How to Start a Successful Software Business - the Complete Guide
“I have an idea for a multi-million dollar app, now what?”
Countless people have pondered this question, be it programmers, businessmen, students, or stay-at-home moms.
Building software has become sexy these days - as a matter of fact, it has never been easier to start a software business with almost no money, over the internet, from your (parents’) basement.
As a software developer, the vision of building a small software product has always been in the back of my mind. Creating the actual software prototype would be pretty easy. Marketing and selling the product couldn’t be that hard either.
To be honest, I already saw myself relaxing on my private yacht, earning passive income, living the 4-hour workweek lifestyle - Tim Ferriss would be proud of me.
Then, reality struck . I googled “how to start a software business” and found myself in a wild mix of videos, podcasts, blogs, tools, and forum threads.
Too many questions popped into my head:
- Where to start?
- How do I find a profitable software idea?
- Where to find customers?
- How do all of these small bits of information fit together?
I felt overwhelmed - and it sucked.
What is This Article?
For weeks and months, I analyzed more than 200 online resources, discovered the best techniques to start a software business, and recognized the patterns of successful software entrepreneurs.
My research resulted in a curated collection of the best online resources, structured in a clear step-by-step guide.
Once you’ve worked through this guide, you’ll know what it takes to start a successful software company.
From a high-level perspective, the process of starting a software business consists of 3 steps:
That’s of course a highly simplified perspective, but it serves as a starting point for your upcoming journey. It visualizes the roadblocks you have to overcome.
This guide focuses on the starting phase of software businesses and therefore neglects the growth- and scaling-phase of a startup. However, once you should reach that stage, you won’t need my help anyway.
Today, most software is sold as SaaS (software-as-a-service). That’s the reason why most online resources refer to the term SaaS and not to software in general. But don’t get confused, this guide is applicable to all kinds of software, including SaaS, mobile apps, WordPress plugins, or on-premise software.
Here’s a table of contents:
- Step 1 - Preparing Your Software Business
- Are You Ready?
- Motivational Success Stories
- Business Fundamentals
- Decision 1: Going Fulltime Vs. Sideproject
- Decision 2: Going Big Vs. Going Niche
- Decision 3: Bootstrapping Vs. Funding
- Step 2 - Finding a Money-Making Software Idea
- Basics of Finding a Good Business Idea
- Scratching Your Own Itch
- The Market-Driven Approach
- Other Great Ways to Find Software Ideas
- Step 3 - Validating & Building Your Software Product
- Lean Startup & Product-Market Fit
- Techniques for Validating Your Software Idea
- Best Guides for Software Entrepreneurs
- Building Your Initial Product (MVP)
Step 1 - Preparing Your Software Business
Without good preparation, your future software company will be a flag on the breeze.
What kind of business do you want to have? Do you want to get rich or do you want to have enough money to sustain your current lifestyle? Do you need money from investors?
If you answer these kinds of questions right from the start, your chance of success will increase dramatically.
Are You Ready?
Don’t get fooled, building a profitable software business is no joke. Among others, you need to master technical development, marketing, sales, and customer support.
I don’t mean to demotivate anyone, but the software industry isn’t suited for everyone. Do you have what it takes to build a software company? Find out:
- Founder Amy Hoy breaks down the requirements for starting a SaaS business. Epic Read! (Blog post, 3 minutes).
- Important facts about the reality of building a software business (Blog post — 10 minutes).
- Lesson 1 is crucial (Blog post — 15 minutes).
- Confessions of a struggling SaaS entrepreneur (Video — 6 minutes).
- In case you’re a non-programmer, this is for you (Forum thread — 15 minutes).
Motivational Success Stories
So, you’re still interested in starting a software business?
To spark your motivation, here are some inspirational stories of successful software founders:
- This my favorite story. Gary Brewer built a multi-million-dollar business without having employees (Blog post — 4 minutes).
- Brandon Pearce built a software tool that helps music teachers with managing their studio (Video — 53 minutes).
- Aaron Fulkerson, CEO of MindTouch, breaks down his bumpy journey to bootstrapping his 8-figure software company (Video — 51 minutes).
- Want more founder’s stories? Discover more than 100 amazing interviews with successful software entrepreneurs from all over the world.
Decision 1: Going Fulltime Vs. Sideproject
Building a software business from scratch is hard- especially if you have a full-time job and a family to feed.
Therefore, you need to find out whether you should go part-time or full-time. However, as the following web resources already suggest, I recommend starting a software business as a side-project:
- A quick checklist helping you to decide whether you should go part- or full-time (Blog post — 3 minutes).
- Aytekin Tank, a successful SaaS founder, details his strategy on how to build a software business on the side (Blog Post— 5 minutes).
- An epic side-hustle-guide by Ryan Robinson — this is a must-read! (Blog post & infographic — 20 minutes).
- The legal aspects of starting a business (Blog post — 5 minutes).
- Two founders explain how they built a profitable SaaS business on the side (Podcast — 40 minutes).
Decision 2: Going Big Vs. Going Niche
Every successful software entrepreneur will tell you the exact same thing:
One of the most important aspects of starting a software business is choosing the right market.
The following resources highlight the importance of profitable markets:
- A forum thread showing the importance of niche-markets (Quora thread — 10 minutes).
- Empirical data showing the differences between vertical- and horizontal markets (Blog post — 5 minutes).
- Examples of solo-founders who succeeded on their own (Forum-post — 5 minutes).
Decision 3 - Bootstrapping Vs. Funding
Are you going to finance your business from your own funds, or do you rely on external capital from investors?
Before making this important decision, you’ll need to understand the pros and cons of both approaches:
- 12 startup founders break down when to raise money and when not (Blog post — 5 minutes).
- Strategical thoughts about fundraising (Blog post — 3 minutes).
- Practical advice on how to bootstrap a business (Blog post — 11 minutes).
- An extensive guide for finding angel investors (Blog post — 60 minutes).
In its essence, every software business is still a plain old business. Paying attention to business fundamentals is important.
The following list could be endless, but I only selected a tiny set of resources to awaken your inner business(wo)man:
- Epic business advice from Tim Ferriss — a must-watch! (Video — 19 minutes).
- The 4 crucial phases of a starting business (Video — 15 minutes).
- Noah Kagan asks you 4 radically honest questions about your business (Video — 2 minutes).
- Don’t even think about building a billion-dollar company, instead, try to make 1000 dollars first (Blog post — 5 minutes).
- Don’t lie to yourself by falling into the wantrepreneur-trap (Podcast — 60 minutes).
Step 2 - Finding a Money-Making Software Idea
Good software products are no coincidence.
If you dive deeper into the stories of successful software companies, you’ll notice that most products had similar beginnings. They have been discovered - knowingly or unknowingly - by applying the same set of methods.
What does this mean for you?
Put simply, you can reverse engineer your own software ideas by applying the same concepts and methods:
Basics of Finding a Good Business Idea
The following resources break down the essentials of successful business ideas:
- Relax, nobody is going to steal your amazing business idea (Video — 8 minutes).
- Startup expert Ash Maurya explains his lean canvas concept and why big ideas are likely going to fail — great read (Blog post — 7 minutes).
- A solid idea is all you need & why delayed gratification is your best friend (Podcast — 45 minutes).
- Justin Jackson breaks down his simple framework for finding profitable business ideas (Blog post — 3 minutes).
- The reason people buy software (Video — 8 minutes).
- Customers have „inner thoughts”, but will you listen? A must-read! (Blog post — 3 minutes)
- A powerful mindset every aspiring entrepreneur needs to apply (PDF — 5 minutes).
- Why it doesn’t matter whether your business idea already exists. (Forum post — 15 minutes).
- If you have too many business ideas, please read this article (Blog post — 5 minutes).
- 8 actionable tips to find your perfect business idea. (Blog post — 3 minutes).
- Don’t ask family, friends & colleagues for feedback on your business idea (Blog post — 5 minutes).
Scratch Your Own Itch
What do apps like Baremetrics, Basecamp, and Buffer have in common (besides being highly successful and starting with “B”)?
They have been developed for the same reason: their founders experienced a problem in their daily lives and solved it by building software. The process of solving your own problems is called „scratching your own itch”.
Here’s all you need to know about it:
- 10 software founders tell their personal stories on how they solved their own problems (Blog post — 15 minutes).
- Why the best ideas come from a personal need (Blog post — 3 minutes).
- Josh Ledgard built a successful SaaS-business by solving his own email marketing problems (Podcast — 50 minutes).
The Market-Driven Approach
Apart from „scratching your own itch”, the market-driven approach is the most common method for finding profitable software ideas.
It’s quickly explained:
- Find a lucrative market
- Identify a pain point inside that market
- Solve that pain by building software
The market-driven approach is a structured procedure that relies on customer feedback and empirical data:
- Simple criteria for finding lucrative markets (Blog Post & video — 11 minutes).
- 2 examples of software founders who started their business with a group of people instead of an idea (Video — 4 minutes).
- 95 ways to get in contact with your target market (Blog post — 20 minutes).
- Explaining why small business owners are a great market — a must-watch (Video — 50 minutes).
- Dane Maxwell doing his magic live on the phone (Audio — 44 minutes).
- Actionable tips to find your target market (Video — 55 minutes).
- A huge list of niche markets (Blog Post — 60 minutes).
Other Great Ways For Finding Software Ideas
If you didn’t find your idea yet, don’t get discouraged. There are countless other ways to do it:
- Tyler Tringas transitioned smoothly from consulting to building a 6-figure SaaS business (Video — 14 minutes).
- Alex Moskovski created a profitable SaaS business (QuoteArtist) by automating Fiverr-tasks (Blog Post — 5 minutes).
- Perry Oostdam built a multi-million-dollar business (Recruitee) by having standards (Podcast — 60 minutes).
- Laura Roeder pivoted from selling information products to building a highly successful social media software (Podcast — 20 minutes).
- Software founder Josh Pigford explains how to build software on the shoulder of giants (platforms). (Blog post — 3 minutes).
- Simple & practical ways to find countless software ideas (Blog post — 10 minutes).
- If nothing helps, use this idea generator to get your creative juices flowing.
Step 3 - Validating & Building Your Software Product
Once you have your idea, it’s time to build the software- right?
Now it’s time to validate your software idea so that you don’t waste your time, money, and energy.
Lean Startup & Product-Market Fit
The Lean Startup movement has become quite popular among startup founders, so I’m going to keep this section short.
In case you’re not familiar with the Lean startup concept, here are some starting resources:
- A great introduction to the MVP concept (Blog post & video— 13 minutes).
- A visual perspective on MVPs (Blog post — 5 minutes).
- A fun-example of an MVP (Video — 11 minutes).
- A crash-course on product-market fit (Blog post — 5 minutes).
- Diving deeper into the concept of product-market fit (Podcast — 54 minutes).
Best Techniques for Validating Your Software Idea
This section breaks down the most effective methods to validate your software idea - without writing a single line of code. Enjoy:
- Joel Gascoigne has validated his successful SaaS app with a simple landing page (Blog post — 5 minutes).
- Brian Casel breaks down how to validate a software idea within 6 weeks (Blog post — 15 minutes).
- How to sell your software before building it (Podcast — 40 minutes).
- Ryan shows his favorite validation techniques (Blog post — 5 minutes).
- A simple demo can be sufficient to validate your software idea (Blog post — 5 minutes).
- A practical checklist by Tyler Tringas. It helps you to filter out bad software ideas (Blog post —3 minutes).
- A 30 point checklist you can use to pick your best SaaS startup idea (Blog post — 10 minutes).
- A forum thread discussing the best validation techniques (Quora thread — 10 minutes).
Best Guides for Software Entrepreneurs
Here are my favorite step-by-step guides on how to start a software business:
- A detailed formula for starting a small software business from scratch — an amazing guide (Blog posts — 60 minutes).
- A truly epic guide for software hustlers (Blog Posts — 45 minutes).
- An indie hacker showing you how to build a simple software business (Blog post — 5 minutes).
- Another great guide focusing on Micro-SaaS (Blog posts — 30 minutes).
- An in-depth guide for smart software entrepreneurs (Blog post — 20 minutes).
Building Your Initial Product (MVP)
OK, you selected your market, discovered your idea, and validated your software product. Now you’re ready to build your initial software prototype:
- Hard-earned knowledge from a successful SaaS entrepreneur (Blog post — 10 Minutes)
- Steve Blank, the father of customer development, teaches you how to select your minimal feature set (Blog post — 3 minutes).
- Design-lessons from proven software founders (Blog post — 10 minutes).
- Simple but powerful thoughts about designing software (Blog post — 5 minutes).
- If you think about hiring a freelancer, this article is for you (Blog post — 15 minutes).
- A detailed formula for outsourcing your software development (Blog post — 10 minutes).
The internet provides all the information you need to build a successful software business.
But what are you going to do with it?
Knowledge is power, but it’s useless without action.
So do yourself a favor and start small - a tiny action is all you need right now. You could:
- discover a market you’re interested in.
- write one short email to a potential customer.
- create a simple landing page.
And if you’re done, keep stacking tiny actions until you succeed.