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How to Start a Software Company
Written by: Carolyn Young
Edited by: David Lepeska
Updated on March 2, 2023
Investment range
$3,550 - $8,100
Revenue potential
$130,000 - $520,000p.a.
Time to build
0 – 3 months
Profit potential
$117,000 - $156,000p.a.
Industry trend
- Decide if the Business Is Right for You
- Hone Your Idea
- Brainstorm a Business Name
- Create a Business Plan
- Register Your Business
- Register for Taxes
- Fund your Business
- Apply for Licenses/Permits
- Open a Business Bank Account
- Get Business Insurance
- Prepare to Launch
- Build Your Team
- Start Making Money!
If you’re a software developer, congratulations — your industry is going through the roof!
The US software market has more than doubled in the last decade and shows no signs of slowing down. If you think you have the “next big thing” in software, or want to develop software for others, you could start your own software company and haul in serious dough in a booming market.
But before you put on your developer’s hat, you’ll need to learn the business side of things. Fortunately, this step-by-step guide has all the business bases covered and will prepare you to launch a successful software company.
Looking to form an LLC? Check out the Best LLC Formation Services .
Step 1: Decide if the Business Is Right for You
Pros and cons.
Starting a software company has pros and cons to consider before deciding if it’s right for you.
- Massive Market – The US software industry is worth nearly $430 billion
- Good Money – Hundreds per hour to develop software
- Ridiculous Potential – Create the next big tech tool and the sky’s the limit!
- Education Required – Specialized skills are necessary to develop software
- Crowded Market – Lots of big players in the software industry
Software industry trends
Industry size and growth.
- Industry size and past growth – The US software publishing industry is worth $427.9 billion in 2022 after more than doubling in the last decade.(( https://www.ibisworld.com/industry-statistics/market-size/software-publishing-united-states/ ))
- Growth forecast – The US software publishing industry is projected to expand 4.1% in 2022.
- Number of businesses – In 2022, 15,452 software publishing businesses are operating in the US.(( https://www.ibisworld.com/industry-statistics/number-of-businesses/software-publishing-united-states/ ))
- Number of people employed – In 2022, the US software publishing industry employs 865,580 people.(( https://www.ibisworld.com/industry-statistics/employment/software-publishing-united-states/ ))
Trends and challenges
Trends in the software industry include:
- Low-code and no-code software development products are becoming more popular, which allow software developers to handle the process more easily.
- Thanks to Big Data, data management software is in high demand.
Challenges in the software industry:
- As technology evolves, developers often struggle to keep up with new trends.
- Because software is such a huge industry, it’s becoming more and more competitive, which means software companies must find a way to stand out.
Demand hotspots
- Most popular states – T he most popular states for software developers are Washington, California, and Oregon . (( https://www.zippia.com/software-developer-jobs/best-states/ ))
- Least popular states – The least popular states for software developers are Alaska, Hawaii, and Oklahoma.
What kind of people work in software?
- Gender – 20.7% of software developers are female, while 79.3% are male.(( https://www.zippia.com/software-developer-jobs/demographics/ ))
- Average level of education – The average software developer has a bachelor’s degree.
- Average age -The average software developer in the US is 39.5 years old.
How much does it cost to start a software business?
Startup costs for a software company range from $3,500 to $8,000. Costs include a computer, programs for development projects, and a website.
If you’re not already a software developer, you can get an online software engineering degree from a place like SNHU .
How much can you earn from a software business?
Software development companies charge about $250 per hour, sometimes more, for developing software to a company’s specifications. If you’re going to develop software to be sold directly to consumers or businesses, you’ll likely charge a monthly subscription fee. This is the software as a service (SaaS) model, and subscriptions cost anywhere from $10 to $400 per month, or even more.
These calculations assume you’re going to start with the first option, charging $250 per hour. Your profit margin should be about 90%. In your first year or two, you could work from home for 10 hours a week, bringing in $130,000 in annual revenue. This would mean $117,000 in profit, assuming that 90% margin.
As your company gains traction, you could work 40 hours a week. At this stage, you’d rent a commercial space and hire staff, reducing your profit margin to around 30%. With annual revenue of $520,000, you’d make an outstanding profit of $156,000.
If you get to the point where you’re developing software to sell directly to consumers, the sky’s the limit to how much you can make if your products are successful.
What barriers to entry are there?
There are a few barriers to entry for a software company. Your biggest challenges will be:
- The education necessary to be a software developer
- Facing a market that is crowded with software development companies
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Step 2: hone your idea.
Now that you know what’s involved in starting a software company, it’s a good idea to hone your concept in preparation to enter a competitive market.
Why? Identify an opportunity
Research software companies in your area to examine their products and services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a company that offers a software solution for financial management, or a custom delivery app software company.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as software for retailers or software products for startup companies.
This could jumpstart your word-of-mouth marketing and attract clients right away.
What? Determine your products or services
You’ll probably start out by developing software solutions for businesses and charge an hourly rate for software engineering. For example, if someone wants to start a delivery service similar to DoorDash, you’ll develop the software for them. You can also offer web development and mobile app development.
Later, you may want to develop your own proprietary software that you can sell, such as business management software. When you do so, you might want to start with a minimum viable product (MVP), which is a basic version of your product that you can use to test the market and then determine features to add based on customer feedback.
How much should you charge for software?
Hourly rates for a software development company are about $250. Your profit margin when you’re working by yourself should be about 90%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Who? Identify your target market
Your target market will be businesses or aspiring entrepreneurs. You can connect with both on LinkedIn or find business owners on Google and Yelp and call them directly.
Where? Choose your business premises
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist , Crexi , and Instant Offices .
When choosing a commercial space, you may want to follow these rules of thumb:
- Central location accessible via public transport
- Ventilated and spacious, with good natural light
- Flexible lease that can be extended as your business grows
- Ready-to-use space with no major renovations or repairs needed
Step 3: Brainstorm a Business Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
- Short, unique, and catchy names tend to stand out
- Names that are easy to say and spell tend to do better
- Name should be relevant to your product or service offerings
- Ask around — family, friends, colleagues, social media — for suggestions
- Including keywords, such as “software” or “software development”, boosts SEO
- Name should allow for expansion, for ex: “Jim’s Bakery” over “Jim’s Cookies”
- Avoid location-based names that might hinder future expansion
- Use online tools like the Step by Step Business Name Generator . Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
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Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Step 4: Create a Business Plan
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
- Executive Summary : Brief overview of the entire business plan; should be written after the plan is complete.
- Business Overview : Overview of the company, vision, mission, ownership, and corporate goals.
- Product and Services : Describe your offerings in detail.
- Market Analysis : Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis .
- Competitive Analysis : Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
- Sales and Marketing : Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
- Management Team : Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
- Operations Plan : Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
- Financial Plan : Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
- Appendix : Include any additional financial or business-related documents.
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to software companies.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your software company will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
- Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
- General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
- Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
- C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
- S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC , which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using Northwest Registered Agent’s online LLC formation service . They will check that your business name is available before filing, submit your articles of organization , and answer any questions you might have.
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Step 6: Register for Taxes
The final step before you’re able to pay taxes is getting an Employer Identification Number , or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist , and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
- Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
- SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan .
- Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
- Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
- Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities.
- Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
- Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
- Personal: Self-fund your business via your savings or the sale of property or other assets.
Bank and SBA loans are probably the best option, other than friends and family, for funding a software business. You might also try crowdfunding if you have an innovative concept.
If you have a unique idea for a software that you can develop to put on the market, you may be able to attract angel investors or venture capital. Tech startups are considered very investable because they have the potential for huge growth.
Step 8: Apply for Licenses/Permits
Starting a software business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration ( OSHA ), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package . They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Step 9: Open a Business Bank Account
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account .
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your software business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
- General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
- Business Property: Provides coverage for your equipment and supplies.
- Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
- Worker’s compensation: Provides compensation to employees injured on the job.
- Property: Covers your physical space, whether it is a cart, storefront, or office.
- Commercial auto: Protection for your company-owned vehicle.
- Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
- Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
Step 11: Prepare to Launch
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use project management software such as Azure DevOps , Zoho , or FunctionFox , to manage your projects, workflows, and collaboration.
- Popular web-based accounting programs for smaller businesses include Quickbooks , Freshbooks , and Xero .
- If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
Some of your business will come from the casual online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.
Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:
- Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area.
- Instagram: Same benefits as Facebook but with different target audiences.
- Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Schedule Consultation Now”. This can sharply increase purchases.
- Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.
Kickstart Marketing
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
- In-Person Sales – Offer your software to local businesses.
- Email marketing/newsletter – Send regular emails to customers and prospects. Make them personal.
- Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
- Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
- Pay – per-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
- Do a webinar – Share your software expertise online with a video seminar
- Testimonials – Share customer testimonials about how your software helped them
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization ( SEO ) practices. These are steps that help pages rank higher in the results of top search engines like Google.
You can create your own website using services like WordPress , Wix , or Squarespace . This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your software company meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your software business could be:
- Custom software for your hot startup
- Streamlined management software to keep your business running smoothly
- Manage your finances with our custom software solutions
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a software business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in software for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in software. You’ll probably generate new customers or find companies with which you could establish a partnership.
Step 12: Build Your Team
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a software business include:
- Software Engineers – assist with software development
- General Manager – scheduling, accounting
- Marketing Lead – SEO strategies, social media
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed , Glassdoor , or ZipRecruiter . Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Step 13: Start Making Money!
As a software developer, you know how in demand your services are. The software industry in the US has taken off in the last decade, more than doubling to reach well over $400 billion. Your own software company could open up a world of opportunity for you and allow you to build great software solutions for businesses all over the world. You could even grow your company into the next Microsoft!
You’ve added business knowledge to your resume now, so it’s time to get to work and launch your successful software company.
Software Business FAQs
For software companies, the sky’s the limit in terms of profitability. Software is a massive and growing industry, so if you’re a developer, there’s plenty of opportunity.
Software development companies charge about $250 per hour, sometimes more, for developing software to a company’s specification. If you’re going to develop software that you’ll sell directly to consumers or businesses, you’ll generally charge a monthly subscription fee of $10 to $400 or more.
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How to Start a Software Company
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How To Start a Software Company
How to start a software company faqs, helpful slideshows, videos & images, additional resources in the software publishing industry.
Starting a software company can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful software company.
Importantly, a crucial step in starting a software company is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
Download our Ultimate Business Plan Template here
15 Steps To Start a Software Company
- Choose the Name for Your Software Company
- Develop Your Software Company Business Plan
- Choose the Legal Structure for Your Software Company
- Secure Startup Funding for Your Software Company (If Needed)
- Secure a Location for Your Business
- Register Your Software Company With the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Software Company
- Buy or Lease the Right Software Company Business Equipment
- Develop Your Software Company Marketing Materials
- Purchase and Setup the Software Needed to Run Your Software Company
- Start Building Your Team
- Open for Business
1. Choose the Name for Your Software Company
The first step to starting your own software company is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your software company:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your software company.
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2. Develop Your Software Company Business Plan
One of the most important steps in starting a software company is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your software business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your software company.
- Company Overview – this section tells the reader about the history of your software company and what type of software company you operate. For example, are you an enterprise software company or a software as a service company?
- Industry Analysis – here you will document key information about the software industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, do they have a specific job title or work in a particular industry?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product : Determine and document what products/services you will offer
- Prices : Document the prices of your products/services
- Place : Where will your business be located and how will that location help you increase sales?
- Promotions : What promotional methods will you use to attract customers to your software company? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your business operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your software company make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
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3. choose the legal structure for your software company.
Next you need to choose a legal structure for your software company and register it and your business name with the Secretary of State in each state where you operate your software business. Below are the five most common legal structures:
1) Sole Proprietorship
A sole proprietorship is a business entity in which the owner of the software company and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
2) Partnerships
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a software company together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a software company include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
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4) c corporation.
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a software company is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your software company, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
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★★★★ ★ inc authority, ★★★★ ★ zen business, 4. secure startup funding for your software company (if needed).
In developing your software company business plan, you might have determined that you need to raise funding to launch your business. If so, the main sources of funding for a software business to consider are venture capital funds, personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a software company that they believe has high potential for growth.
5. Secure a Location for Your Business
You have some flexibility in deciding whether you want to secure an office space for your software company, build a remote team, or a combination of the two.
If you choose to buy or rent a physical location, consider:
- Driving around to find the right areas while looking for “for lease” signs
- Contacting a commercial real estate agent
- Doing commercial real estate searches online
- Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space
6. Register Your Software Company With the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
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7. Open a Business Bank Account
It is important to establish a bank account in your software company’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
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8. get a business credit card.
You should get a business credit card for your software company to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
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9. get the required business licenses and permits.
Every state, county and city has different business license and permit requirements.
Nearly all states, counties and/or cities have license requirements including:
- General Business License – A business license is typically required to operate a business in a particular state. The requirements and fees for a business license vary by state, so it is important to research the requirements in your state. Some common requirements for a business license include having a registered name for your company and filing articles of incorporation.
- Sales Tax License – A sales tax license is typically required to collect and remit sales tax in a particular state. The requirements and fees for a sales tax license vary by state, so it is important to research the requirements in your state. Some common requirements for a sales tax license include registering with the state department of revenue and applying for a seller’s permit.
Depending on where you launch your software company, you will have to obtain the necessary state, county and/or city licenses.
10. Get Business Insurance for Your Software Company
Some common types of insurance to consider include:
- General Liability Insurance – General liability insurance is a type of insurance that provides coverage for a business in the event that it is sued for negligence or other wrongful acts. This type of insurance can help protect a software company from lawsuits related to product liability, property damage, or personal injury.
- Errors and Omissions Insurance – Errors and omissions insurance, also known as professional liability insurance, is a type of insurance that provides coverage for a business in the event that it is sued for negligence or other wrongful acts. This type of insurance can help protect a software company from lawsuits related to software development, consulting, or other professional services.
- Product Liability Insurance – Product liability insurance is a type of insurance that provides coverage for a business in the event that its products cause harm to consumers. This type of insurance can help protect a software company from lawsuits related to product defects, design flaws, or improper instructions.
- Workers’ Compensation Insurance – Workers’ compensation insurance is a type of insurance that provides coverage for a business in the event that an employee is injured while working. This type of insurance can help protect a software company from lawsuits related to workplace accidents.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
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11. Buy or Lease the Right Software Company Business Equipment
To start, a software company really only needs reliable computers and basic office supplies. If you are opening a physical location for your software company, you might also need desks and other office furniture for your team, as well as reception furniture. If you plan to do many virtual meetings, be sure to invest in a decent webcam.
12. Develop Your Software Company Marketing Materials
Marketing materials will be required to attract and retain customers to your software company.
The key marketing materials you will need are as follows:
- Logo – Spend some time developing a good logo for your software company. Your logo will be printed on company stationery, business cards, marketing materials, and may even be seen when users load your products. The right logo can increase customer trust and awareness of your brand.
Quickly and easily create a memorable business logo
- Website – Likewise, a professional software company website provides potential customers with information about the products and/or services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how your target market perceives you.
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- Social Media Accounts – Establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your software company.
13. Purchase and Setup the Software Needed to Run Your Software Company
Your team will need a good software development platform. This can be something like Microsoft Visual Studio, Eclipse, or Xcode. The company also needs a good source code control system, like Git or Subversion. Finally, the company will need some good software development tools, like a compiler, an editor, and a debugger.
Slack is another popular tool among software development teams that allows members to keep in touch and help to build workplace morale among virtual workers. You should also explore bookkeeping and payroll software.
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14. start building your team.
Your team should be composed of individuals with the necessary skills and experience to help you build your product and grow your company. When assembling your team, it’s important to find people who share your vision and are passionate about your product.
It is a good idea to hire at least one product manager who can be responsible for creating and managing your product roadmap, defining product features, and coordinating development efforts
Any software development business relies on having a strong development team. You will need software engineers to actually design, build, and maintain the products you create. Likewise, your should plan on hiring sales and marketing team members to spread awareness about your products and make sales.
15. Open for Business
You are now ready to open your software company. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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Is It Hard To Start a Software Company?
Yes, it can be hard to start a software company. One of the biggest hurdles will be coming up with a great idea for software that people will want to use. Attempting to raise money needed to start a software development company can also be difficult. Owning a software company can also be a lot of fun and a rewarding experience, however, and the steps we have outlined above will help put you on the path to success. Just be sure to understand the needs of your particular business before you begin.
How Can I Start a Software Company With No Experience?
One of the most important things you can do to start a new software company with no experience is research. Look into the software industry as a whole, as well as how much it typically costs and the time needed to develop software. You might also consider connecting with experienced software development business owners who can give you their insights into the dos and don't of opening and running a successful software company.
What Type of Software Company Is Most Profitable?
There is no easy answer to this question, as the profitability of a software company depends on a variety of factors, including the type of software it produces, the size and location of the market it targets, and the level of competition it faces. However, some types of software companies are more likely to be profitable than others.
Generally speaking, an enterprise software development business can charge more for its products as the target market is often large organizations. Companies that make custom software may also charge more since they create tailor-made solutions for their customers, which often requires more resources and time than selling a premade software product.
How Much Does It Cost To Start a Software Company?
The amount you will need to spend to start a software development business will depend on the type of company you want to create, the services you offer, and the location where you plan to operate.
You will need to pay for office space, computers, software, and marketing materials. You may also need to hire employees or contractors. It is important to remember that you will also need to pay taxes on your income, so make sure you have enough money set aside to cover your expenses.
Startup costs for software companies range from $30,000 to $150,000 depending on the business scale.
What Are the Ongoing Expenses for a Software Company?
One of the biggest expenses for any software company is employee salaries. You'll need to pay your employees a livable wage in order to keep them happy and productive. In addition, you'll also need to budget for things like office supplies, marketing, and of course, taxes. Key expenses include:
- Wages – Over a third of revenue is comprised of wages.
- Purchases, Research and Development – Over 10% of software publishing revenue is spent for purchases, research and development.
- Other – The other costs in the software publishing industry comprise marketing costs, depreciation, rent, office supplies, furniture, etc.
How Does a Software Company Make Money?
There are a few ways that a software company can make money. The most common way is to sell licenses to the software that they create. This can be a one-time purchase or a fee charged on a subscription basis. In the case of SaaS, customers often pay a regular fee to access software over the internet instead of installing it on a local device. Another way to make money is to create add-on products or services that complement the software. These could be additional features or support plans.
Is Owning a Software Company Profitable?
The answer to this question largely depends on the specific industry and market conditions. However, in general, companies that produce and sell software can be quite profitable. The key is to have a unique and valuable product that meets the needs of your customers.
How Much Do Software Publishing Operators Make?
A software publisher earns an average of $61,000.
Why Do Software Companies Fail?
One of the main reasons software companies fail is that they do not have a clear vision and strategy. A company without a clear vision will lack focus and direction, which can lead to missed opportunities and failure. Additionally, a lack of strategy can doom a company to failure because it means they are not taking the necessary steps to succeed. Other reasons software companies fail include poor marketing, inadequate funding, and no customer base.
How Big Is the Software Publishing Industry?
There are 7,737 software companies in the U.S. and they generated $192.7 billion in revenue last year. This shows an annual growth rate of 3.6% in the past 5 years.
What Are the Key Segments of the Software Publishing Industry?
The main segments of the industry are Application software publishing and System software publishing. Other product segments include re-sale of computer hardware and software, Information technology technical consulting services, custom application design and development, and information technology-related training services.
What External Factors Affect the Software Publishing Industry?
A number of factors affect the performance of the software publishing industry. These drivers include:
- Private Investment in Computers and Software - When the demand for computers increases, the software publishing industry is positively affected. This year, investment in computers and software is expected to rise.
- Number of Mobile Internet Connections - An increase in the use of mobile internet connections make mobile devices more vulnerable to viruses, thus also increasing the need for security software and improving industry revenue. The number of mobile internet connections continues to increase.
- Corporate Profit - When the profit of companies rises, they tend to upgrade IT systems which involves purchases of new software.
- Demand From Video Games - An increase in sales from video games benefits the software publishers. This year, demand for video games will increase.
- Government Consumption and Investment - Government spending benefits the software publishing industry and it is increasing this year.
- Percentage of Households With at Least One Computer - An increase in the number of PC owners means there’s also higher demand for software. The percentage of households with at least one computer is increasing today.
- Per Capita Disposable Income - An increase in consumers’ per capita disposable income indicates that there is a high chance that they will purchase new software for personal use or entertainment.
Who Are the Key Competitors in the Software Publishing Industry?
Oracle Corp.
Microsoft Corporation
International Business Machines Corp.
What Are the Key Customer Segments in the Software Publishing Industry?
The largest customer segment in the software publishing industry is businesses. Households then make up about a third of all customers and government entities make up a small portion.
Measuring Your SaaS Success
Saas business models – keys to success, what do investors look for in api startups, code to company: lessons in building a software company.
How to Estimate in Software Development
6 Stages of Software Development Life Cycle
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For additional information on the software publishing market, consider these industry resources:
- The Software & Information Industry Association: www.siia.net
- US Census Bureau: www.census.gov
- The Entertainment Software Association: www.theesa.com
- US Bureau of Labor Statistics: www.bls.gov
- Software Mavericks: www.softwaremavericks.com
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How to Write a Software Startup Business Plan in 2023 [With Templates]
Updated 05 Jan 2023
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Technical writer
Every company is rooted in a unique business concept. However, having ideas isn’t enough for a company's prosperity and success. Many startups fail due to faulty training in their first year. An IT startup business plan is the first thing that can be corrected by organizing your thoughts and even finding the right people to work with, turning your idea into a prosperous project.
We'll cover how to write a startup business plan, thoroughly covering each part, give some advice, section templates, and more.
Why Does Your Startup Need a Business Plan
Before we go into precise statistics and data, let’s have a closer look at the notion of a business plan. It will assist you in better navigating the subject. The tech startup business plan is a document that summarizes strategies and ideas for the new company launch, support, and even an exit.
Now, we’ll look at stats to understand why a business plan is required. Startups fall due to a bunch of reasons: among the most widespread ones, CBInsights mentions running out of funds (for 38% of startups), absence of market need (for 35%), etc. A business plan can raise startup success chances.
Such a document serves companies for different purposes. The most common of them are:
- Attracting investments
- Building a development strategy
- Predicting your upcoming financial expenses and needs
How can the IT startup business plan assist business owners in implementing these purposes into life? It’s possible due to the following benefits such a document brings:
A technology business plan benefits
Remember that to gain these benefits, you must adhere to a specific structure when drafting your startup business plan. It must contain the following parts:
- Executive summary
- Company description
- Marketing plan
- Financial projections
- Team structure
“How to write a startup business plan” is a common question, and many entrepreneurs are looking for an answer. We’ll discuss it in detail, looking closely at each section.
Executive Summary of Technology Company Business Plan
This section serves as an introduction to the entire document. A well-written executive summary grabs readers' attention and instantly illustrates what your technology business plan is all about.
It typically includes the following parts:
Business overview
Introduce your startup to readers, tell them about your plans and offers. This section should be short - about 1-3 sentences.
Target market
Define the target market for your startup company. To make the section more useful and demonstrate your future startup value, provide a detailed market overview and client issues you would solve with your product.
Competition
Portray your possible competitors as well as the attributes that will set your company apart. Describe how you will compete in pricing, quality, or service structure in this part of the executive summary in your software startup business plan.
Emphasize your company's goals and particular milestones, illustrating the said with charts (including profit, sales, and ROI) for greater clarity of prospective investors. Think about financial estimates for different periods.
Briefly describe your team composition or tell about the lack of particular specialists and your possible ways to find them. Portray the existing staff members along with their experience, and don’t forget to mention the startup's technical partners .
The final section tells potential investors how much money you'll need to bring your idea to life. Tell this aspect to stakeholders beforehand, including the appropriate data to the executive summary.
Sometimes even the perfect technology company business plan is not enough for the stakeholders to pay attention to your project. They’ve reviewed piles of such documents, so one more, looking like the previous, may not interest them a lot. But you can change the situation by preparing a presentation of your business plan, where you can mark the vital concepts you’d like to share (e.g., company overview, problems you’d like to solve, startup team composition, etc.).
6 Tips to Create an A+ Executive Summary
We've compiled a list of recommendations to help you create an excellent executive summary of the whole technology startup business plan.
Tip #1. Write it last
Executive summaries should be written last as they summarize the entire business plan. That's why you should complete your research for all areas of your startup business plan and then write the executive summary.
Tip #2. Capture readers’ attention
An executive summary's main objective is to emphasize critical information about the tech company business plan. But, it's vital not to overload the summary with unnecessary details regarding the concept. It should grab people's interest and make them want to learn more.
Tip #3. Keep it structured
A well-defined structure of summary will convey your ideas. Consider including an introduction, main body, and conclusion that are short but informative. The important takeaways from your tech business plan would be provided by this structure.
Tip #4. Mention exit strategy
An exit strategy is an essential part for stakeholders. It can be an acquisition by another company after running technical due diligence , share selling, or employee buyout.
Tip #5. Use facts
Your primary goal is to persuade people to invest in your company. If your startup's goals, experience, and market perspectives are based on facts, they will have more impact. For instance, you may give information about market valuation and your expected market share.
Tip #6. Avoid cliches
There are a few hazards to avoid if you want your executive summary to succeed. For example, don’t mention the team’s passion and enthusiasm. Investors already know it. They’ve seen hundreds of passionate startups before. Instead, provide decision-makers with facts and let them say that for you.
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Company Description
The company description section of a technical business plan exposes its history, aims, team structure, etc. However, it is frequently the shortest part of the business plan.
Company history
This part is based on your company's current stage. If you're an established organization looking for money for a new project, it's a good idea to provide investors with some company background. In case you are a startup business without a rich history, you may tell who is behind the company and how the founders came up with the idea.
Give a brief description of your company's location, including a physical address, or inform investors about your prospective location coordinates. Whether you'll buy or rent an office, as well as how long you'll be using it as a company location. If you have a home office, also indicate this aspect.
Type of business
This section provides information about your industry. It should be brief but not excessively so. Don't write something like, "We're going to sell things." Indicate your domain: travel, healthcare industry, etc. Finish this section off with a domain description.
Management and employees
This is a chance for investors to get acquainted with your team. Mention all staff members and management personnel, defining their duties, abilities, experience, and accomplishments. Also, don't forget to include information about yourself as an opening. Describe any gaps in the team (if you have ones) and explain how you plan to fill them.
Legal structure and ownership
This data is critical for investors because taxation varies based on the legal structure. Specify if you're an LLC, a C-Corp, an S-Corp, a Sole proprietor, or in a partnership. Specify who runs the enterprise and what technical co-founder equity they have.
Company’s mission and principles
Write this part in a creative manner. Come up with one or two lines that precisely define the aims and ideals of your business.
Critical parts of Company description
You can also include the following parts in this section of a tech business plan:
Business scaling strategies
Scaling a business equates to laying the groundwork for your company's future development. So, writing this section of the business plan for technology company, think about appropriate systems, personnel, procedures, technology, or funding — everything you need to scale.
Business opportunities
Prospective investors want to understand why your company’s considered to be profitable. Tell them about your business opportunities, offering information about factors of your future success, specialists you’ve consulted about your business, and their thoughts about it, reasons for selling the certain articles/services, and profit they may bring, etc.
Marketing Plan
It outlines the company's competitive advantage as well as its marketing objectives. This part of the business plan for startup also aids in the particular domain identification and the development of a viable business strategy.
Moreover, you can define and put down such important data as a qualitative concept description and strategies for attracting clients to show stakeholders how to differentiate your startup activity from your competitors’ and ways you may engage the users to cooperate.
This part of the business plan for a tech startup is typically divided into three sections:
Marketing plan components in a nutshell
Target Audience Analysis
Customers are vital to every company. So, you must determine to whom you will offer your services. Begin with easy tasks and work your way up to more complicated ones.
Let's say your firm is an online car parts store that you want to open on the West Coast of the USA. Your potential core audience may look like this after brainstorming:
- Gender (Males)
- Age (16 - 60)
- Location (Los Angeles, CA)
- Education (Secondary)
- Income ($60,000 - $75,000)
- Ethnicity (drivers, service stations workers)
After determining general characteristics, it is time to dive deeper into the analysis. It can be done in a variety of ways in every sample business plan for tech startup.
Conduct surveys
According to your audience assumptions, you may collect focus groups and conduct surveys. It is possible to complete them both online and personally for technology business plans. Surveys can help you learn more about your consumers to provide better service.
Analyze competitor’s audience
Competitors already meet consumers’ needs, and your task is to identify their audience and understand what makes them use their product or service.
Examine your rivals' marketing channels to see how they do it. Visit their websites, follow them on social media, and sign up for their newsletter. These procedures will assist you in identifying the pain areas of your clients.
Create a buyer persona
The final stage in the target audience study is to create a buyer persona based on the research findings from prior steps of every tech business plan example. Let's take a closer look at it.
A buyer persona is an ideal consumer description, including how they use their leisure time, the obstacles they face, and their decisions. Such a description may be created using various methods. For example, HubSpot's Make My Persona product works perfectly for it.
Learn more about how to identify your target audience in our article !
Competitor Analysis
Competitor research is critical to the company's success. It allows you to have a deeper understanding of your target market, as well as identify competitors, their tactics, and offerings, among other things.
You should follow three phases while conducting a competitive analysis for a business plan for tech startup.
Step #1. Find competitors
Start by searching for basic requests in Google. Make a list of your rivals in the same business as you and have similar ideas. After that, do some in-depth research, analyzing their social media posts, news reports, or consumer reviews.
Step #2. Examine them
It’s time to dig deeper. But keep in mind that you may need special tools like Ahrefs or SimilarWeb. Carefully examine the following criteria essential for every tech business plan sample:
Pricing. Analyze the charges for their services. It will assist you in determining the pricing boundaries for your goods. However, bear in mind that you are not obligated to value your product lower than your competitors in order to win the competition.
Organic traffic. Determine how many visits they receive due to a Google search. These metrics will display the popularity of your competitors. To handle them, you can use tools like Ahrefs, SimilarWeb, and Alexa.
Social media mentions. It's another way to look into your opponents' activities and see what consumers say about them. With tools like Followerwonk, Social Searcher, and Sprout Social, you can monitor engagement rates, keywords chosen, or social shares and mark them in your business plan.
Time on the market. You must determine the time on the market to see if you will compete with a major company or a start-up. The WHOis.net service may be used to examine the domain name registration date, server stats, and contact information.
Step #3. Categorize them
Even having learnt everything about your competition, you still need to watch your rivals and follow their movements. The next step would be to split competitors into three categories based on their “danger level”:
Primary competitors
These are the main ones oriented to the same core audience as you.
Secondary competitors
They can provide high or low-level versions of your services to a different target audience than yours.
Tertiary competitors
They are indirectly related to your company.
SWOT Analysis
It’s the final step of the section in every tech startup business plan example.
SWOT is an abbreviation of Strengths, Weaknesses, Opportunities, and Threats:
- Strengths contain your strengths, killing features, and those able to help stand out from the competition.
- Weaknesses mean your weak sides and flaws that may slow you down in a competitive race.
- Opportunities are the levers that’ll help you in business development.
- Threats are external threats that may impact your startup yet don’t depend on your decisions.
The SWOT matrix is a tool used by businesses to compile all their data into one page. To simplify this process, we recommend using the below technology business plan template (namely, one for SWOT analysis).
SWOT analysis template
Financial Plan
A financial plan is a projection of future income and costs for your business. It's an important aspect of strategic planning that can turn vague objectives into concrete milestones.
Complete the following parts in your business plan tech startup example or create them yourself:
Balance sheet
This part illustrates your present financial situation. A balance sheet is a wonderful method to forecast your future financial condition and design your growth objectives if you're searching for finances.
Expense projections
You must plan your future expenses classified into fixed and recurring costs to make your concept clearer to stakeholders. In general, estimate how much money will be spent on your idea implementation and how frequent these expenses would be.
Income projections
This part of the business plan tech startup needs summarizes the project's future earnings and sales. To begin with, you must predict your product's sales. After that, forecast the possible revenue for your startup using the sales projection.
Cash flow projections
The cash flow estimates are the last element of the financial plan. In a nutshell, it's a summary of all the money going in and out of the company. It shows your company's financial health at all stages of development, including the company's income and expenses. Depending on it, the remaining cash balance is calculated for a given time.
Monetization strategies
A company establishment and a beginning of the product development flow are only half of the way to market launch, impossible without a proper monetization strategy — a method of future profit gaining. For example, if your upcoming product is a fitness mobile application, you can implement advertisements, in-app purchases, freemium strategy, and others.
For successfully hitting your aims, you should know your destination, as well as the tools and methods you need to achieve established objectives. All this information can be included in your sales plan.
Though it’s considered to be a separate document looking like the business plan, the essential difference is that the business plan contains your objectives, and the sales plan mentions how to achieve them.
You can also include a sales plan as a section in a startup business plan, containing your situation assessment, financial forecasting, resources, revenue targets, etc. Document templates (for example, one from 150 Startups below) will help you understand which direction to choose.
Financial plan section
Tips to Make a Financial Plan
Preparing a financial strategy for a starting firm might be difficult, but it is essential for any business plan. To make the process easier, we've compiled four helpful hints answering how to write a business plan for a tech startup, namely this section.
Keep your financial plan in line with the business plan
The statistics in your financial predictions should back up all of your verbal goals outlined in earlier parts. For example, if you want to launch your product in the third quarter of 2022, you'll need to budget for marketing, shipping, and other expenses during that time.
Your financial assumptions must be clear
Even if the precision in figures of a financial plan is critical, most investors care about your projections comprehension. Demonstrate your understanding to them, providing enough material to back up your financial assumptions: annual financial statements, market/competitor analysis data, etc.
Be optimistic yet realistic
Even a significant financial plan requires a healthy dose of optimism. But don't go too far with it, or you'll come out as a dreamer to the investors. It's critical to balance the accuracy of the facts and the need to show a financially viable project to stakeholders.
Use templates
Many business owners have no clue where to start when creating a financial strategy or how to present it. If so, use pre-made templates with all of the essential sheets and columns.
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Team Structure
This is the final section of the business plan, informing investors about your startup's organizational structure. It may contain the following parts:
Management Team
Team composition is essential for a proper startup functioning, as well as for its future growth. If you’re going to launch a software development company, at the beginning of the startup’s existence, your project team formed may include:
- Chief Executive Officer (CEO) — an expert responsible for company management, supervising, human resources running, communication with CTO, etc.
- Chief Technology Officer (CTO) — a team member competent in development and technology areas, UI/UX design, back-end, or QA team supervising
- Chief Marketing Officer (CMO) — a specialist responsible for the clients’ perception of your service or product offered
- Chief Sales Officer (CSO) — an expert running all activities connected with business development
The software development team composition should contain the following specialists as UI/UX designers, front-end and back-end developers, QA engineers, and others essential for the product’s appropriate development.
How to build a software development team — revealed! Check our recent guide to know more!
So, list and briefly characterize each key management person in your business. Try to tie their expertise to your company's current responsibilities, using the business plan template tech startup requires, or write this part on your own.
For instance, if your VP of Sales has previously worked for an organization that increased sales from $5 million to $10 million, it would be a wonderful addition to demonstrate their knowledge and value on the team. You'll also demonstrate to investors that you've assembled a strong team they can trust with their funds.
Management Team Gaps
This is common when a company lacks some management team members while developing a business plan. If it's your case, you should make a list of any absent personnel and the particular skills for future candidates, such as experience in the needed sector, duties, etc.
For example, if you want to find a CTO for a startup , you can say that the perfect candidate must have 10+ years of experience, top-class knowledge of modern technologies, and extensive skills to effectively manage the team and develop the product.
Board Members
The Board of Directors is a hired group of individuals that assist you in running your business properly. Even if a Board of Directors is uncommon for startups, you may spot one in the team structure and care about these gaps to be filled.
Supplementary Sections For Your Business Plan
If you need to provide stakeholders and other readers of your business plan with additional information about your startup company, you may give it in a supplementary appendix section to your business plan example tech startup needs (or one created by yourself). It isn’t essential; however, your possible investors may need some more data about you and your business (a credit history, for instance).
So, the appendix should be prepared beforehand to save time in the future. You can include in it:
- Charts, tables, and other illustrations absent in the central parts
- Trademark/patent documentation
- Market researches in details
- Credit history
- Supportive papers (contracts, agreements, etc.)
You may also add here:
A production plan: it is your helper during production activity setting tasks that should be completed for aims achievement, every employee function in such a completion, and so on.
An operations plan: it may identify your startup’s primary business needs, such as equipment, requirements to inventory, office building, or location.
Preparing an appendix, care about its simplicity in reading and comfort in use. If it’s too long or contains too many documents to read, make a supplementary table of contents for more straightforward navigation of your plan readers. Disclosing confidential data, please monitor users having access to it and remind them about the necessity of maintaining confidentiality.
On top of that, the readers can skip the supplementary section as it’s the last part of your business plan; your prepared plan should be understandable and self-reliant. Otherwise, it will need reworking.
The Famous Startups Succeeded Due to Planning
A way to success and prosperity isn’t a bed of roses. World-famous companies began their way from startups one day, thoroughly planning every step on the road to fame. For you to inspire, we’ve prepared a shortlist of such startups’ success stories.
Samples of startups successful due to accurate planning
In the beginning, Pinterest was an invitation-only service. To go further on their development path, the company planned every business step, thinking about a proper UX for their product: Ben Silbermann even gave users his personal phone number to contact him about the site at any time of day or night. This perseverance paid off. Now Pinterest is a unique platform with $633 million revenue.
Canva is one of the leading graphic design platforms designers love to use for everything. This successful Australian business has raised over $US 1 billion of revenue. Due to proper scheduling policy and belief in workforce empowering, Canva CEO Melanie Perkins could make her company successful, having an audience of more than 10 million customers.
The well-known messenger allowing people to communicate worldwide was invented in a gym. When Jan Koum and his co-founder Brian Acton were annoyed with missing calls while at the gym, they created WhatsApp, which allows users to update their "status" to indicate when they are ready to accept calls. They only wanted to make a good product for customers, which approximately turned into more than $5.5 billion of revenue.
Netflix, which started its way as a rent-by-mail DVD service that required users to pay for each rental, is now worth more than $30 billion. It's a brilliant illustration of how pivoting a business model can significantly affect a company's direction. Netflix was able to further establish itself as the go-to media company by pivoting from DVD by mail to developing award-winning programming and gaining revenue of more than $US 7.5 billion .
Creating Your Own Business Plan
Strict planning of business steps was one of the essential things all the above companies had in common to grow and become more successful. We can personally propose a tech startup business plan template from Shopify that most nearly meets the points discussed above.
Shopify tech company business plan template
But remember that such a document will properly work if its critical blocks are created with the help of qualified experts. Cleveroad, a skilled IT consulting company and software solution provider from Ukraine, Eastern Europe, is ready to help you with initial project development phases and further ones. Since 2011, we've been assisting startups and organizations of all kinds in acquiring cutting-edge technologies.
During the collaboration with us, you’ll obtain a wide range of services, containing (but not limited to):
- Proven in-depth software development experience in a variety of sectors
- Working with high-qualified, certified, and agile-oriented Business Analysts, Solution Architects, and other tech specialists able to help you solve business issues
- Consultations from our Business Analysts and tech experts about your project
- Initial project estimates from our Sales Managers for free, with no hidden costs
- Honesty with our clients and partners as a critical component of developing outstanding products
You can also apply to us if you have problems with business plan creation. We’ll help you solve them quickly and efficiently build a software product for your business.
Order a consultation on a project
Book a call, and our Business Analysts will give you a full understanding of your software solution
Wrapping Up
Developing an information technology startup business plan is a complicated and time-consuming process that practically every company should undertake. You can adapt pre-made templates, but no one-size-fits-all template will work for every company. That’s why you may make your job easier, applying to specialists competent in software development.
A business plan can help you organize your thoughts, ideas, and even find the right people to work with. Even though making a business plan (or completing a technology startup business plan example) is a long and complex process, almost every startup should go through it.
Your startup business must have these sections:
- Executive summary. This section sums up the entire business plan and works as an introduction.
- Company description. This part reveals history, goals, team structure, and other details about your company.
- Marketing plan. A marketing plan is a representation of the startup’s competitive advantage and marketing goals.
- Financial projections. In plain language, it’s a forecast of the future revenue and expenses of your startup.
- Team structure. This section serves to familiarize investors with the hierarchy of your startup team.
- Step 1. First of all find a flexible template to jot down your business plan.
- Step 2. Write company description.
- Step 3. Define your goals, make a market research and jot down it's results in marketing plan.
- Step 4. Write financial plan.
- Step 5. Write your management team structure.
- Step 6. Sum previous section in executive summary.
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Thanks for the article! I'm an entrepreneur, and I've been stuck in this business plan stage. It's hard for newcomers to gather all their thoughts in one plan. But you've explained it perfectly!
Great job, very useful!
Good article. Found it interesting.
Nice piece of information. You've nailed its explanation. Besides, these templates that you've attached are really great. I think that they will suit perfectly for new startups.
Mar 01, 2023
Don't bother with copy and paste.
Get this complete sample business plan as a free text document.
Computer Software Business Plan
Start your own computer software business plan
FoodFun Lifeskills Instructional Software
Executive summary executive summary is a brief introduction to your business plan. it describes your business, the problem that it solves, your target market, and financial highlights.">.
FoodFun Lifeskills Instructional Software (FoodFun LIS) is a start-up organization whose vision is to create the finest education/entertainment software for non-reading individuals with developmental disabilities. The software product has been designed and created by a Ph.D. veteran of the special education industry, to meet the needs of this special customer segment. The software will be constructive by teaching certain lifeskills and will be fun to use, encouraging the student to use it as often as possible. FoodFun LIS was formed as an Illinois L.L.C. by founder and owner is Sue Altamirankow, Ph.D. and will be based in Chicago.
The Market FoodFun has identified four distinct market segments that will be interested in the software product. These segments are the most likely consumers of the software. The segments are as follows:
- Centers for Independent Living – These centers exist to help train individuals with developmental disabilities to live on their own. The curriculum is often based around four primary lifeskills that are necessary for the individuals to have in order to successfully live independently.
- School Districts – All states are required to provide education for students of special needs until they reach the age of 21. The school districts are often the educational providers until the students are 18 and will be interested in FoodFun’s software as they help the students obtain fundamental lifeskills.
- Proactive Parents – Parents who are taking an active role in the education of their children will be looking for aids that they can use at home to help with their child’s learning progress.
- Agencies – Many states have formed agencies that act as brokers to connect service providers with individuals. The agencies have generally been formed as a result of a settlement or payout from a lawsuit (including class action).
Parents are expected to purchase only one copy of the program, while the other segments will generally purchase multiple copies/site licenses and are likely to purchase upgrades to subsequent versions.
The Product Grocery shopping and socialization/leisure are two of the main lifeskills which individuals with developmental disabilities are taught. FoodFun has developed a unique software product that is an effective teaching aid for these important skills. The first component of the software is grocery shopping. This takes the form of a digital cookbook of recipes. Each recipe is represented by a picture. When the student chooses the picture they desire, they then see a list of pictures which are the ingredients and utensils needed to make the dish. The student is then able to print out the pictures and take the pictures to the grocery store, allowing them to shop independently.
The second component is the socialization/leisure time module that provides the user with a choice of many different social events/parties for which they can prepare food. This module allows students to plan for a party (and we know EVERYONE loves to plan for parties) and incorporates music linked to each type of social event to provide entertainment for the user. Many/most individuals with developmental disabilities will receive shear joy when they click on a social even and hear the music.
Competitive Edge There are several companies on the market selling educational products for this target segment. FoodFun LIS will leverage their competitive edge by incorporating entertainment into their software product, a means of creating interest and joy while using the software. This interest and joy will increase the amount of time that the students use the software, thereby increasing the effectiveness of the program. FoodFun is convinced that when students enjoy what they are doing they are likely to use the product instead of having to be forced to use it.
Management FoodFun has been founded and will be led by Dr. Sue Altamirankow. Sue has a Masters and Ph.D. in special education and has been teaching in the university setting for eight years. Her published thesis “Implications in Lifeskill Training for Individuals with Autism” was a ground-breaking paper that carefully studied all aspects of lifeskills. This was the foundation of her idea to start a software company. She realized that she could develop a study aid that would be fun and effective. It would be fun because the students would enjoy using it, it would be effective because it taught important necessary lifeskills to individuals with developmental disabilities who begin to live more independently. FoodFun has forecasted revenues of $400,397 and $490,000 for years two and three.
1.1 Mission
To develop fun-to-use educational software for non-readers with developmental disabilities. Our software will provide lifeskills training that empowers the individuals and make them more independent. We exist to make products that the market demands and have a positive impact on society.
1.2 Keys to Success
- Develop educational software that is constructive and fun. If it is not fun, it likely will not be used.
- Implement a strong marketing campaign to develop awareness of the software and its benefits within all of the training centers, school districts, brokerages, and among parents.
- Design strict financial controls for the organization.
1.3 Objectives
- Increase sales by triple for the first two years.
- Achieve 20% market penetration by year four.
- Assist more than 10,000 different individuals with development disabilities.
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Computer Software Business Plan Sample
MAR.03, 2021
Computer software business plan for starting your own company
Do you want to start a computer software business? Well, the business has immense demand these days. Firstly, because of the introduction of software that enhance business efficiency and productivity. And second, due to the coronavirus that has made people work from home.
Starting this business doesn’t require you to occupy a large space. However, the startup costs are still high. Mainly because of the costs of software and the salaries of software experts.
To make sure that your business is started and run efficiently, you must create a business plan computer software. To help you in making an accurate business continuity plan computer software company for your business, we’re providing here a business plan for software product . This sample business plan software for mac and pc is written for a computer software startup, Tech Solutions.
Computer Software Business Plan Summary
2.1 the business.
Tech Solutions will be a registered and insured computer software business. The business will provide all sorts of management, business, engineering, analytics, and computer repair software. The company will also offer software that allows integration with hardware devices. Moreover, some hardware accessories will also be sold by the company.
In this business plan sample of an online computer repair and sales of hardware and software, we’ll be providing all details of Tech Solutions for your guidance.
2.2 Management of Computer Software Company
To ensure the smooth and successful running of your business, it is essential to first create a business plan template for computer software. In your computer software reseller business plan, you should mention all details of how you will establish your business, hire the staff, purchase the inventory, and software for reselling. Moreover, it should explain a proper management structure that will allow you to cater to unexpected orders, staff problems, and financial issues.
2.3 Customers of Computer Software Company
Tech Solutions identified the following groups of people as its target customers:
- Companies & Businesses
- Engineering Schools
- Others (Retail Stores & General Public)
2.4 Business Target
We aim to earn and maintain a CSAT score above 90% within a year of our launch. Financially, we aim at earning a profit margin of $32.3k per month by the end of the three years of our launch.
Company Summary
3.1 company owner.
Tech Solutions will be owned by Dustin Grant. Dustin is a software engineer who has also acquired a master’s degree in business administration after his graduation. He has worked in a software firm for two years but eventually decided to start his own business plan for software product .
3.2 Why the computer software business is being started
Dustin started the computer software business to be an entrepreneur and earn huge profits. Throughout his academic and service years, he remained associated with software businesses. Therefore, at the time of starting his own business plan for software product , he believed the computer software business to be the best choice for him.
3.3 How the pc software business will be started
Step1: Develop computer hardware and software business plan
The first step to start this business would be to create a computer software and technology business plan. Dustin had adequate knowledge to develop the business continuity plan for computer software company, therefore he did the task himself. If you think that you don’t possess the required skillset to develop a business plan software for apple computers or any other relevant service, you must hire a professional for doing so.
Step2: Define your brand
After planning everything about your business plan for software product , you should step into the execution phase. This is the time to acquire licenses, registrations, inventory, and required software and hardware. Meanwhile, you should define your business values and services so that people can know about you.
Step3: Start the recruitment
The next step is to recruit the most component and skillful employees for your business plan for software product . A good approach is to also give them a few months of training so that they can learn to collaborate with each other.
Step4: Promote & market
After establishing your workplace and workforce, the next step is to promote your competitive advantages.
Step5: Establish a web presence
A strong web presence is inevitable for a software company. Since software services can be provided online, your customers are more likely to search about you on Google. Therefore, to offer your services on a wider scale, it is a must to establish a strong online presence.
Products of Computer Software Company
In your computer software retail business plan, you should also include the services you want to offer. To decide your services, you should study some guide to writing a computer software business plan examples. This will give you a broader idea of what other people are offering in the domain.
The products offered by Tech Solutions are provided below:
- Billing Software
- Asset Management software
- Clear Analytics
- Metric Insights
- SAP BusinessObjects
- StudioCloud
- Autodesk Revit
- JavaScript and more.
- Network Interface Cards
- Expansion cards
- Power supply unit
- Motherboard
- Optical disc drive
- Microprocessor
- Hard disk drive and more.
Marketing Analysis of Computer Software Business
Your business plan for computer software is incomplete unless you have done a detailed marketing analysis in it. Since purchasing software and hiring the persons who can run those software is a costly operation. Therefore, it is a must for you to purchase only the software that are demanded by your target customers. Knowing your target market will help you in understanding which type of software you should acquire. Moreover, by analyzing customers’ buying patterns you can figure out whether or not you should purchase a certain software.
In this computer programs business plan we’re providing the market analysis done for Tech Solutions. Dustin carried out a detailed marketing analysis before developing business plan software for mac computers and other devices. His special focus was to offer software products that weren’t offered by his market competitors.
5.1 Market Trends
The market stats for computer software-related companies are extremely good. According to IBISWorld, market size of $564bn is held just by online computer software sellers in the United States. The trends for business analytics software businesses are also highly encouraging. According to the same source, more than 4.5k such businesses are running in the United States successfully. The business has grown by 22.8% in the past five years, from 2016 to 2021. And is expected to grow more by 13.3% in 2021 alone.
5.2 Marketing Segmentation
The groups of target customers identified by Tech Solutions are provided in this computer software business plan sample.
5.2.1 Companies/ Businesses & Organizations
The first group of our target customers will comprise organizations and enterprises that need management and cloud-based intelligent software to manage their business plan for software product . They are expected to be our potential customers as they will need the latest software support to enhance their productivity.
5.2.2 Engineering Schools & Firms
The second group of our target customers will be the universities and firms that make use of engineering software. They may include design engineering firms, software firms, and manufacturing firms.
5.2.3 Others
The third category includes all other people and businesses who may need software and hardware. For example, retail stores are expected to get billing software from us. High school students are believed to purchase hardware accessories from us etc.
5.3 Business Target
Our business targets are
- To achieve a Net Promoter Score above 50 by the end of the two years of our launch.
- To earn and maintain a CSAT score above 90% within a year of our launch.
- To earn a net profit margin of $32.3k per month by the end of the third year
- To achieve and maintain an average ranking above 4.75 throughout our service years.
5.4 Product Pricing
Our prices are a little higher as compared to our market competitors. It is because of the continuous software support and training we’ll be providing free of cost.
Marketing Strategy of Computer Software Business
In your business plan computer software company you should also include the ways, you will adopt to outperform your competitors. Ideally, you should analyze your competitive benefits, sales business strategy , and forecasted sales in this part of computer software training business plan.
6.1 Competitive Analysis
- Our biggest competitive benefit is that we’re providing free training to our customers. People who will purchase software from us will be given 10-12 days of training so that they can use all the features of the software.
- We are highly customer-oriented. Our collaborative staff will remain in touch with you to provide you expert advice whenever you face any technical issues with the provided software.
- Our software offerings are more than all of our competitors. Therefore, we expect to get more customers than them.
6.2 Sales Strategy
- We’ll establish a strong web and social media presence to reach out to a wider audience.
- To advertise our services, we’ll make use of Google Local ads service, and local newspaper.
- We’ll send our sales executive to several companies and organizations to let them know about us.
- We’ll provide a 20% discount on all of our software for the first month of our launch.
- We’ll provide a 30% discount on all of our hardware products for the first two months of our launch.
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
Personnel plan
The skills and performance of your employees are the things that will impact your business impression in the long run. To make your startup a success, it is essential to hire your employees with great care. And develop a human resource management plan to help them improve over time.
In this computer hardware software business plan, we’re providing the personnel plan of Tech Solutions.
7.1 Company Staff
Dustin will hire the following employees for his business:
- 1 Co-Manager to manage the company’s operations
- 4 Software Engineers to develop software and train people
- 2 IT Experts to maintain IT systems
- 2 Computer Technicians to help maintain the machinery
- 2 Sales Executives to discover new ventures for the company
- 1 Accountant to maintain financial records
- 1 Store Manager to manage hardware sales
7.2 Average Salary of Employees
Financial plan.
Though opening a computer software business doesn’t require you to rent a large space or procure huge inventory, still, the costs of starting and running this business are high. It is because many business software are very expensive especially those which are cloud-based and agile. And secondly, the salaries of highly expert software engineers are also high. Therefore, the finances of this business plan for software product need to be managed.
The best way for managing your finances, investments, profits, and losses is to develop a financial plan. In this computer software business plan sample we’re providing the financial plan that Dustin developed for Tech Solutions.
8.1 Important Assumptions
8.2 break-even analysis.
8.3 Projected Profit and Loss
8.3.1 profit monthly.
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
8.5 Projected Balance Sheet
8.6 business ratios.
Download Computer Software Business Plan Sample in pdf
Professional OGS capital writers specialized also in themes such as smartphone business plan , computer store business plan , iPhone repair business plan , solid semiconductor business plan , best biotech business plans and many others.
OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.
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A business plan will help you raise funding, if needed, and plan out the growth of your software company to improve your chances of success. Your software company business plan is a living document that should be updated annually as your company grows and changes. Sources of Funding for Software Companies
Step 1: Decide if the Business Is Right for You Pros and cons Starting a software company has pros and cons to consider before deciding if it’s right for you. Pros Massive Market – The US software industry is worth nearly $430 billion Good Money – Hundreds per hour to develop software
15 Steps To Start a Software Company Choose the Name for Your Software Company Develop Your Software Company Business Plan Choose the Legal Structure for Your Software Company Secure Startup Funding for Your Software Company (If Needed) Secure a Location for Your Business Register Your Software Company With the IRS Open a Business Bank Account
A business plan can raise startup success chances. Such a document serves companies for different purposes. The most common of them are: Attracting investments Building a development strategy Predicting your upcoming financial expenses and needs How can the IT startup business plan assist business owners in implementing these purposes into life?
Create your own business plan 1.1 Mission To develop fun-to-use educational software for non-readers with developmental disabilities. Our software will provide lifeskills training that empowers the individuals and make them more independent. We exist to make products that the market demands and have a positive impact on society. 1.2 Keys to Success
Step1: Develop computer hardware and software business plan The first step to start this business would be to create a computer software and technology business plan. Dustin had adequate knowledge to develop the business continuity plan for computer software company, therefore he did the task himself.