Companies have spent more money on software as a service (SaaS) applications every year since 2010.
There is little doubt that the software industry will continue to grow. Small businesses and large organizations alike are looking for ways to automate more tasks and be more efficient. Software solutions can help.
Do you have an idea for a software company that can provide useful solutions for people or companies? You’ll need to know how to start a software company to turn your idea into a reality.
Read on to find out how you can start a software company that makes a big difference and is highly profitable.
Start With an Idea
The place you have to begin is with your idea. There are a lot of questions that you want to get out of the way early in the process. For example, you want to decide what your software will do.
The three most basic questions are:
- What will the software do?
- Who is it for?
- What makes your software different?
Flesh out your idea and get a sense of what you want your offering to be and do for people. Your answers don’t need to be perfect.
You can then take the next step in the process and figure out the implementation. For instance, will your software be cloud-based, or will it be installed locally? Will users need a mobile app with the software?
This is your preliminary roadmap that will be fleshed out as you go through the journey to start your software business.
Perform Market Research
Market research is necessary to get data behind your answers. With market research, you understand what the competitive landscape is.
You want to know the competition inside and out. Know what they offer, their pricing, and how they message the product to appeal to users. You need to position your software in a way that’s different.
For instance, you may decide to position your software as a premium platform for your audience. Based on the information you find here, you may adjust your initial ideas.
If your initial idea was to have a software that’s installed locally, you’ll learn in your research that SaaS is a fast-growing segment of the software industry. More companies are migrating to internet-based solutions as they look for ways to be more efficient.
Understand Who You Serve
You’re in business to make money, but you also have to find a way to serve people, too. You have to take the time to narrow down your niche.
The mistake that software companies make is that they try to appeal to everyone. A financial software company can try to appeal to anyone who has an interest in finances.
That could be anyone. That company could try to reach financial planners, or they could target millennials trying to pay off student loans faster. They could target small business owners who need to manage their business and personal finances.
The reason why businesses are reluctant to niche down is that they fear losing potential customers. That’s not true at all. Companies that have a focused niche do better because they can make their product relatable to that specific audience.
As you figure out your niche, understand what their unique challenges are. That will help you as you market your product and create it.
Write a Business Plan
A business plan is going to be the most important document as you launch your company. It can be a map where you outline your entire business.
You have to have a competitive analysis, market analysis, and financial analysis of your business. Your plan needs to include more information about your company, such as your executive team and your operational plan.
The key to any successful business is to manage cash flow. Software companies tend to have it a bit easier than other companies. Once you have a stable base of customers, you have predictable income on a monthly basis.
Your business plan needs to show regular cash flow, which you can create by using an MRR calculator. This will show your monthly recurring revenue based on certain assumptions. The main assumption is your attrition rate, that is the percentage of customers you plan to lose each month.
Develop a Minimum Viable Product
You need to prove that you have the basis for a good product. That starts out with a minimum viable product. This is a bare-bones version of your software.
You want to create a focus group of prospective users who use the software. They’ll give you valuable feedback as to the pricing, the need, and the usability of the software.
Once you prove that you have something viable, you can move to complete the project. Software development isn’t a cheap thing to do, even if you are an expert programmer.
You can get your software to market much faster if you hire a team of developers to help you complete the project. Financing will become necessary to hire your team.
Financing can be done through SBA loans, peer-to-peer lending networks, venture capitalists, and angel investors. Each type of investment will have advantages and disadvantages.
A loan will depend on your personal credit and could have a high interest rate. You’ll also have to pay that loan back, adding to your monthly expenses. An individual investor will want a piece of your company.
Set Up Your Internal Systems
Before you launch your product, you need to make sure you have your internal systems set up. This is critical to provide seamless service to your customers.
You’ll need to have systems for customer support, sales, and payment management. You’ll also need software to manage your finances.
How to Start a Software Company
Do you want to know how to start a software company? Start with your idea and do your research to make sure you have a solution that people will want and need.
You then need to create a minimum viable product, get financing, and bring your product to market. Each step requires careful planning, which is why it’s important to have solid systems in place.
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