason), and I keep my nose to the grindstone when it comes to this sort of things. The people that have had problems were quite clearly pushing the limits and playing with fire, like the LightSaber App, Netshare, etc.

I think your fear of being sued by a random user is somewhat misplaced. If you're not using someone's copyrights or ripping off another person's game, then people really have little or no grounds to sue you. Especially if your app falls into a category like games, where its clearly meant to be fun. I can't think of any reason a user would have to sue you and succeed.

Basically, if your App is all your own and original, then you're not doing anything wrong for someone to sue you. I say this not to encourage or discourage you one way or the other, only to remark that I think your assessment of the risks is off. You're putting too much weight on the possibility of something going wrong. Legal liabilities aren't black holes where anything can happen, nor will having a lawyer or an LLC won't protect you from crazies costing you money in litigation.

That said, business is a game of risk, and if you are a very risk averse person, you will get all your legal ducks in order, because that is what will make you feel safe. Its likely to decrease your returns, but in exchange you feel better. Thats the way it works.

By the way, you really only need one company for all your apps. So even if you are planning on working on them part time, if you decide to go for a lawyer the initial fee you pay to set up an LLC will protect you going forward.