How To Open A Software Company – 9 Things I Wish I Had Known

Introduction:

Starting a business, especially a software company, is a dream of every young entrepreneur but it is not an easy task, since many other young entrepreneurs are also looking forward to starting their software businesses, thus it would not be wrong to say that there is cut-throat competition in the market So the question that lies here is how to open a software company?

It is important to mention here that many individuals who plan to open a software company try their luck in jobs either to gain experience or to figure out whether a software company is just about writing codes. The fact is that a software company involves strategic planning, creativity, and meeting the challenges of the market and it is a huge business. 

Just like any other business, software company business also requires identifying a proper market niche, a properly talented team, availability and management of finances, and many other countless factors that together lead the business of a software company to success.

If you are reading this article, it certainly means you are looking for guidance on how to open a software company and you want to avoid the pitfalls and not learn the hard way which many people do because of unplanned moves.

Over the years of experience, I have learned that a software company is not like a store that just has a great product it is about scaling the operations of your company intelligently, getting customer retention, and creating the environment that makes a fan base.

In this article, I will share 9 things that I wish I had known before opening a software company. I hope these 9 valuable lessons help the reader learn about the software business and enable him to not only make informed decisions but also help them avoid mistakes that compromise your business venture’s long-term success and derail the business.

Top 9 Important Steps for Opening A Software Company

Importance of Niche in the Software Business

The first and foremost thing the investor must do before opening a software company is to identify the niche of the company.

It is important to mention here that the software company investor must specialize in a specific niche and should not try to provide multiple products to appeal to every customer in the market.

If the business is started by identifying a particular business niche, it helps the investor properly understand the needs of the target audience, fulfill their requirements properly, and capture a large portion of the market.

Defining a business niche is of significant importance since helps the investor in planning product development and making effective marketing and sales strategies.

This can be demonstrated with a simple example, just for instance the investor gets an order to prepare software for a relatively small business, now, the investor if his business is niche specific will focus only on the features that are most relevant to the ordering party’s needs.

This would save time and effort for the investor’s company.   

Another big advantage of making a niche-specific software company is the opportunity to lead and dominate the market in that specific niche rather than competing with the whole market in different niches. For example, Shopify is a company that focuses on e-commerce tools. 

In a nutshell, when you are in the initial stages of business and are learning how to open a software company, it should be kept in mind that a well-defined niche, plays a vital role in making your product appealing to the customer and allows the business to properly and effectively utilize its resources.

A clear software business niche reduces the communication gap between the customer and the seller since it becomes easy for the seller to effectively solve the niche-specific problems.

This practice of defining a niche before starting the software company eventually leads to the long-term success of the business.

Developing a Sound Business Plan

Any business seeking success requires a roadmap, and it would not be wrong to say that a good business plan is a roadmap to any type of business.

A business plan encapsulates the vision, mission, objectives, and all the unique problems that your software company looks forward to solving.

A strong business plan is made after proper market research through which the target audience and their specific needs are identified, the solution you will provide, how your product will differ from other markets and how will you generate revenue through it – will it be through subscription, one-time sale, or the method of licensing will be used.

A clear marketing strategy along with the allocated budget should also be mentioned.

A good business plan works as a strong foundation stone through which you can pitch to investors and also guide your team in the process of growth.

Initial Budgeting and Funding

Any person who plans to learn how to open a software company must be well-versed in the importance of budgeting, financing, and start-up costs. 

A person who is under the impression that having an ample amount of money is the key to success in business is wrong because having money to start a business is not sufficient. An important key factor is managing money wisely.  

The entrepreneur must decide how he is going to fund his venture. The entrepreneur may use his savings to bootstrap the company or may even seek funding from external sources like venture capitalists. However, the advice is to choose the source that aligns with the business model.

Once the funding for the business is raised, the immediate next step should be the budgeting and allocation of the raised funds. 

A realistic costing of expenses includes but is not limited to, developers’ fees, software tool expenses, software designers’ costs, and marketing costs.

It is pertinent to mention here that at this stage the business is on the runway and is yet to take a flight and generate revenue therefore a close eye has to be kept on cash flow and expenses so as to avoid any surprises.

Concluding, a well-thought-out budgeting and financing strategy can make a pivotal difference and lead the business to the path of success.

Importance of The Right And Technically Sound Team

When analyzing how to open a software company, the investor must realize that he cannot do everything by himself. Building a team equipped with the related skills is the key to success.

A software company may produce an appealing product for the market with a lot of demand for it however but the investor should always keep in mind that the existence of the product was possible only because of the mutual efforts of the software team.

It is also important to mention here that the software team must be aligned with the business plan of the investor. In the beginning, the company may not be in a position to hire a large amount of staff but whoever is hired must be able to fill the weaknesses of the company and accept the strengths of the other staff members. For example, if you are technically strong but are weak in designing marketing and sales strategies, the person hired should be the one who covers this loophole.  

Another important point to be considered while learning how to open a software company is the ambiance of the company. The team of the company must feel trusted by the investor since every person in the small software company has somehow direct impact on the outcome. So, every team member must feel supported.

In conclusion, one of the most valuable assets of a software company is the right team since it is a pillar of support in facing challenges, staying focused, remaining motivated, and achieving success.

Focusing on Strong Marketing And Sales Strategies

An investor of the software company must understand that marketing a software company is not only about advertising, rather it is all about connecting your company with the right audience and building trust.

The owner of the software company must understand the problem faced by the targeted customer and explain how the offered software can solve the problem.

Content Marketing can be one of the best strategies for a software company. Blogging, Surveys, and how-to guides are effective tools that can be used to not only attract the audience and educate them but also promote and position your software.

SEO is another effective marketing tool that is used by an investor of a software company to optimize his website. SEO brings organic traffic to the website of the company. 

Here you can read about Digital Media Marketing

Social media marketing is another powerful tool that is used for the positioning and promotion of the software of a company. The platforms used in social media marketing include Facebook, Instagram, LinkedIn and Reddit.

These platforms are used to engage customers and share with them valuable insights about the product.

It is important to mention here that customer feedback must be encouraged since positive and negative testimonials both matters.

Software company owners must understand that marketing is about creating strong relationships with customers.

Producing a Minimum Viable Product (MVP)

A fundamental concept that is to be considered and kept in mind when opening a software company is the concept of Minimum Variable Product (MVP).

MVP refers to the broken-down version of the product of a software company. Putting simply MVP is that version of the product that requires updates and fixes with time.

It is important to mention here that the final product of the MVP must not take a lot of time since that will lead to a missed opportunity from the market by the investor.

Now the question that may arise here is why the MVP is launched. The purpose of launching MVP is to enable people to get hold of the product and then give reviews on it. These reviews allow the developers to improve and customize the product to the needs of the customer.  

The idea of MVP saves the developer from extra work and the investor from investment since the MVP initially deals with the core problem and improvements are made only if the customer welcomes the MVP.

In a nutshell, MVP helps the investor validate his idea. Another important point is that MVP need not be perfect it just needs to be working functional to get the attention of customers and demonstrate value. Once feedback is received after initial use in the market, additional features are then incorporated into it.

Choosing the right Legal Structure of your Software Company

While opening a software company one has to be clear about the legal requirements of this business. Without understanding the legal requirements of this business, one cannot learn how to open a software company.

Legal structure affects the complete structure of the company which includes but is not limited to taxes, risk management, and fundraising since it plays a vital role in the existence of the company. 

Several common structures of the company can be opted for while opening the software company. Each structure has both advantages and disadvantages.

Sole Proprietorship

This structure is followed by people who plan to go solo in their business. This is perhaps the simplest way to start a company. This business structure though has many advantages however the owner of the business is personally responsible for all the liabilities, debts, and legal issues. This makes the sole proprietorship structure rather risky.

Limited Liability Company (LLC)

This is perhaps one of the most famous types of business structure opted by many businesses in their startups. This business structure provides flexibility to the investor and protects his assets from business liabilities. If the entrepreneur has a small team and capital to invest, this structure can be a great choice.

Corporation (C-Corp)

This business is opted for by large technology companies who plan to raise venture capital. Although the corporation structure provides strong liability protection however this model comes with a lot of paperwork. Furthermore, rules of taxation may vary from region to region.

It is important to mention here that since the rules of opening a business and licenses vary from region to region and from country to country therefore it is a wise decision to consult and take guidance from a lawyer to establish a business to ensure that from day one the business starts moving in the right direction.

Importance of Customer Support

A very important aspect to be kept in mind while implementing the business plan and working on how to make a software company is customer support. Customer support is one of the most critical elements for the success of a company, especially for a software company.

The investor needs to keep in mind that building great software is only one part of the picture and that the customers are as important as the product itself for the company. 

The investor must take all necessary steps to offer quick and responsive customer service like video calls, email, WhatsApp, and live chat since it builds trust and customer retention is increased.

Here it is important to mention that responding to customer queries is not sufficient, in fact, the software company must seek responses from the customer through reviews and surveys since they help the company to improve the product, develop more products, and work on MVPs.

Once the customer feels that you are committed to fulfilling their needs, they will eventually become loyal customers and will also advocate your software in front of others.

Standby Plan for Scaling and Growth

A very crucial point to consider before the company hits traction is pre-planning. The growth must be planned before it is achieved. Entrepreneurs must identify key areas where scaling is required in the business.

Here you can read about Virtual Personal Assistants and their impact on businesses

This can be the area of hiring more software developers, Software designers, software testing teams, marketing teams, and expanding the infrastructure. A good option is to avail of cloud services for automotive repetitive tasks and handle the increased demand of the customers.

Growth in business means new challenges, so a solid scaling plan that is made before time and is in standby mode can smoothly lead your company from a small start-up to a thriving business.

Conclusion

In conclusion, the whole process of opening a software company which includes, identifying niches, building a business plan, securing funds, and making a scaling and growth plan, all steps requires deep concentration and effort. Challenges are an integral part of the business and cannot be avoided but a clear vision and a dedicated team can help you to cope with the challenges and overcome them.

If the right and timely decisions are made, and a strong foundation stone is laid for the business in the inception, then there is no stopping for the business’s success.