Software businesses provide consumer solutions using the latest technological innovations. Microsoft and Apple are some of the pioneers in the software industry, but newcomers continue to provide an array of new products and services.
You can also unleash your potential with a thriving software business. The software industry does seem saturated, but there is still a huge potential if you have dreams of owning “my software business.” Here are some tips on starting a successful software business by finding solutions that can meet various needs and let your company stand out.
How to Start a Software Business
Two of the most significant things to consider before starting a software company are your qualifications and the issues you want to solve through your software company.
To become a software startup founder, a computer science, business, or marketing degree is unnecessary, but having at least one can prove valuable. Training programs and on-the-job experience are ideal precursors because they can give you some critical skills for running a software company.
The next step is to identify the problem you want your software to solve. It does not always have to be something innovative. Often, software products add something useful to an existing product. Other considerations are the viability of the product and the market demand.
Once you have identified an existing market, you can start planning your software business.
1. Legal Structure and Other Legal Considerations
Consider which legal structure is best once you start a software company. The legal structure of a business defines how it files its taxes and how its profits are taxed.
Choose one of the following legal structures according to your business goals:
Sole proprietorship – This easy and common business structure means you own and operate the business. It does not provide for a legal separation between the two, meaning you are solely responsible for the business profits, losses, and liabilities.
Partnership – If you want to start the business with another individual, you need a partnership. You sign an agreement about your individual percentage share in the business profits, losses, and debts.
Limited liability company: With an LLC, you, the business owner, have protection from personal liability. You pay taxes on your portion of the profits through your individual income tax return and pay self-employment tax.
Corporation: You create a legally independent entity belonging to shareholders, filing the business taxes separately from yours. The drawback of a corporation is double taxation, meaning it’s not suitable for a smaller company. Choose this if you foresee fast business growth.
Once you have decided on the best business structure, research the rest of the legal requirements for starting a software business. These include applying for national and state permits and licenses that keep your business compliant and safe from repercussions.
Besides federal taxes, businesses must also pay state and sales taxes, depending on the state and business legal structure. You need a tax identification number to pay taxes.
Finally, every business must register a business name with the state. Choose a suitable one for your software business and a DBA (doing business as) if you plan to conduct your business under another name than its legal name.
2. Create Your Business Plan
Your software business needs a business plan and robust software business strategy to attract potential investors and act as a roadmap to ensure it thrives. In it, you define the purpose and role of your business as you navigate and grow it to find its rightful place in the software market.
It must include the following:
- Describe your company and the type of software you plan to develop
- Your business location
- Your target markets
- Name your competitors
- Research data and overview of the current software market
- Operations plan
- Your business financial plan (include your startup costs, running expenses, and funding sources)
- Equipment required
- Business name and legal requirements
3. Fund Your Software Business
You may not need to read further if you are lucky enough to have the funds to start a software company. However, most businesses need to raise capital as they start, and you may need more resources once you start expanding.
Popular ways to fund a software company include:
- Venture capital investors (some specialize in software companies). They give you the capital in exchange for some share equity.
- Grants or loans from the Small Business Administration (SBA), educational institutions, or government agencies are worth pursuing.
- Loans from lending institutions are more difficult to get, and you need to pay these back with interest over a predefined period.
- Use your savings and ask friends and family to help fund your business with the rest of the money.
4. Determine Your Costs and Expenses
Understanding the costs and expenses of your software business is vital to ensuring it is adequately funded and successfully run. These include:
- Employee wages
- Costs for research and development (R&D)
- Software marketing and promotion
- Business location rental
- Equipment, office furniture, and supplies
- Costs for software development like data storage, servers, and applications
5. Hiring the Right Employees
You cannot run a software business without the right employees that will contribute to its success. You will need a hands-on approach to hiring a software development, marketing, and administrative team.
Look for candidates with the right qualifications and passion to match your culture. Valuable employees come with the right skills to complement and enhance your skills. You can attract valuable talent by offering the company stock.
6. Test Your Software Products
Software products require testing to ensure you fix any problems before they reach the market. Testing is crucial to your software business’s reputation, helping you gain customer loyalty in your product’s lifecycle as early as possible.
Whether you have a dedicated team of experienced developers or outsource quality control, you must provide the steps to assess the product correctly. Before finalizing and releasing the product, invite some end users to evaluate its functionality.
Promote and Marketing Your Software
Once your software is ready to hit the market, you must promote and market it online where your clients are by creating a solid presence. Create an attractive and user-friendly website, promotional campaigns with a taste of what your software offers, and an active social media presence.
Guard Your Software from Intellectual Property Theft
Software is especially vulnerable to intellectual property theft, damaging your software startup’s prospects and reputation. Measures to take include:
- Anyone with access to privileged information must sign a non-disclosure agreement (NDA) drafted by an experienced and trusted business lawyer.
- Obtain the patents and trademarks for your software, product names, and symbols through an experienced patent or intellectual property lawyer.
- Register your product copyright. Copyright protections have longer validity than patents.
Insure Your Software Business from Risks
According to Embroker, some of the risks you must insure against include the following:
- Cybercrimes like ransomware attacks and data breaches.
- Technology errors & omissions insurance (Tech E&O) protects against liability risks of the tech industry.
- Business owners’ policies to protect it from property damage, general liability, and any business interruptions.
- Get worker’s compensation insurance and employment practices liability insurance (EPLI). The first protects employees from work-related injuries, and the second protects employers from employee claims against them.
Tips for Running a Successful Software Business
Success in software requires meticulous planning, strategic decision-making, and a relentless pursuit of innovation. Here are some tips to help you thrive in the software industry:
- Stay updated on industry trends: The software business is dynamic and fast-paced. You must keep abreast of the latest technology advancements and industry trends to stay competitive.
- Invest in customer service: Providing excellent customer service can be a significant differentiator for your software business. Make sure to address customer queries promptly and resolve their issues efficiently.
- Continuous learning and improvement: Always look for ways to improve your software product. Encourage feedback from users and make necessary improvements based on their input.
- Network: Networking can lead to valuable partnerships and opportunities. Attend industry events, engage in online forums, and join professional associations in the software industry.
- Invest in your team: Your team is your most valuable asset. Invest in their development and create a conducive working environment to foster creativity and innovation.
- Prioritize cybersecurity: With increasing threats of cyber attacks, it’s crucial to prioritize security in your software. Implement robust security protocols to safeguard your software and users’ data.
Remember, running a successful software business is a marathon, not a sprint. You can build a profitable software business with patience, determination, and the right strategies.
Suppose you want to say proudly. “This is my software business,” then use the advice above to unleash your potential and build a thriving software company. With commitment, patience, and time, you can realize your vision and create software everyone wants to use!
What are the primary expenses in running a software business?
The primary expenses include employee wages, research and development (R&D) costs, software marketing and promotion, business location rental, equipment and supplies, and costs for software development like data storage and servers.
How do I protect my software from intellectual property theft?
To protect your software, you should have anyone with access to privileged information sign a non-disclosure agreement (NDA), obtain patents and trademarks for your software, and register your product’s copyright.
What insurance should I consider for my software business?
You should consider insurance against cybercrime, technology errors & omissions insurance (Tech E&O), business owners’ policies, worker’s compensation insurance, and employment practices liability insurance (EPLI).
What are some tips for running a successful software business?
Staying updated on industry trends, investing in customer service, continuous learning and improvement, networking, investing in your team, and prioritizing cybersecurity are some tips for running a successful software business.
How can I promote my software product?
To promote your software product, create a solid online presence with an attractive and user-friendly website, promotional campaigns showcasing what your software offers, and an active social media presence.