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How to Build an App Empire: Can You Create The Next Instagram? 889 Comments

Written by Tim Ferriss Topics: 4-Hour Case Studies, Entrepreneurship

Chad Mureta runs his seven-figure app business from his iPhone. (Photo: Jorge Quinteros).

I first met Chad Mureta in Napa Valley in 2011.

Two years prior, he had been in a horrible car accident. He’d lost control of his truck in at attempt to avoid a deer, hit a median, and flipped four times, nearly destroying his dominant arm in the wreckage.

While in the hospital for a lengthy recovery, a friend gave him an article about the app market. Shortly thereafter, Chad began designing and developing apps. His results?

    “In just over two years, I’ve created and sold three app companies that have generated millions in revenue. Two months after launching my first company, one of my apps averaged $30,000 a month in profit. In December of 2010, the company’s monthly income had reached $120,000. In all, I’ve developed more than 40 apps and have had more than 35 million app downloads across the globe. Over 90 percent of my apps were successful and made money.”

After finishing rehab, Chad was able to leave his real estate company, where he’d been working 70 hours a week, to run his app business from his iPhone… in less than 5 hours per week.

“Apps” are the new, new thing, thanks to major successes like Draw Something (bought by Zynga for $210 million) and Instagram (bought by Facebook for $1 billion), among others. But for all the hype and promise, few people actually know how to create something that gets traction.

In this post, Chad will discuss his step-by-step formula for rapid app development and sales optimization. It covers real-world case studies and the details you usually don’t see: early prototype sketches, screenshots, how to code if you don’t know how to code, and much more.

Last but not least, don’t miss the competition at the end. If you’ve ever thought “I should make an app that…,” this one is for you…
Enter Chad Mureta

When you are on your deathbed, will you be able to say you lived a fulfilled life?

I nearly couldn’t.

I started my app business from a hospital bed, wondering if I even wanted to live. I had barely survived a terrible car accident that shattered my left arm. I had gone through two groundbreaking operations, and spent 18 months in painful rehabilitation.

With limited insurance, I had racked up $100,000 in medical bills. Even though I survived, I had no clue how to get out of the deep hole I felt trapped in. I was moved to a physical rehabilitation center and worked on reconstructing my body, my mind, and ultimately my life. While I was there, I read two books that made a huge impact: Unlimited Power strengthened my thought processes, and The 4-Hour Workweek inspired me to pursue lifestyle freedom.

During that time, a good friend gave me an article about “appreneurs” and told me I should consider getting into the business. I learned that most appreneurs were one- or two-person teams with low costs, and the successful ones were bringing in millions in profits. Still in my hospital bed, in a state of semi-coherence from the pain medication, I began drawing up ideas for apps.

Three weeks after my final surgery, desperate, broke, and grasping at straws, I borrowed $1,800 from my stepdad and jumped into the app business. Fortunately, taking that leap was the best decision I’ve ever made…

These days, my life is about doing what I love while earning easy income. I run my business from my iPhone, working in a virtual world while earning real dollars. I am part of a growing community of “appreneurs,” entrepreneurs who make money from applications that are used on iPhones, iPads, iPods, Droids, and Blackberries. As of this writing, the world’s youngest appreneur is nine years old, and the oldest is 80!

Appreneurs earn money while creating lifestyles of great freedom. Two of my appreneur friends spend several months of the year doing nonprofit work in Vietnam, while their businesses are generating seven-figure incomes. Another is taking his kids to see the Seven Wonders of the World, creating priceless memories with his family. Still another friend goes backpacking throughout Europe with his wife for most of the year. As for me, I’ve hiked in the Australian Outback, trekked with Aborigines across the desert, climbed in the Rocky Mountains, got certified in solo skydiving, heli-skied in Canada, walked on fire, and most important of all, learned not to take life so seriously.

No matter what your dream lifestyle is, you can have it as an appreneur.
The Opportunity for Appreneurs

There are currently more than 4.6 billion cell phones being used worldwide, enough for two-thirds of the people on Earth. The app market is literally the fastest growing industry in history, with no signs of slowing down. Now is the perfect time to jump into the mobile game.

What happened during the early days of the Internet, with the creation of websites like Google and eBay, is exactly what’s happening today with apps and mobile technology. The only difference is that we have experienced the rise of the Internet and are conditioned to react more quickly to the app revolution. This means that the app world is running light years ahead of the Internet, when it was at the same development stage. Developing apps is your chance to jump ahead of the masses and not be left behind, saying years from now, “I wish I had…”

    Common Objections

    “I’m not a tech person. I have no experience in this market.”
    I was in the same spot, and I still don’t know how to write code. But I found successful people to learn from, emulated their models, and hired programmers and designers who could execute my ideas. If you can draw your idea on a piece of paper, you can successfully build an app.

    “The app market has too much competition. I don’t stand a chance.”
    This industry is just getting started– it’s less than four years old! What makes the app business unique is that the big players are on the same playing field as everyone else. They have the same questions and challenges as you and I will have.

    “I don’t have the money.”
    You don’t need a lot of money to start. It costs anywhere from $500 to $5,000 to develop simple apps. As soon as you launch your app (depending on your sales), you could see money hit your bank account within two months.

    “It’s difficult… I don’t understand it… I’m not smart enough.”
    Just like everything you’ve learned in life, you have to start somewhere. Fortunately, running an app business is far easier than almost every other type of business. Apple and Google handle all of the distribution, so you can spend your time creating apps and marketing them. And you don’t have to come up with new, innovative ideas. If you can improve on existing app ideas, you can make money.

Many people are joining the app gold rush with a get-rich-quick mentality and unrealistic expectations. Maintaining an optimistic perspective is important, but so is understanding that you will have to put in work. My goal in this post is to help you think like a business owner, and show you the map I’ve used to find “the gold.” This is not a one-time app lottery, and you can’t treat it as such. If you think of this endeavor as a long-term business, it will grow and become a sustainable source of income.

Still interested? Then let’s get started!
Step 1: Get a Feel for the Market

As with any business, your success will be directly related to your understanding of the marketplace. The App Store is the marketplace of the app business, so in order to understand the market, we have to study the App Store. This seems rather obvious, but you wouldn’t believe how many developers I meet that don’t understand this concept. They don’t watch the market, follow the most successful apps, or try to figure out why those apps are successful.

In order to become a great app supplier, you must first become an app addict. That means spending at least 2-4 weeks researching the market while downloading and playing with tons of apps (give yourself an app budget of $100 to start). This training period is an investment in your expertise, which will become the lifeblood of your success. The more hours you rack up playing around and studying successful apps, the better you’ll be able to understand their common traits and what users desire.

So, how do you keep pace with the market? The best way is to study Apple’s cheat sheet constantly. The App Store displays the top paid, top free, and top-grossing apps (the apps that make the most money, including free apps), almost in real-time. Apple provides the same lists in the individual app categories.

These charts are golden because they tell us volumes about the market. The best part is this information is freely accessible to anyone, at any moment (unlike the market info for basically every other industry).

Review these charts frequently, and keep a notebook of potential trends you spot. Doing this repeatedly will educate you on successful app design, marketing, and various pricing models. The research you’re doing is simple, costs nothing, and it’s actually fun!

Here are some questions to ask while you’re researching successful apps in the market:

    Why is this app successful?
    What is its rank and has it been consistent?
    Why do people want this app? (Look at the reviews.)
    Has this app made the customer a raving fan?
    Does this app provoke an impulse buy?
    Does this app meet any of my needs?
    Did I become a raving fan after trying it?
    Will the customer use it again?
    How are they marketing to their customers? (Check out the screen shots, icon design, and descriptions.)
    What is the competitive advantage of this app?
    What does this app cost? Are there in-app purchases? Advertisements?

Most developers will build an app and expect tons of people to find and download it right away. That rarely happens. You have to figure out what people are interested in and the kinds of apps they’re downloading first, then you build your app based on that insight.

Once you’ve put in the necessary 2-4 weeks of research and feel you have a decent grasp on the market, it will be time to look back on the trends you discovered and explore some ideas for potential apps you can develop.
Step 2: Align Your Ideas with Successful Apps

How do you know if the market wants your app? Again, you’ll need to look at the Top Apps chart. Are apps like the one you want to create listed there? If yes, you’ve got a potential winner. If not, keep looking. It’s that simple.

Don’t hate; Emulate! When you follow in the footsteps of successful apps, you will have a better chance of succeeding because these apps have proven demand and an existing user base. This takes the guesswork out of creating great app ideas.

I can’t stress the importance of emulating existing apps enough. It’s easy for people to fall in love with their own idea, even if the market doesn’t show an appetite for it. But this is one of the costliest errors you can make.

Unfortunately, developers make this mistake all the time. They focus on generating original ideas and spend a lot of time and effort creating those apps. When it doesn’t work out, they go to the next untested idea, instead of learning from the market. Often times, they repeat this cycle until they run out of money and dismiss the app game. This doesn’t have to be your experience.

A personal example of how to successfully emulate competitors is my Emoji app. First, I took a close look at what the market offered and downloaded all the major emoticon apps. I liked what I saw, but noticed that there was a lack of variety and limited functionality.

Screenshots from a competing Emoji app. The app (left) is opened once to provide the user with instructions on how to enable the Emoji keyboard (right).

I wondered how I could improve upon these existing apps, given that the Emoji keyboard had a limited number of emoticons that couldn’t be increased. I was also curious how profitable these apps could be if they were only being used once.

I kept brainstorming until it hit me. I couldn’t add more emoticons to the Emoji keyboard, but I could include unlimited emoticons within my app that people could send as images via text message or email.

I created an app that not only enabled the Emoji keyboard, but also contained an additional 450 emoticons within the app itself, which could be shared via SMS, e-mail, Facebook, and so on. The app was used constantly since users had to return to the app to send an emoticon.


Screenshots of my Emoji app.

The Emoji app was developed in two weeks. It followed the freemium model, meaning free with an in-app purchase option. The app hit the number one spot in the App Store’s productivity category and the number 12 spot in the top free overall category within six days, raking in nearly $500 per day. Bingo.

Whenever you decide to look into emulating an app, ask yourself these six questions:

    Why are people purchasing this?
    Can I do something to emulate this idea and take it to another level?
    What other ideas would this app’s demographic like?
    How many other similar apps are in the market? (Visit TopAppCharts.com to find out.)
    How successful and consistent have they been?
    How does their marketing and pricing model work?

Step 3: Design Your App’s Experience

You’ve studied the market, you see an opportunity, and you have an idea that could be profitable. Great! Now it’s time to turn those thoughts into something tangible.

To convey your idea properly, you can simply draw it on a piece of paper. Maybe it will look like a 3-year old’s artwork, but it will still convey what you’re trying to do. Some people like putting this together in digital form, using Photoshop or Draft. Whatever you’re most comfortable with, and whatever will give the programmers the details they need, is the way to go.

For your viewing pleasure, here are the rudimentary drawings (a.k.a. wireframes) for my first app, Finger Print Security Pro. As you can see, it doesn’t have to be pretty!

And here’s how the app’s final design turned out:

To make the design process easier, I look at certain apps in the App Store and reference them to show my programmers what I’m looking for. For example, I’ll say, “Download the XYZ app. I want the ABC functionality to work like theirs. Take a look at the screenshots from this other app, and change this.” I take certain components of apps that I’d like to emulate, and give them to the programmer so that we are as clear as possible.

Highlight menu vs. Facebook menu
Notice any similarities? Highlight’s menu (left) emulated the style of Facebook’s menu (right).

The clearer you are, the fewer misunderstandings and problems you will have once it’s time to hand off your drawings to a programmer. The idea is to convey what the app will look like, where everything will be placed, and what happens if certain buttons are selected. This helps the programmer know what you want and will be a useful blueprint when designing your app. Do not be vague or ambiguous. You should know what every part of your app will do. If you don’t, you need to develop your idea more thoroughly.

You have to consider your design to be final before you can begin the coding phase. Inevitably, you will have ideas for additional features once you start testing the initial versions of your app. But if you decide to make major changes after a substantial amount of work has been done, it can frustrate your programmer. It’s like telling the builder who just installed your fireplace that you want it on the other side of the living room. The news will not go over well. Most people don’t realize this is what they are demanding of their programmer when they ask for big changes. That’s why it’s important for you to take your time and carefully plan every aspect of the app before you submit it for coding.
Step 4: Register as a Developer

You now have your idea drawn out. Before you go any further, you need to sign up as a developer with the platform for which you’re looking to create apps.

Don’t be intimidated by the word “developer.” It doesn’t mean you have to be the programmer. It’s simply the name used for somebody who publishes apps. All you have to do is set up a “developer account” so you can offer your apps for sale in one of the app stores.

Here are the links for each platform and a brief overview of their requirements.

    Apple iOS *— Registration requirements include a fee of $99 per year and accepting the terms of service.

    Android— Registration requirements include a fee of $25 per year and accepting the terms of service.

    BlackBerry— Registration requirements include a $200 fee for every 10 apps you publish. You must have a BlackBerry World App Vendor Agreement in place with RIM (the creator of BlackBerry) to distribute apps.

* For your first app, I strongly suggest developing for Apple iOS, rather than Android or Blackberry. Simply put, Apple users are much more likely to spend money on apps. You will increase your odds of making a profit simply by developing for the iOS platform.

Also, don’t forget to go over the App Store review guidelines. Apple enforces these rules during the review process, and if you don’t follow them, your app will be rejected. For instance, you might remember seeing a plethora of fart or flashlight apps on the App Store awhile back. As a result, Apple has decided to no longer accept those types of apps. Knowing these rules can save you a lot of time and effort. If you see any of your ideas conflicting with the guidelines, reject them and move on to the next one.
Step 5: Find Prospective Programmers

Coding your own app, especially if you’re teaching yourself at the same time, will take too long. The likelihood of you getting stuck and giving up is very high. It will also be unsustainable over the long run when you want to create several apps at the same time and consistently update your existing apps. After all, the goal is to get your time back and escape the long hours of the rat race. Therefore, programmers will be the foundation of your business. They will allow you to create apps quickly and scale your efforts.

Hiring your first programmer will be a lengthy process. You’ll need to: post the job, filter applicants, interview qualified candidates, have them sign your NDA, explain your idea, then give them a micro-test… all before coding begins! But while this process takes time, it is time well spent. Making great hires will help you avoid unnecessary delays, costs, and frustration in the future. You’ll always be looking to add new talent to your team, so learning how to quickly and effectively assess programmers is an important skill to develop.

Let’s get started. The first part of this step is to post your job to a hiring site.

    Top Hiring Resources

    These websites allow programmers to bid on jobs that you post. As you can imagine, the competition creates a bidding frenzy that gives you a good chance of getting quality work at a low price.

    Here are a few of my favorite outsourcing sites:

    oDesk— Its work diary feature tracks the hours your programmer is working for you and takes screenshots of the programmer’s desktop at certain time intervals.

    Freelancer— This site has the most programmers listed. They claim that twice as many programmers will respond to your ad, and I found this to be mostly true.

    Guru and Elance. Both of these sites have huge lists of programmers.



Below is a template of a job posting, followed by an explanation for each of its components:


Click the image to enlarge.

Enter the skill requirements—What programming languages do they know? For iPhone apps, the skills I list are: iPhone, Objective C, Cocoa, and C Programming.

Give a basic description of your project—Keep it simple and skill-specific. Tell the applicants that you will discuss details during the selection process. Do NOT reveal the specifics of your idea or marketing plan. Use general descriptions, and request info on how many revisions (a.k.a. iterations) their quote includes.

Post your ad only for a few days—This way programmers have a sense of urgency to quickly bid on your job.

Filter applicants—I always filter applicants using these criteria:

- They have a rating of four or five stars.
- They have at least 100 hours of work logged.
- Their English is good.

Compose individual messages to all suitable applicants, inviting them to a Skype call for further screening. Most of these programmers will overseas, which can present issues with communication and time zone differences. Therefore, a Skype interview is an absolute must before you can continue. Disqualify anyone who is not willing to jump on a Skype call.

    The Interview: Essential Questions to Ask Programmers

    Don’t give away any of your ideas during this initial conversation. Whenever the topic comes up, say you’ll be more than happy to discuss everything after they sign the NDA (if you want a copy of the NDA template I use, see the bottom of this post). Here are the questions you should ask each applicant before committing to anything:

    - How long have you been developing apps?

    - How many apps have you worked on? Can I see them?

    - Do you have a website? What is it?

    - Do you have references I can talk to?

    - What’s your schedule like? How soon can you start?

    - What time zone do you work in? What are your hours?

    - What’s frustrating for you when working with clients?

    - Are you working with a team? What are their skills?

    - Can you create graphics, or do you have somebody who can?

    - Can I see examples of the graphics work?

    - What happens if you become sick during a project?

    - What if you hit a technical hurdle during the project? Do you have other team members or a network of programmers who can help you?

    - How do you ensure that you don’t compete with your clients?

    - Can you provide flat-fee quotes?

    - What’s your payment schedule? How do you prefer payment?

    - Can you create milestones tied to payments?

    - Do you publish your own apps on the App Store?

    - How do you submit an app to the App Store? (Can they verbally walk you through the process, or do they make you feel brain challenged?)

    Finally, mention that you like to start things off with a few simple tests (creating/delivering your app’s icon and a “Hello, World!” app) before coding begins. You need to tell them this upfront so they aren’t surprised after they have provided their quote. Most programmers are happy to get these tests done without a charge, but some will want a small fee. In either case, be clear with this requirement and have them include it in the quote.

During the interview, pay attention to how well they are able to explain themselves. Are they articulate? Do they use too much techno babble? Do they speak your native language fluently? Do they seem confident with their answers? How is their tone and demeanor? If you have any issues or worries, you may want to move on to somebody else. But if you can communicate with them easily and your gut is telling you “Yes,” you’ll want to proceed to the next step.

In either case, thank them for their time and mention that you will follow up with an NDA agreement if you decide to move forward.
Step 6: Sign NDA, Share your Idea, and Hire Your Programmer

You must protect your ideas, source code, and any other intellectual property. These are the assets that will build your business, so you need to have each potential programmer sign an NDA before you hire them. Yes, it’s rare to have an idea stolen, but it does happen (read the bottom of this post if you want a copy of the NDA that I use).

As you’re going through this process, you will be getting feedback on your programmers’ responsiveness. For instance, if it’s taking too long for them to sign the NDA, it might indicate how slowly the development process will move. Buyer beware!

Once the NDA has been signed by both parties, you can share your idea and designs with your programmer. At this stage, it’s critical to ensure they have the skills to complete your app. You do not have any wiggle room here, especially on your first app. Either they know how to make it or they don’t. You want to hear things like, “I know exactly how to do that” or “I’ve done similar apps, so it will not be a problem.” You don’t want to hear things like, “I should be able to do that, but I have to research a few things” or “I’m not sure but I can probably figure it out.” If you hear those words, switch to an app idea they are confident about or run for the hills.

After you’ve found the best programmer for the job, you can commit to hiring them. Establish milestones and timelines during the quoting process (break up the app into several parts), and decide on a schedule for check-ins that you’re both comfortable with (ask them directly how they like to be managed). You will need to periodically review their work, from start to finish. Most applications go through multiple iterations during design and development, and I won’t release partial payments until I’m fully satisfied with each milestone.
Step 7: Begin Coding

Rather than jumping haphazardly into a full-fledged project, I prefer to gradually ramp up my programmer’s workload by starting with a couple smaller tasks. You need to assess their graphics capabilities, implementation speed, and overall work dynamic (e.g. communication, time zone, etc.). If you’re underwhelmed with their skills, you need to get out quickly. Remember: Hire slow, fire fast. It will pay off over the long run.

Here’s my three-step process during the coding phase:

1. Icon—Ask the programmer to create and deliver the icon of your app. You will probably have several ideas for icons, so pass them on and ask for a finished 512 x 512 iTunes Artwork version of the icon.

2. Hello, World!—Ask the programmer for a “Hello, World!” app. It’s a simple app that opens up and shows a page that displays “Hello, World!”, and it will take them 10 minutes to create. The idea here is not to test their programming skills, but to determine how they will deliver apps to you for testing. This app should include the icon they created, so you can see how it will look on your phone.

3. App Delivery—When the programmers are ready to show you a test version of your app, they have to create something called an “ad hoc” (a version of your app that can be delivered to and run on your iPhone, without the use of the App Store). This ad hoc version of your app needs to be installed on your phone before you can test it. The initial installation was a bit cumbersome in the past, but a new service called TestFlight has simplified the process. I ask all programmers to use this service even if they have not used it before. They will be able to figure it out, and you’ll be able to install your test apps with a few touches on your phone.

The first version of your app is finished and delivered, and you’re now staring at it on your phone/tablet. Give yourself a pat on the back — you’ve made serious progress! But don’t get too caught up with yourself, because now it’s time to begin the testing phase.
Step 8: Test Your App

If you were having a house built, you’d want to make sure everything was in working order before you signed off. You would check major things like the roof and plumbing, all the way down to minor things, like crown molding and paint. You need to do the same thing with your app.

To start, your app must perform as expected. Pull out your initial design document and go through every feature. Never assume that something works because it worked last time you tested the app. Test each feature every time, especially before the final release.