Thinking about building an in-house development team? The upfront salaries are just the beginning. Let's break down the true cost--and why many startups are choosing smarter alternatives.
The Obvious Costs: Salaries
For a basic development team, here are 2024-2025 average salaries:
- Product Manager: $120,000 - $160,000/year
- UX/UI Designer: $90,000 - $130,000/year
- Frontend Developer: $130,000 - $170,000/year
- Backend Developer: $135,000 - $175,000/year
- QA Engineer: $85,000 - $120,000/year
Annual Salary Total: $560,000 - $755,000
But that is just the beginning.
The Hidden Costs
1. Benefits and Taxes (Add 25-35%)
- Health insurance: $12,000-$18,000 per employee
- 401(k) matching: 3-6% of salary
- Payroll taxes: 7.65% of salary
- Paid time off: 15-25 days per employee
- Sick leave, parental leave, etc.
Additional Cost: $140,000 - $264,000/year
2. Recruiting and Onboarding
- Recruiter fees: 15-25% of first-year salary per hire
- Job board postings: $500-$1,000 per role
- Screening and interviews: 40-60 hours of team time per hire
- Onboarding: 1-3 months until full productivity
One-Time Cost: $84,000 - $188,750 Opportunity Cost: Delayed product launch
3. Equipment and Software
Per employee:
- Computer and hardware: $2,500-$4,000
- Software licenses: $3,000-$8,000/year
- Development tools: $500-$2,000/year
- Office furniture: $1,000-$3,000
Annual Cost: $32,500 - $85,000
4. Office Space
Even with remote options, you need:
- Office space: $500-$1,500 per person/month
- Utilities and maintenance
- Internet and infrastructure
- Coffee, snacks, supplies
Annual Cost: $30,000 - $90,000
5. Management Overhead
Someone needs to:
- Manage the team (Engineering Manager: $150,000-$200,000)
- Handle HR and operations
- Coordinate projects
- Resolve conflicts
Annual Cost: $150,000 - $200,000
6. Training and Development
To keep your team current:
- Conferences: $2,000-$5,000 per person
- Online courses and certifications
- Books and learning resources
- Internal training time
Annual Cost: $10,000 - $25,000
The Total True Cost
First Year
Salaries: $560,000
Benefits/Taxes: $140,000
Recruiting: $84,000
Equipment/Software: $32,500
Office: $30,000
Management: $150,000
Training: $10,000
Total First Year: $1,006,500
Ongoing Annual Cost
$880,000 - $1,200,000/year
The Opportunity Cost
Beyond money, consider:
- Time to Hire: 3-6 months to build your team
- Ramp-Up Period: 2-3 months until full productivity
- Management Distraction: Founders spend 30-50% time on team management
- Risk: What if someone quits? Start over with recruiting
Alternative: App Sprout
Compare this to working with App Sprout:
- Project Cost: $35,000 - $75,000
- Timeline: 2-4 months to launch
- Team: Included (designers, developers, QA, PM)
- Ongoing: Pay only for updates you need
- Risk: None--we handle everything
Savings: $930,000+ in year one
When In-House Makes Sense
You SHOULD hire in-house if:
- You have $5M+ in funding
- You are building a tech platform (not just an app)
- You have 50+ employees already
- Software is your core product
- You need 24/7 development capacity
For most startups and businesses, this is not the case.
The Smart Startup Approach
Successful startups in 2025:
- Start with Experts: Partner with agencies like App Sprout for v1.0
- Validate First: Prove your business model with real users
- Hire Strategically: Bring in-house only when you have product-market fit
- Scale Gradually: Start with one or two key hires, not a full team
Hidden Benefits of Outsourcing
Beyond cost savings:
- Expertise on Demand: Access senior developers without senior salaries
- Latest Technology: Agencies stay current with new tools and frameworks
- Flexibility: Scale up or down based on needs
- Focus: Founders focus on business, not managing developers
- Speed: Experienced teams work faster
The Math is Clear
In-House Team Year 1: $1,000,000+
App Sprout Project: $35,000-$75,000
Savings: $925,000+
That is capital you can use for:
- Marketing and user acquisition
- Improving your product
- Hiring business-critical roles
- Extending runway
- Growing revenue
Making the Decision
Ask yourself:
- Is software development your core competency?
- Do you have $1M+ to spend on development?
- Can you afford 6-9 months to build a team?
- Do you have experience managing developers?
- Is your product complex enough to need full-time developers?
If you answered "no" to most of these, outsourcing is likely your best bet.
Conclusion
Building an in-house development team is expensive, time-consuming, and risky. For most startups and growing businesses, partnering with an experienced development agency like App Sprout offers:
- Better value: 90%+ cost savings
- Faster time to market: Launch in weeks, not months
- Lower risk: No hiring mistakes or team turnover
- Higher quality: Access to senior-level expertise
The question is not whether you CAN afford an in-house team--it is whether you SHOULD build one.
Want to discuss your development needs? Get in touch with App Sprout for a free consultation.