How to Start Your Own Software Business

Tuesday, June 17, 2014

How to Start Your Own Software Business

Software Business is the commercial activity of the software industry, aimed at producing, buying and selling software products or software services. The business of software differs from other businesses, in that its main good is intangible and fixed costs of production are high while variable costs of production are close to zero.

Types of software businesses:

Cusumano and Nambisan divide software companies (supplier-side) into service and product companies according to how they conduct business. Popp and Meyer give a more detailed analysis of different types of business models of software companies.

Software product business

In the Software product business, Software is licensed for installation and execution on a user- or customer-supplied infrastructure. In the software product business, revenues typically originate from selling software upgrades to the customer.

Software service business

Software services business is a strategy of a software company whose offering consists mainly of services or consulting relating to software development.

Characteristics of software services business

Generally business model of a software company can be categorized as product company, services company or a hybrid between these two models. Software service business can also refer to offering Software as a Service.

Software services business can be categorized into following categories:

Companies that provide consultation services related to software business
Companies that provide software development services as a subcontractor.

Service Operations

Characteristics of Service Operations that are relevant to software services industry:

Intangibility: Service is produced instead of tangible product. Therefore service innovations can be easily copied by competitors.
Perishability: Human resource intensive services cannot be produced in advance, therefore demand and supply is difficult to manage. This also affects business scalability.
Heterogeneity: Service encounters are unique and customer needs vary, therefore software services are difficult to standardize and productize. Therefore service business is also difficult to scale.

Knowing how to start your own software business can fast track you to success. The best way to get started in software is the opposite of starting most businesses. It is best to create your product first and then build a business around it. If you do not have a piece of software that is wanted or needed by the market, then you really have no business.

Instructions:

Step 1

CREATE SOFTWARE - Create software that is needed and wanted in the industry. This is the tricky part. You can either develop new software that is revolutionary which of course can be very difficult to come up with an idea and then create it or you can take an existing software and make it better, faster and stronger than its competition. In the software industry it is imperative that you make a product that makes peoples lives better or run faster. If you do not have a software product that is needed or wanted in the industry, preferably both, then you really do not have a viable business that can make money. Create the software and they will come.

Step 2

DO YOUR FOOTWORK - Take the time in between working on your hot new software product to do the traditional steps of creating your own company. You will need to have a name for your company and a professional look so that when you do find someone that really wants or needs your software, you will be able to greet them properly. Contact an account or tax professional to help you decide what is the best way to start up your software company. You will need to decide on a sole proprietorship, corporation or limited liability company. Next you will need to file a fictitious business name statement, open a business banking account and order a business phone. Depending on your individual situation, you may or may not want to spend the money on business cards and brochures at this point.

Step 3

PROMOTE YOUR PRODUCT - Get the word out that you have created a software product that is needed or wanted in the industry. Although you may want to keep the actually software well hidden because you do not want anyone to steal your ideas, you do want to promote the general work that the software will provide for the end users.

If you need more information on starting your own software company, look in Resources below. Now you know how to start your own software company.

1 comment:

AnonymousJune 18, 2014 at 5:03 AM
I couldn't resist commenting. Exceptionally well
written!

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Easy Tips and Ideas to Start Business

Although anyone can start a business, many people fail because of a bad product or improper research. If you want to start your own business, you can improve your chances for success before you even begin. In order to make your business successful, start strong and make sure that your idea will hold out for the long haul.

Have a Good Product

Ensure that you plan to sell something useful. Although you may think that your product is important or special, that doesn't mean the general public will agree. Ask friends, family and strangers what they think of your product. If they don't seem that interested, ask them why. With their suggestions, you can either improve the product or scrap the idea completely. According to Brad Sugars of Entrepreneur magazine, most small businesses fail because they sold a product that didn't have an adequate market. This also applies to small businesses that provide a service. A lawn-care business might be useful for part of the year in a northern state, but it is in-demand year-round in the south. Consider whether people will actually want to use your service and get constructive advice from those not afraid to give their opinion.

Research Local Businesses

Research local companies before starting up your own business. This will not only give you an idea of the amount of competition you will have, but it will also help you price your product or service. If you're looking to start a wedding photography business, you may find during your research that the market is over-saturated in your area. If not over-saturated, you should contact each business and ask them for a price list. Alter your prices so you can stay competitive with the competition in town. Researching similar local businesses will also help you decide where to locate your business location. Try not to start up a store or office close to another business of your type. If your small business is located away from similar business types, this will cause locals to choose you over businesses that are farther away from where they live.

Get Professional Advice

You may know someone who has started their own successful business. Ask him for advice and listen to his stories of how he started his company. You may gain useful advice on the good and bad ways to start a business. Local entrepreneurs can also introduce you to local product providers or advertisers that you may not have met without their help. Accept any advice with open arms, especially if the advice is coming from someone successful in the area.

How to Calculate Business Start Up Costs

Starting a business in no easy endeavor. It takes a great deal of research, perseverance and hard work. While sweat equity will make your small business more successful, you will most likely need real capital to get the business started. Before you start raising capital and/or investing your own funds, the first thing you need to do is determine the total start-up costs.

Step 1

Determine your costs of sales. For most small businesses this means inventory, the cost of raw materials, manufacturing equipment, shipping, packaging, and warehousing. However, not all businesses sell products. In this case, the cost of sales is primarily the direct labor involved in making the sale. For example, to open a small shoe business entails purchasing enough inventory ($10,000) to stock the store.

Step 2

Determine professional fees. Planning your business structure, i.e., limited liability corporation or general partnership, means hiring an attorney. There may also be the need to pay an attorney for help with establishing trademarks, copyrights, and patents. In this scenario, that puts total professional fees at an estimated $20,000.

Step 3

Determine technology costs. Technology can greatly reduce the cost of labor for small business if used effectively. Most small businesses require computers, printers, cell phones, website development, Internet access, software applications, information security, data storage, and outsourced information technology (IT) consulting. If the cost of technology is $10,000 to start, add an additional $5,000 a year for maintenance (hint: maintenance is not included in start-up costs).

Step 4

Determine administrative costs. This varies with business types and may include items such as business insurance, office supplies, product packaging, parking, rent, express shipping, desks, chairs, fax machines, phones, or anything else necessary to operate the business daily. A good estimate for start-up administrative costs would be $5,000 for the first six months.

Step 5

Determine initial sales and marketing costs. Now that you have your product, you need to let folks know about it. Sales and marketing costs generally include marketing materials for presentations, printing stationery, business cards, advertising, trade show events, and public relations. These initial sales and marketing costs can add up to $3,000.

Step 6

Determine the wages and benefits needed to secure a staff. This includes employee salaries, benefits, workers compensation, and payroll taxes. Let's put the cost of wages and benefits estimated at $20,000 for the first three months of business.

Step 7

Add all costs associated with starting the business for a total. Be sure to only include business start-up costs that will be incurred in the first three to six months of operations. For this example, the calculation is: $10,000 + $20,000 + $10,000 + $5,000 + $3,000 + $20,000 = $68,000.

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Tuesday, June 17, 2014