You’ve come up with a brilliant idea for software a business and are eager to get it off the ground. However, if you’ve never started a software company before, then you may not know what you’re getting yourself into. Before you start a software company, you need to fully understand what it takes to run such a business and do some research to see if this business is viable and potentially profitable.

With any startup, you run the risk of not securing the startup funds or not feeling confident to roll out the product, but there are some strategies that you can implement to better secure success.

Here is our breakdown for starting a software company, including what a software company is, and some tips to get it off the ground.


What is a Software Company?

A software company is unlike a basic IT team and encapsulates a business whose main product is the very software that they are selling. A software business might also be referred to as a business that sells Software as a Service (SaaS). For the most part, a software company doesn’t necessarily develop the software that they sell. Instead, they are involved in the production of that software or buying and selling different software products or services.

Anyone can start a software company as long as they have an idea for selling a software product. The software shouldn’t be developed already as you would have to pay for the transfer of rights or potential royalties for that item. Instead, you’d want to create an original idea for a piece of software and work with a ​software development team​ to create it.

Once the product is created and ready to be sold, the software company would need a platform to sell. Most companies operate online through eCommerce websites, but some might be attached to a brick-and-mortar store. Services might be sold alongside the initial sale of the product, including subscription-based software updates, software patches, basic software upgrades, implementing plugins or APIs, and customization.


Steps to Take Before Starting a Software Company

If you’re looking to start a software company, then you’ll want to first do some research to make sure your business is set up for success. Here are some steps to consider before you make your first move:

Conduct Market Research

Upon starting any business venture, it is wise to conduct some ​market research​ so that you understand the current market in which you are trying to gain entry and to seek the viable ways that your business could succeed within the current market. This will give you a better understanding of your potential competition, the gaps that your product can fill, customer pain points, market saturation, market decline, and so on.

Market research will really tell you how good your idea is. If you have an idea for a common service, then you’ll quickly see what is already out there. In creating an already-developed software concept, you’ll need to hone the aspects of your software that sets you apart from competitors. In this scenario, you’re entering the market at the maturity stage. This is often the best stage to enter because the idea is already there and your software will improve it.

If you have a new idea that no one has ever thought of, then you will be up against challenges like selling the value of your product and educating new customers (or developers) about its ins-and-outs. This is known as the introduction stage and it either suggests that your idea is in huge demand or there is no demand for your product.

Then, there is the decline stage, where software is introduced into an oversaturated market. In an oversaturated market, the product that you are trying to push is competing against too many competitors or competitors who are too powerful. Your idea lags behind and is likely to fail.

Identifying Your Sales Avenues

Identifying how you want to sell your product is just as important as identifying the market stage that your product belongs in. If you do not know how you will be selling your product or the types of people who would be interesting in selling your product, then you would likely be running into dead-ends come product deployment.

For the most part, you will be selling your software through a website so that your customers can download it directly to their devices. If you’re going this route, consider offering a free trial and continue to offer a subscription after the purchase of the product to encourage support, maintenance, and updates.

Direct sales will have you dealing with big companies or SMEs. In this case, you’ll need a license to sell the software or charge the subscription fee, depending on which sales tactic you choose. In this avenue, you may be able to offer customized or white-labeled software products that would improve the value and uniqueness of the product and separate your business from competitors.

Hire a Software Developer Partner

Unless you have a technical background, you will likely want a software developer on your side. A software developer can be an individual consultant or it can be a fully fleshed-out team that handles the software development stages as well as the support and maintenance stages.

Having a software business without a software developer is like selling paper without a paper mill. You need to make sure that your product will continue to please your customers and you’ll likely want to adapt as the market changes. Partnering with a software developer will enable you to do this.

Software development teams can be hired for long-term contracts, so don’t think that you will be shelling out hundreds of thousands of dollars annually just to keep a software team on call. A software development team will be able to catch security issues, keep your software compliant, alert you to market shifts, and keep software updated on a regular and timely basis.

Do your research and find a team that is reliable and that you can work with for a long time. Sometimes you can find a team that can do more than one thing, like also consult for ​business development​ or business marketing.

Understanding the Software Development Process

In starting a software company, you are essentially tackling two major tasks: the ​startup​ and operation of your business and the development and continued investment in your product (i.e., the software). Software development on its own is a complex process. Luckily there are software developers and development teams that you can hire to help you through this process and who will stay on with your company as your product evolves.

In finding a reliable ​software developer​, look for reviews from past clients. You want to know your developer has done this before and won’t put you through the wringer while they figure this out. Ask for client reviews and product demos. You could always recommend a prototype example so that you are better prepared for the process.

Software development is a multi-stage process, which could take months. Luckily software development has improved from the early 2000s where software development took years.

Now, a software development team can work with you from concept design to wireframing and prototyping, getting it to a point where you see the product before it is developed and you are happy with it. The developer will of course write and develop the codes behind the software, as well as seek user feedback and provide testing and implementation.

Vet each software development team that you look to hire so that you know that this process will run smoothly and that you’ll enjoy working with them.


Starting Up As a Software Company

Once you have addressed these initial steps, you can then “startup.” Starting up is its own process, which requires additional research and heavy lifting.

Some things to consider for the startup:

  1. You’ll likely need to patent or trademark your product in order to protect it. Look into intellectual property ​rights in your country.
  2. Create your business plan
  3. Try to prepare for legal potentials, like licenses, insurance, taxation, and potential legal issues
  4. Start your search for a software development team early
  5. Test the software

Once you feel confident that you can go to market, you can begin to ​market​ your business, find partners and sellers, and hire additional staff. Keep your software developer on call as a partner so that updates are regular and modifications to the code can be made quickly.

Starting a software company is extremely validating and fulfilling, but it’s hard work. Set yourself up for success with these tips and you’ll be well on your way to creating your software company startup!