How to Calculate the Cost of a Software Bug: A Simple Formula for Small Businesses
For start-ups and small businesses, every dollar and every customer matters. Yet one of the biggest hidden costs in software development comes from bugs that leak into live system — the version your customers actually use.
A single defect can mean lost revenue, wasted developer time, reputational damage, and even compliance issues. And while the exact cost depends on your business, there’s a simple way to estimate the real impact of a bug so you can understand why QA is not an expense, but an investment. A lightweight inexpensive QA strategy can make a big difference to your business.
The Simple Formula for Bug Cost
Here’s a practical way to calculate the cost of a bug in production:
Cost of Bug = (Number of Users Affected × Impact per User) + (Internal Fixing Cost × Time to Fix)
Where:
- Number of Users Affected → how many customers were impacted (e.g., couldn’t buy, couldn’t sign up).
- Impact per User → lost revenue, refunds, or churn per customer.
- Internal Fixing Cost → developer/tester hourly rate.
- Time to Fix → time spent diagnosing, fixing, testing, and redeploying.
Example 1: E-Commerce Checkout Bug
- Bug: Checkout fails on mobile Safari.
- Users affected: 500 lost transactions.
- Average order value: $40.
- Dev team cost: $60/hour.
- Fixing time: 10 hours.
Cost = (500 × $40) + (10 × $60) = $20,000 + $600 = $20,600.
Example 2: SaaS Subscription Bug
- Bug: Trial sign-up conversion fails.
- Users affected: 200 trials.
- Lost revenue per trial: $100 (first month).
- Dev team cost: $80/hour.
- Fixing time: 15 hours.
Cost = (200 × $100) + (15 × $80) = $20,000 + $1,200 = $21,200.
Rule of Thumb: The 10x Principle
You don’t always need to calculate exact dollars. Industry studies show that:
- A bug found during development costs 1x to fix.
- A bug found in testing costs ~10x more.
- A bug found in production can cost 30x more (or higher).
For start-ups and small businesses, this multiplier can mean the difference between keeping customers — or losing them to competitors.
Why the Cost Varies by Business
The impact of a bug isn’t the same everywhere:
- Airline or Medical Software → A bug can cost lives. The true cost is beyond money — it’s priceless.
- Online Banking or FinTech → A defect can cause financial loss, reputational damage, and even compliance/legal penalties.
- Retail & E-Commerce → Bugs often translate directly into lost sales and abandoned carts.
- Small SaaS Startups → A single defect in sign-up or billing can stop growth in its tracks and scare off investors.
Even if you’re not running an airline or a bank, for a startup the stakes are high: every bug that reaches customers can stall your momentum, drain your runway, and undermine trust.
Key Takeaways
For small businesses and startups, the real danger isn’t just the cost of fixing bugs — it’s the opportunity cost of delayed releases, lost customers, and damaged trust.
👉 Investing in QA early saves you from firefighting later. Even a lightweight QA process — clear requirements, targeted testing, and smart tool choices — can prevent costly bugs from ever reaching your customers.
At QAPhase, I help lean teams avoid these pitfalls by building practical QA strategies that fit their size and budget.
Don’t wait until a bug hurts your business. Calculate the cost — and prevent it before it happens.
Want to protect your business from costly bugs? Learn more about my QA Process Review & Strategy service.