How to Start a Successful Software Business - the Complete Guide

How To Start a Software Business

“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:

How to start a software as a service business

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

Mindset of software entrepeneurs

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:

When should you start a SaaS?

  • Founder Amy Hoy breaks down the requirements for starting a SaaS business. Epic Read! (Blog post, 3 minutes).

5 Things I Wish Somebody Told Me Before I Founded My SaaS

  • Important facts about the reality of building a software business (Blog post — 10 minutes).

The Critical Lessons I Wish I Had Known About Before Starting A Software Company

  • Lesson 1 is crucial (Blog post — 15 minutes).

Growing a SaaS Business is HARD

  • Confessions of a struggling SaaS entrepreneur (Video — 6 minutes).

Founders who can’t code 

  • 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:

BuiltWith is perhaps one of Australia’s most profitable online companies and has zero staff

  • This my favorite story. Gary Brewer built a multi-million-dollar business without having employees (Blog post — 4 minutes).

How Brandon Pearce bootstrapped a startup from $0 to $70K a Month

  • Brandon Pearce built a software tool that helps music teachers with managing their studio (Video — 53 minutes).

How we bootstrapped our SaaS business from zero to 8-Figures

  • Aaron Fulkerson, CEO of MindTouch, breaks down his bumpy journey to bootstrapping his 8-figure software company (Video — 51 minutes).

Interviews With Indie Hackers

  • 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:

Should you start your business part-time or full time?

  • A quick checklist helping you to decide whether you should go part- or full-time (Blog post — 3 minutes).

Build a Startup Without Quitting Your Day Job

  • Aytekin Tank, a successful SaaS founder, details his strategy on how to build a software business on the side (Blog Post— 5 minutes).

10 steps to start a business while working a full-time job

  • An epic side-hustle-guide by Ryan Robinson — this is a must-read! (Blog post & infographic — 20 minutes).

Do’s and Dont’s for starting a business while having a fulltime-job

  • The legal aspects of starting a business (Blog post — 5 minutes).

Bootstrapping a business with a full-time job and a family to feed

  • 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:

Do successful SaaS companies target a niche market or go mass market?

  • A forum thread showing the importance of niche-markets (Quora thread — 10 minutes).

Vertical Versus Horizontal Markets

  • Empirical data showing the differences between vertical- and horizontal markets (Blog post — 5 minutes).

One-person SaaS apps that are profitable

  • 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 pros and cons of raising money vs. bootstrapping

  • 12 startup founders break down when to raise money and when not (Blog post — 5 minutes).

SaaS Startup: 5 Key Bootstrapping vs. Fundraising considerations

  • Strategical thoughts about fundraising (Blog post — 3 minutes).

4 Strategies for successfully bootstrapping your startup

  • Practical advice on how to bootstrap a business (Blog post — 11 minutes).

Angel Investment — Guide

  • An extensive guide for finding angel investors (Blog post — 60 minutes).

Business Fundamentals

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:

Tim Ferriss’s advice on starting a business

  • Epic business advice from Tim Ferriss — a must-watch! (Video — 19 minutes).

How to strategize as an entrepreneur

  •  The 4 crucial phases of a starting business (Video — 15 minutes).

4 Questions to start any business

  • Noah Kagan asks you 4 radically honest questions about your business (Video — 2 minutes).

Why entrepreneurs should start a 1000-dollars startup

  • Don’t even think about building a billion-dollar company, instead, try to make 1000 dollars first (Blog post — 5 minutes).

5 Steps to make the transition from Wantrepreneur to Entrepreneur

  • Don’t lie to yourself by falling into the wantrepreneur-trap (Podcast — 60 minutes).

Step 2 - Finding a Money-Making Software Idea

Find a 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:

Why You Should Tell Everyone About Your Startup Idea

  • Relax, nobody is going to steal your amazing business idea (Video — 8 minutes).

Love The Problem, Not Your Solution

  • Startup expert Ash Maurya explains his lean canvas concept and why big ideas are likely going to fail — great read (Blog post — 7 minutes).

Don’t Look for Unique Ideas

  • A solid idea is all you need & why delayed gratification is your best friend (Podcast — 45 minutes).

Why Most Product Ideas Aren’t That Good

  • Justin Jackson breaks down his simple framework for finding profitable business ideas (Blog post — 3 minutes).

SaaS, Software WordPress Plugins — What makes people buy?

  • The reason people buy software (Video — 8 minutes).

Why People Buy Software

  • Customers have „inner thoughts”, but will you listen? A must-read! (Blog post — 3 minutes)

Intro To Idea Extraction

  • A powerful mindset every aspiring entrepreneur needs to apply (PDF — 5 minutes).

My Idea Already Exists

  • Why it doesn’t matter whether your business idea already exists. (Forum post — 15 minutes).

A Quick Guide to Help You Picking Up The Best Side Project Idea

  • If you have too many business ideas, please read this article (Blog post — 5 minutes).

How to come up With Side Project Ideas

  • 8 actionable tips to find your perfect business idea. (Blog post — 3 minutes).

Your Ideas Don’t Suck, Your Feedback Loop Does

  • 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 Examples Of Successful SaaS-Founders Who Scratched Their Own Itch

  • 10 software founders tell their personal stories on how they solved their own problems (Blog post — 15 minutes).

The Power Of Scratching Your Own Itch

  • Why the best ideas come from a personal need (Blog post — 3 minutes).

How to Scratch Your Own Itch and Build a 6-Figure SaaS Business

  • 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:

  1. Find a lucrative market
  2. Identify a pain point inside that market
  3. Solve that pain by building software

The market-driven approach is a structured procedure that relies on customer feedback and empirical data:

How to choose a target market for your SaaS

  • Simple criteria for finding lucrative markets (Blog Post & video — 11 minutes).

Find a Market You Want To Serve, And Then Build What They Want

  • 2 examples of software founders who started their business with a group of people instead of an idea (Video — 4 minutes).

95 Ways to Find Your First Customers for Customer Development

  • 95 ways to get in contact with your target market (Blog post — 20 minutes).

Designing SaaS Products For the Small Business Owner

  • Explaining why small business owners are a great market — a must-watch (Video — 50 minutes).

Listen to Dane Maxwell Extracting a Profitable Business Idea

  • Dane Maxwell doing his magic live on the phone (Audio — 44 minutes).

How to Find a Starving Crowd Hungry for Your SaaS Product

  • Actionable tips to find your target market (Video — 55 minutes).

400+ Niche Market Examples

  • 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:

Pivot From Consulting to Software

  • Tyler Tringas transitioned smoothly from consulting to building a 6-figure SaaS business (Video — 14 minutes).

Automate Freelancing

  • Alex Moskovski created a profitable SaaS business (QuoteArtist) by automating Fiverr-tasks (Blog Post — 5 minutes).

Reverse Engineering A Software Idea

  • Perry Oostdam built a multi-million-dollar business (Recruitee) by having standards (Podcast — 60 minutes).

From Infoproduct To SaaS

  • Laura Roeder pivoted from selling information products to building a highly successful social media software (Podcast — 20 minutes).

Build on existing platforms (like Baremetrics)

  • Software founder Josh Pigford explains how to build software on the shoulder of giants (platforms). (Blog post — 3 minutes).

A Practical Guide to Finding Problems to Solve In Less Than 60 Minutes

  • Simple & practical ways to find countless software ideas (Blog post — 10 minutes).

Apply Niche SaaS Generator 

  • If nothing helps, use this idea generator to get your creative juices flowing.

Step 3 - Validating & Building Your Software Product

Validate your software

Once you have your idea, it’s time to build the software- right?

Wrong.

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:

What is a Minimum Viable Product (MVP)

  • A great introduction to the MVP concept (Blog post & video— 13 minutes).

Don’t Build an MVP Until You Do This

  • A visual perspective on MVPs (Blog post — 5 minutes).

MVP: Quickly validate your start-up

  • A fun-example of an MVP (Video — 11 minutes).

12 Things about Product-Market Fit

  • A crash-course on product-market fit (Blog post — 5 minutes).

Before and After Product-Market Fit

  • 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:

Create a Landing Page (like Buffer did)

  • Joel Gascoigne has validated his successful SaaS app with a simple landing page (Blog post — 5 minutes).

Zero to Validating a SaaS: A Step-by-Step Recap

  • Brian Casel breaks down how to validate a software idea within 6 weeks (Blog post — 15 minutes).

Presell like Jarrod Robinson

  • How to sell your software before building it (Podcast — 40 minutes).

5 SaaS Product Validation Techniques

  • Ryan shows his favorite validation techniques (Blog post — 5 minutes).

Create Demos

  • A simple demo can be sufficient to validate your software idea (Blog post — 5 minutes).

How to Get Startup Ideas: The Meat Grinder Approach

  • A practical checklist by Tyler Tringas. It helps you to filter out bad software ideas (Blog post —3 minutes).

How I evaluate my SaaS startup ideas with a pre-validation checklist

  • A 30 point checklist you can use to pick your best SaaS startup idea (Blog post — 10 minutes).

How should I validate my SaaS-idea?

  • 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:

Building Micro-SaaS Businesses

  • A detailed formula for starting a small software business from scratch — an amazing guide (Blog posts — 60 minutes).

The Epic Guide to bootstrapping a SaaS startup from scratch

  • A truly epic guide for software hustlers (Blog Posts — 45 minutes).

How I made a SaaS Webservice earning $1000 monthly profit

  • An indie hacker showing you how to build a simple software business (Blog post — 5 minutes).

Micro-SaaS: The Definitive Guide for 2021

  • Another great guide focusing on Micro-SaaS (Blog posts — 30 minutes).

The SaaS Cheat Code: How to Build a 50K+/Month SaaS By Using Existing Software

  • 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:

From Idea to Minimum Viable Product

  • Hard-earned knowledge from a successful SaaS entrepreneur (Blog post — 10 Minutes)

Perfection by subtraction — the minimum feature set

  • Steve Blank, the father of customer development, teaches you how to select your minimal feature set (Blog post — 3 minutes).

Learning about product design from famous SaaS founders

  • Design-lessons from proven software founders (Blog post — 10 minutes).

Minimum viable UX: a guide for SaaS design

  • Simple but powerful thoughts about designing software (Blog post — 5 minutes).

How Ryan Shank built a SaaS-product by outsourcing

  • If you think about hiring a freelancer, this article is for you (Blog post — 15 minutes).

How to outsource your app the right way

  • A detailed formula for outsourcing your software development (Blog post — 10 minutes).

Keep Going

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.

Good luck!

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