The global software market is a $593.40 billion industry, with almost 50% of its revenue generated in the United States. With notable names such as Microsoft Windows, Google Chrome, Adobe PDF, and McAfee Antivirus, software programs have become a part of our everyday lives, and growth in this digital market is set to continue.
From mobile apps to web-based applications, the race to create bigger and better software programs come with many benefits. A recurring revenue business model, low overheads, and the potential for eye-watering profits upon exit are undeniably appealing to any software developer, not to mention a coveted place on the cover of many business magazines. If you are considering entering this highly competitive yet expanding industry by creating your own software business, the following tips will stand you in good stead.
Solve a Problem
To be a successful software product, you must develop something that the market wants and will buy. Whether you are targeting a niche group or a global market, it’s important to create something that will meet the genuine needs of your potential customer.
One of the best ways to do this is by identifying a problem that needs to be solved. Perhaps it is an original idea or the creation of a faster, easier, or cheaper version of a product that already exists.
By researching your target market, you can determine their pain points and challenges, helping you to better understand their wants and needs. Spend time researching online forums and Facebook group reports from marketing resources, and conduct your own surveys to get a solid understanding of your market. When there is a genuine problem you are solving, you can then develop software to address it, providing real value for your customers.
Validate Your Idea
Once you have identified your product, the next step is to validate your idea by carrying out a secondary stage of market research. You may have identified a great pain point in the market, but this step will establish whether your target market will actually pay for your product. This step can be undertaken separately or in combination with your market research above.
Interview potential customers in person or through online surveys to see how much they would pay for your product or solution to be implemented and on what basis they would pay, i.e., a monthly or annual subscription. Using a crowdfunding platform for your business venture is another great way to gauge the market’s appetite for your product while raising funds at the same time. The valuable data that you gather during this process will help you to evaluate and improve your idea and to price it correctly within the market.
Define Your Business Model
Having established the need and validity of your software product, the next stage is to consider how to monetize it. Your business model will determine how you will deliver value to your customers and the way your company will be paid for its product. Some of the common business models used by software companies include the following:
- Software-as-a-Service (SaaS): The SaaS business model involves selling software to consumers through monthly or annual subscription fees. While this is a popular way to generate an income stream, there is an inherent risk that people may stop subscribing.
- Licensing: Under this business model, a software company will sell licenses to businesses or individuals to use their source code. This licensing solution enables consumers to gain access to software while the software developer retains ownership rights. Some common types of licensing models include perpetual, floating concurrent and proprietary licenses.
- Freemium: In this business model, companies offer consumers a basic or limited version of their product for free, with the option to access greater functionality and features by upgrading to a premium version via paid subscription. Freemium has become the dominant business model for internet start-ups and smartphone app developers. Some mainstream businesses that use the freemium model include Slack, Spotify, Dropbox, and Zoom.
Deciding which business model to adopt will depend on your research findings and may evolve over time to adapt to the changing needs of your business or consumer habits.
Focus On Your Customers
As with any business, customers are its lifeline, and the software business is no exception. While you must focus on the needs of your potential customer when developing your product, this point should not be overlooked or neglected once you have launched your business.
Make sure you are delivering on your promises and meeting or exceeding your customer’s expectations. It is important to actively seek and take into account feedback from your customers to improve on areas where your business may be falling short. Having a process in place which addresses your customers’ needs, such as a dedicated customer service function, can help your business to swiftly resolve any problems your customers may be facing as painlessly as possible. This is especially important in technical areas where many people are inexperienced or feel at a loss to find solutions when problems arise.
Customer service can make or break a business. It doesn’t matter how great the product is if consumers are not given the help they need to resolve problems and receive the value they expect from a product. Conversely, a great customer experience is commonly shared on online reviews and social media, helping a business attract new customers.
Assemble a Great Team
The software developers you hire will become the backbone of your business. It is essential to find not only a skilled talent pool but one that is passionate about your vision and values and has the drive to make it a reality.
As well as being great team players, your software development team comprises enthusiastic and creative individuals who wish to grow with your company and share in its success long-term. Below are some tips to help your business attract the right talent:
- Document your company’s values and mission
- Clearly define the position and the responsibilities of the role
- Incentivize your staff by creating a job position that grows as the company succeeds. This can be in terms of equity, bonuses, or position within the company.
- Use a filtering device in your job post to attract only those candidates who read it fully.
Now that you know the initial steps for creating a successful software business, you can begin putting your business plan to work.