I have a product I'm developing on my own, with no other investors or partners. Via another project I'm developing, I have an IP Waiver and NDA that I can use for the project, I'm using my personal computer and resources to build the application.
The product is a web-based application for a particular market, which can be very niche, or grown, as I have the time and resources available to build it. That is, the fundamental components of the application are NOT niche, but the way it's presented IS niche. When I have time/resources to add additional presentation methods, the niche market can grow.
My question is this: I have a very small budget to spend money on for the project - $1000. I have the personal technical expertise to develop the architecture of this application, but I am not a web designer or a graphic designer. I have one user of the application already lined up, with a potential second. I have three companies who's clients would want to use this application who have agreed to do some beta testing for me, free of charge, prior to the public launch, and, if they like what I've done, to promote it to their clients. Both beta testers are technical in nature, and will be somewhat forgiving of a simple UI in the first version.
What would you say would be the best use of my money? I already have the domain for the site registered, and have earmarked $75 for hosting for one year (yes, I priced it out, and the only reason I would have to increase that would be if I had enough revenue to justify the increase).
So, $925 to spend to design/build/test/launch/market/support the application. What do I spend the money on?
This is a tough one, but instead of focusing on the thing you don't have (money), focus on the thing you do have (time and talent).
Getting early customers is always, always hard. My advice would be to kick off a blog (that's a long term play, but still necessary). Second, start locating bloggers that are in your industry and forging the relationship. Read what they write, contribute to their conversations. Start poking around in twitter and LinkedIn answers. The idea is to find people that are not just potential customers (which would be great), but also find potential influences and well-wishers.
But, as soon as possible, you should be working to find real customers for the application, not just free beta testers. People willing to support you in the early days is great, but it still doesn't help you answer the question as to whether people will pay for it.
I took a look at the root site of your blog, and I'd say improving your web design needs to be a top priority. Spec out what you need for the sales site, and find someone on eLance that can set up a CMS and theme it for you for $500. It doesn't have to be original, it just needs to look professional. You'll need to do the work to make the application itself look similar. Request a minimalist theme; it will be easier for you to reproduce its look and feel (pay attention to colors, fonts, and spacing).
Don't pay for a logo yet. Your first logo should simply be beautiful type. Try some different fonts for the product name, save them, and show screenshots of the site to friends, with different versions of the logo in each, to get some feedback on which font best matches the feel you're going for with the product.
After typography, the next best thing you can do to improve the design of your site and app is add icons. Check out http://www.smashingmagazine.com/2009/03/03/how-to-use-icons-to-support-content-in-web-design/ for a guide. There are many free icon sets available with varying licensing restrictions, but consider shelling out $50-$100 for an icon set.
As far as marketing budget goes, I couldn't say without more information about the product and market for it. It's always worth investigating the relevant keywords and seeing how much a search enginge Cost Per Click campaign would cost you.
Make sure anything the users' experience is as good as possible. All the rest can wait.
What you have is time. Code your design yourself. Learn CSS (it's not that hard). There are millions of free resources out there.
Start a blog. It's the best way to attract the attention of Google (SEO).
Once all of this is done, you'll still have $1,000. I wouldn't spend the money on anything. No formal PR. The trick is being persistent. Start your blog now, not when your product is in beta.
One suggestion on how to proceed and where to focus your energies (and money) would be to read Getting Real - 37Signals excellent online book on how to create and run a web application company.
When looking at expenses and where to spend your money, you should put together a basic budget on what you expect the costs to run your company would be (and put some of your up-front funds in reserve) - since you mentioned it is a web application, your $75 hosting / bandwidth budget may be very low if you start to capture significant traffic.