Finance director and entrepreneur Maciej Kubat, ACMA, CGMA, is using his finance skills to develop an app business. His experience offers lessons for anyone considering engaging with the sector, which has spawned almost 2 million apps currently on Apple’s App Store alone.
After taking an online coding course, Kubat developed a first app in 2016 as a way of practising what he had learned. Kubat invests in startup companies and has also been a mentor at Google’s London Campus, which provides space and free Wi-Fi for startups. A year after creating his first app, that initial work led to a collaboration with a developer on Take Home Pay, an app intended for workers included in the UK’s pay-as-you-earn (PAYE) income tax and national insurance payment system who are thinking of moving to a new job.
Two months’ development followed by two months’ testing, including by friends, were needed before the app was submitted to the App Store and Google Play in March 2018. It was approved after three or four days.
Kubat was motivated to create an app that was easy to use without accounting or payroll knowledge. The idea was to first release a simple version that allowed inputting either gross salary to calculate net salary, or net salary to calculate the gross figure. This would help people determine what a new job could look like from a financial viewpoint.
A new feature added in June allows figures from the UK tax authority HMRC’s P45 form (Details of Employee Leaving Work) to be added.
Kubat said: “Our goal is to add something every month. … The more frequent the changes are, the easier to find it.” Apple and Google give new apps a rankings boost, which Kubat discovered is a volatile process. It means that from being ranked in the top ten, an app can shift quickly down to the top 50 the next day and could be below 100th place two weeks later.
And what are the economics of the app?
“The entry to market is very, very low,” Kubat explained. “So £200 for both platforms as the total cost. And that’s pretty much it, apart from the time spending on developing, there [are] no other costs involved at the production stage. But then once released, obviously, it has to be discovered.”
“So at the moment, we’ve used very simple tools. One is to tell everybody we know on Facebook, social media, that the app is available in the App Store, on both stores. And then the second bit was to start the Search Ads, which is like Google AdWords for Apple.”
With a background in search engine optimisation (SEO), Kubat was well placed to select keywords that could be the most relevant and popular. But before bidding for these, he worked out that 4p a click was the maximum the company could pay to be profitable, based on predicted sales.
“It works like an auction. So, if let’s say two developers [are] competing for the same term, keyword … the more you bid, the higher chances are [that] you will be visible on the App Store. So your app will be there. So you need to measure very, very carefully what your lifetime value is, what can you charge, what is your clickthrough rate, and conversion rate.”
Sales in May 2018 were around 20 apps a week and growing, with pricing at 99p. Kubat then decided to switch to a freemium model: The app is free to download, but features are available as in-app purchases. In November 2018 the app had hundreds of downloads per week.
Included in the app, Take Home Pay – UK Salary & Tax Calculator, is a setting for residents of Scotland, which has different tax bands from the rest of the UK; a student loan setting; and a setting for pension contributions and childcare vouchers, which are the large salary sacrifice schemes where employees give up part of their salary in return for a noncash benefit from their employer.
Kubat and his company, JM Smart Apps, are reviewing progress and deciding on strategy — whether to expand the current app, create another to be used by contractors, or turn the app into a marketplace matching recruiters with job-seekers.
Along the way there have been a few surprises, Kubat explained. “Developing the app is the easiest step in the whole process. … And probably 90% of the work involved in the application is around this: how to market, how people find it, the pricing structure, and maybe next the features. Because you cannot be static with your app. [If] you want to release and forget, it doesn’t work.”
A second surprise has been the lag of one or two days between an app purchase and when it is first used, analysis of the data has revealed.
A complication, which Kubat likened to “driving in the car just watching the rear-view mirror”, is the time lag between potentially good search keywords and implementing them in the app stores. “And then you find out after a while that actually these keywords maybe were OK at the time when you research them, but not now.”
Kubat said his management accountancy training has been helpful during the app journey. “When I talk to other developers, they’re obviously obsessed with the CLV, which is the customer lifetime value, and the conversion rates, and so on. But what I noticed [is that the basics are] as important as the others: the gross profit, and how much you make, what was the contribution from the ad? And how much you can spend on the ad? And what’s your fixed cost? And so on.”
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is FM magazine’s external affairs editor.