How Much Does It Cost To Hire A Software Developer For A Startup?

Regardless of the size and nature of the business, having custom software that can automate and simplify your indispensable yet time-consuming tasks has become necessary. Some may argue that custom software is only important for big businesses and large enterprises. Well, that’s true to some extent because if a business has multiple departments and loads of data to manage, it becomes essential for them to have one.

But in the case of a startup venture, why investing in software is important? The answer is, that it helps startups to stay competitive in the market by providing tools for market research, customer relationship management, and analytics. Many other reasons, such as automating repetitive tasks, enhancing productivity, and scaling the business faster, motivate startup owners to invest in custom software.

As a startup owner aiming to make your dream come true, you need to hire a software developer. The cost of hiring a software developer is not easy to determine, not because we don’t know it, but because it depends on several factors. Each factor impacts the cost of software development tremendously. For instance, if you hire a software developer from the US, it’ll cost you a lot more than if you hire a software developer from India.

Without wasting any time, let’s jump in and try to find the answer to the most asked question in the software development industry.

5 Top Factors Affecting The Cost Of Software Developer

software developer cost factor that impacts the cost

1. Software Developer Experience Will Increase The Salary

Not just in the case of software development, regardless of the field, hiring a more experienced person will definitely cost you more than hiring someone with less experience. Specifically in software development, if a person has more than five years of experience, then it will cost you more than if they have only two years of experience. Similarly, a software developer with two years of experience will cost you more than a new graduate looking for a job.

The higher salary is due to the skills and expertise that an experienced individual brings to the table compared to a less experienced one. A software developer with more than 10 years of experience costs $132,775. On the other hand, the cost to hire a newly graduated software developer is $65,872. But if you opt for a software developer who has neither too much experience nor is a newcomer, then it’ll cost $78,290.

2. Technology Can Impact The Developer’s Cost Per Hour

If a software developer has more skills and is more technology-informed, then a startup business has to pay them more. To understand this better, let’s consider an example. For instance, you post two job listings. In the first job post, you specify that the ideal candidate should have a solid understanding of software development concepts and technologies. Responsibilities include coding, debugging, and testing software applications.

The second job that you post states that we are hiring a Senior Software Developer with expertise in advanced programming languages such as Python, Java, or C++. The ideal candidate will have extensive experience in full-stack development, including front-end and back-end technologies. Proficiency in cloud computing platforms such as AWS or Azure is required.

Based on the job description, you can infer that the software developer who will apply for the first job will likely have less experience, skills, and expertise. Conversely, the software engineer who will apply for the second job post will likely be more skilled, experienced, and expert in the field. Therefore, the salary offered to the first person will be less than the salary offered to the person hired for the second job post.

The salary of a Solidity developer, which is a high-level object-oriented programming language, is $135k per year, making it the highest in the world compared to the salaries of PHP and HTML developers, which are typically lower.

3. Location Significantly Impacts The Software Developer’s Cost Per Hour

The cost of a software product can be greatly influenced by the location of the team or the developer you’ve hired. For instance, if you have hired a developer from a country with a high standard of living, premium living conditions, and high salaries, it will cost you more than in a country with alternative conditions.

Countries where software developer rates are highest include the US, Canada, Australia, and Germany. The average hourly rate for software developers in the US is $53.77. In Canada, the per-hour cost for software developers is $53.75, followed by Australia with AU$31 per hour, and Germany with a rate of 44 € per hour.

The lowest software developer per-hour fees are in India, Pakistan, Bangladesh, and Nigeria. Software developers located in India have a per-hour rate of $20, followed by Pakistan at $16. Simply put, if a startup wants to save money or is operating on a tight budget, the best locations to hire a software developer are countries with low per-hour rates. However, factors such as language barriers and different time zones should not be overlooked.

4. Hiring Models Can Vary The Cost Of The Software Development

The type of hiring model you choose, whether it’s a full-time in-house software developer, freelancer, or hiring an outsourcing company, depends on your own choice and the type of project. However, it will have a considerable effect on the startup costs for software development. Without a doubt, hiring a full-time software developer will cost you more than both a freelancer and an outsourced software development company. This is because it’s not just about the salary or per-hour rate, but now you also have to cover other benefits such as health insurance, retirement plans, professional development, and work-life balance.

a. Cost of Full-time in-house developer vs Cost of freelancer

For startup ventures low on budget, hiring a freelance software developer is a better option than hiring a full-time in-house developer. For instance, if you’re located in a region like the US or Canada and you hire an in-house software developer, you have to pay a per-hour rate of $56. Conversely, if you hire a freelance software developer from countries like India and Pakistan, you only have to pay a salary of $20. Putting this in perspective, a freelancer is a more budget-friendly option than a full-time in-house developer.

b. The cost of a Full-time in-house developer vs the Cost of an outsourced company 

Building an in-house team of software developers for a startup is a much more expensive option than hiring an outsourced company. Also, hiring a professional outsourced company takes a few weeks if not days. On the other hand, building an in-house software development team takes several months. From a cost point of view, if you want to build a software product for your startup, first you have to hire a full-scale team required for the software. Whereas, if you go with the outsourced team, everything will be ready for you.

All you need to do is provide them with the project details, and they will start working on it.

c. Cost of Outsource company vs Cost of Freelancer

Between them, which option is more expensive depends on the type of software. If you want to build a software product completely from scratch, you would need a team. In this case, an outsourced company is a better option because they already have a complete team hired, and secondly, it saves plenty of time. But if you only need one software developer, then a freelancer is a better option.

5. Hiring A Developer With Unique Or Specialized Skills Can Be More Expensive

Just like in any other case, when the demand is more than the supply, the price goes up. And when the supply is more than the demand, the price goes down. Similarly, in the tech or software development industry currently, the demand is more than the supply. According to a report, around 40 million technical jobs go unfulfilled due to a lack of skilled talent.

Similarly, when a new technology enters the market, the number of individuals skilled in that technology is very limited. Therefore, the cost of a person who is knowledgeable about that technology increases. Currently, the demand for software developers who are experts in programming languages such as Clojure and Scala is rising, but the supply is very low. Therefore, if you want to hire a software developer who is an expert in these languages, it will cost you more.

How Can Startups Optimize Costs When Recruiting Software Developers?

  1. Instead of hiring a software developer from countries where the standard of living and salaries are higher, opt for regions where the salaries are lower. India, Pakistan, Bangladesh, Nigeria, and the Philippines are examples of countries where startups can recruit software developers while saving a significant amount of money.
  2. Hiring a freelance software developer or working with an outsourced software development team is another amazing way startups can save a lot of money. While hiring a full-time in-house developer certainly has many benefits, cost is not one of them.
  3. Ask your current employees, investors, advisors, and network to refer potential candidates. When you hire a software developer referenced by a dependable person, you significantly reduce recruitment costs.
  4. Startups can hire talented newly graduated software developers from universities or coding bootcamps. Interns can contribute to your projects at a lower cost while gaining valuable experience, and you can potentially convert them into full-time employees later on.

Over to you!!!

Now you must have learned why it’s not possible to quote you a cost to hire a software developer for a startup. Factors like location, experience, and project complexity significantly impact the cost. But if you have read the blog right till the end, then you would be in a better position to calculate the cost on your own. In order to save money, you can implement the tips that we have mentioned in this blog.