When I graduated college I had no idea I wanted to start my own business. I just got my degree, started interviewing for jobs, and accepted one that I thought sounded cool. I went to work writing software for jet engine testing. That's pretty cool right?
Actually I really enjoyed it, but it didn't take long for me to realize I didn't want to work for somebody else. I knew how much money I made my company, and it turns out if you make that money for yourself you get to keep more of it. After 4 years I finally decided to give it a go.
My wife and I had been working towards this goal for awhile. We purposefully got out of debt by paying off 28k in school loans in 10 months. Then we saved up a 25k emergency fund. We wanted to have a big runway so that I didn't have to have a ton of pressure to make money NOW! If you are thinking about quitting and starting your own business, I'd highly recommend this. Getting our expenses down and our savings up meant I didn't have to worry about money for a few months, and that made starting the business much much easier.
Down to the business part. I make mobile apps. I started working on them in spare time just because I thought it was a cool technology and it might be useful to know. My first apps were simple utility type apps that look really terrible because I'm not a designer and I didn't want to spend a ton of money on my "hobby." I just wanted to go through the process of getting a few apps on the store and see how things worked.
One of those first apps was a simple battery app. It's almost embarrassing to admit. As ugly as it is, it does what it is supposed to and is rated 4.5 stars. Several years later it still makes roughly $50 a month.
Learning how to make iPhone apps ended up helping me at my old job as well. We added some things to the business and one of those led to me making a large iPhone app for them. I also made a version for WP7 while others worked on the Android version. It was great to get to spend my days learning more and making apps instead of just nights and weekends.
After working on apps on and off in my spare time for almost 2 years I decided I might like to try this full time. I started working almost as much during nights and weekends as I was at my regular job during the week. This part sucked. After about 2 months I decided that I couldn't stand doing that for much longer and I decided to quit. So in May 2011 I turned in my notice. That month I made 500 dollars from app sales.
Over the next few months I spent most of my time working on a set of budgeting apps. Getting out of debt we followed Dave Ramsey's debt snowball and envelope budgeting methods, and so I had been looking for an app to help with the budgeting. I was sick of trying to deal with envelopes of cash so I decided an iPhone app would work. At that point there were lots of budgeting apps, but none that imported transactions from banks AND had cloud syncing so my wife could stay up to date on the budget as well.
I made Ez Budget with a friend (which is free now, more on that later) and it worked great for what we wanted. I get all my transactions from the debit card, put them in envelopes, and it syncs on my wife's phone. Unfortunately, it didn't hit #1 on the app store. Turns out nobody likes budgeting, and spending $50 on UI design is just not enough. On the bright side it works great for my wife and I, and between the iPad and Mac version that I made over the next few months it does bring in a decent amount of money, not quite what we hoped though.
Side note: The worst/hardest thing about the last year has been customer support. It's amazing what people expect for free and $2.99 apps. Also, the major banks in America suck. They make connecting using the open Direct Connect standard a huge pain. When we were testing the apps with our banks they worked awesome. Fifth Third just lets you use your normal login and password and everything just works. I found out later that the major banks make you sign up with them ahead of time, change passwords, pay them $3.99-9.99 a month for the privilege, mail back a separate pin for logging in, etc. It has been a huge source of frustration and most of our bad reviews. Even after adding popup help in the app telling people this and offering my email to help them through, I still get reviews that say "This sucks I just get an error when I try to add Bank X."
Back to the business. After I realized the budgeting market wasn't going to fill 100% of my needs, at least not in it's current form, I made a list of apps that I'd like to have for myself. It doesn't matter if it already exists. There are over 600k apps on the store now, whatever you are thinking of probably exists. Just like any other business though, you can take marketshare if you make something decent.
I made some bigger apps and some more smaller utilities. I have 2 speedometer apps, one analog and one digital, because some people prefer one over the other.
Last fall I met a designer that wanted to get into the app business. That has been really awesome for me. We decided to partner on a few apps, and they look much better and have gotten great reviews.
Another short side note: It's amazing how the look of an app factors into reviews. I've seen apps that work terrible get 4-5 star reviews that go something like "This crashes a lot and doesn't do what I was hoping but it is beautiful" and then I get 2-3 star reviews on my budgeting apps that are "This is a great app that does just what I needed but it doesn't look that great." Unreal. My latest though is 5 stars after a month. 19 out of 21 5 stars and the others are 4 stars. It's amazing what a great UI designer can do for you - Debt Snowball+.
I'm not sure what conclusions I have other than it is definitely possible to make a living on the app store(s). The main thing would probably be to spend as much as you can afford on good design. It is really key. I haven't had anything you could call a hit, though the Debt Snowball+ app got to #125 overall when it released. Everything I've made sells though, and making roughly an app every 2 months keeps building the revenue. The biggest project so far has been the Mac version of the budgeting app and it gave me a huge revelation.
I worked on it from July - October. Nothing new released for a couple months. In October I made several thousand dollars, and more than in the previous few months just because Apple released a new phone. All of the money I made in October came from work I did in Feb-June. That was when I realized how great making money on products is compared to working hourly for someone else.
When you are working for someone else, the things you create make you money that month, and they make someone else money for months and years after that. When you work for yourself you don't make as much immediately, but you get to keep reaping the benefits month after month. Time != Money anymore.
Now for the pretty charts:
[A] Ez Budget for iPad released. Got some decent initial press which is the spike you see here.
[B] The upward trend and new plateau in Q4 was from the new iPhone 4s as well as Ez Budget for Mac finally getting released.
[C] Christmas. The end of December and much of January is a great time of year for app developers just like many other businesses. The new devices are helpful, but the bigger key in my opinion is the iTunes gift cards people get. They have extra money to spend on apps for awhile and it shows in our results for at least 3-4 weeks.
[D] Debt Snowball+ released. Featured on a few app websites and peaked at #125 overall and #2 in Finance.
That day I noticed I made a huge mistake. The ad network I added had a class named the same as one of my classes in a different part of the app. This means going to that part of the app is instant crash. I hadn't tested it before because I didn't change anything there. Lesson learned.
Then I made an even bigger mistake. I took the app off the store while I submitted an update to fix it. I was afraid I'd get too many bad reviews for having a crash button in the app. By the time the update was approved I lost my positions in the search rankings. It crashed to almost no downloads. Experiment fail.
 We just started working with Android last month. So far we just have 1 Speedometer utility app on the store to see how the whole process worked. Sales haven't been very impressive, but it's just a speedometer and we were a bit late for the party. Part of the plan over the next few months is to spend more time building Android apps not because I think they will make more money, but because I want to spread the risk some, and because porting things that are already done is quicker than starting from scratch. At some point I'll do a post comparing Android and iPhone, but this post has gone on long enough.
P.S - For anyone interested to see the entire range of apps you can check out all of them here.
If you've read this far and are interested in the mobile app market you may want to check out my book on how I make money on the mobile app stores called Building an App Business.