How Much Does It Really Cost to Develop a Product?

Imagine walking into a car dealership and asking, "How much is a car?" The salesperson would smile and say, "Well, are you buying a used hatchback or a brand-new Ferrari?"

Developing a product is the same story. Depending on what you’re building — a simple plastic gadget or a complex AI-powered device — the cost can swing from $20K to $5M+. (Quick fact: Apple reportedly spent $150 million to develop the first iPhone. Definitely the Ferrari side of the lot.)

The lesson? Asking "how much" without context is pointless.

Think ROI, Not Just Price

Smart founders flip the question around. Instead of panicking about the price tag, they ask: “What’s my expected return — and is the cost justified?”

👉 A great rule of thumb: Development cost ≈ 1.5 to 3 Years of gross profit.

If you expect to make $300K gross profit in Year 1, then spending ~$300K on development might make sense. If it’ll take 5 years to pay back? 🚩 Big red flag.

Development is an investment. If you can make back your investment in a year to a maximum of 3 years (or close to it), it’s probably a healthy project. If not, either the cost is too high — or the opportunity isn’t big enough.

How to Estimate Your Product’s ROI

You only need 3 numbers:

1. Expected Unit Sales (Year 1) — How many units can you sell?

2. Selling Price per Unit — What’s your average price point?

3. COGS per Unit — How much does it cost you to build one unit?

Formula: Gross Profit = (Selling Price – COGS) × Units Sold

✅ Example: Sell 10,000 units at $50 each. COGS = $20 per unit. → $30 margin × 10,000 units = $300K gross profit

Now match that against your development cost. $300K development cost? Great. $600K? Problem.

Wrapping Up

Product development isn’t about the cheapest project — it’s about the smartest investment. If the math works, the project works.

🔜 Next up:

 "What actually drives development costs sky-high? (And where can you save?)"

 Stay tuned for Part 2.