Since our application will be requiring a backend with a 24/7 uptime, we will be renting out a virtual private server; we expect rental costs for sufficiently powerful servers and databases to be approximately $240/month, with an extra cost of $48/month for weekly backups (DigitalOcean, 2021). In addition, the cost associated with hosting the website itself and the domain will lead to fixed costs of $14/year, with $4 discount for the first year (Domain.com, 2021). For our emergency chatbot AI, we will be relying on external services at a cost of $175/month (IBM Cloud, 2021), and we estimate that a monthly upkeep of $300 will be required to maintain and update the chatbot application. Finally, we plan to patent our danger level heatmap technology, which will require a one-time fee of about $205 (Government of Canada - CIPO, 2021).
We plan to distribute our application on both the Apple and Android mobile platforms. In order to register as a developer which is required to publish our app to the Apple App Store, we will need to pay yearly fees of $125 (Apple, 2021). Similarly, for Android, a one-time fee of $35 is required upon registration (Google, 2021).
Altogether, we predict that we will be facing total technology-related costs of $774/month for the first year and $775/month for subsequent years, on top of a one-time fee of $235.31.
Wages:
Our company will be hiring software developers to maintain the application internally. We plan on developing the code behind the app, so there will be no initial development costs. Since our service requires 24/7 uptime, we will hire 3 developers, each working 8-hour shifts. The hourly rate for these developers will be around $32/hour (PayScale, 2021); with each of these workers working for 8 hours a day, and on average 30 days a month, the monthly rate will total to about $23,040 for the developers' wages.
Others:
As our service mainly relies on attracting new businesses to enroll in our certification program, advertisements are vital to our success. Using Google AdSense's budget estimator, we predict that approximately a cost of $4,560/month will be sufficient in gaining the attention of businesses. Our monthly advertising budget is expected to increase as we expand our operations in the future.
To obtain a variety geographical data required to create the app, we will be relying on Google's Maps API. We forecast that this will cost us $30 per 1000 users.
Finally, since we require a $30,000 minimum cash requirement for each month's closing balance, we will be borrowing from the bank at a 3% monthly rate until we are able to meet the closing balance requirements, which we estimate will be by about Feburary 2022. The interest paid on this loan will contribute towards our disbursements.
Our main source of revenue will be from the business certification program, which is subscription-based with a monthly fee of $30 for each business. The remaining revenue will come from in-app advertisements and selling anonymous user data to businesses. According to the Google AdSense estimator, the ad revenue generated per user will be about $0.15, and the data which we will be selling pertaining to location and traffic information can be sold for about $0.07 per user (Financial Times, 2013).
At the end of our first month, we expect to receive about $1,800 in revenue from our business certification program. This is expected to increase to $7,500 in May 2021, and by a further $4,500 every following month up as more businesses join the program. This growth is projected to continue until February 2022, after which the number of certified businesses will start to stabilize and sales from the program should remain relatively stable at around $50,000. The revenue from advertisements will start at $600 and should increase by about $9,000 every following month as we obtain more users. For our starting month, we may not have enough data to reliably turn a profit, so we will only start selling data starting at the end of our second month. From there, we expect to make $700, consistently incrementing by $420 in the subsequent months.
Based on the cash budget forecasted for the next 12 months, the company is expected to turn a profit in May 2021, due to our low variable costs. However, since the cash excess of $9,384.98 is insufficient to meet our minimum cash requirement of $30,000, and we will need to take out a loan from the bank to compensate for the difference for that month. From September 2021 onwards, our excess cash is expected to large enough to surpass our minimum cash requirement, and thus we will be able to completely pay back our banks loans by the end of September, whereupon no financing will be reuired.
With our rapid potential to become profitable and relieved of any debt, Walk With Ease's growth as a business presents a promising venture to invest in and grow alongside in the future.
As with any new venture, we must address the fixed and variable costs associated with keeping our business running. For a service such as ours and to create value through our cost structure, we expect to have very low variable costs and relatively higher fixed costs. As explained in the previous disbursements section and in the cash budget, our monthly average fixed costs are about $28,375, which will pay for the marketing, maintenance, and publishing of our application, as well as the fees required for third-party technologies required by our app to run. Our business certification program has no costs associated with it, and as such all of our variable costs come from the Google Maps API fee, totalling to about $0.03 per user. We additionally have a few one-time fees, involving patenting our danger heatmap technology and developer registration, which total to roughly $240, all to be paid in the first month. By taking advantage of the vast technological ecosystem on the Internet, we are able to keep our costs associated with our application low, allowing us to keep our services free while still remaining profitable and provide our users the feeling of safety they deserve.