How to Start a Software Company

How to Start a Software Company

Founder @ ProductCrafters
Reading Time: 8 minutes

For first-time entrepreneurs, building a software company is a challenging task. Even though their business idea is great, it’s not enough to start a tech company and bring it to success. There are many steps between just having the idea and the moment of getting revenue from your company. If you don’t want to become overwhelmed, it’s necessary to clarify these steps and follow them. Here is what you need to know to start a software company and make it thriving. 

Research the Market

Before building a software product, you have to be sure it will solve the pains of your market. But do you know the market well enough to provide the product they really need?

Start with investigating your customers. Who are these people? What is the problem you want to solve? Why do they have it? When do they face it? What does it cost them (time, money, resources)? Are there any other solutions to these pain points? 

Research the Market

It might be difficult to answer all these questions at once. That’s why you need to spend time to do the research. Find Facebook groups and forums relative to your business idea. Reach out to people, communicate with them, ask questions. Just keep in mind, it’s a very bad idea to ask whether people would use your product. They do not know the answer yet. It might seem like something they desperately need and would use all the time. But when the product is ready, it might appear needless or impractical. Ask them a broader range of questions. Focus on their pains and different ways to solve it. 

In addition, you can create a survey (use regular google form) and share it among such communities. Remember that people are a bit lazy in their nature. So keep the survey short (10 questions max) and include only the most useful questions.

If your product idea is based on your personal pains, still don’t neglect to conduct research. Even if it seems you know all the answers, keep asking people.  Their problems can differ significantly from yours. They also can give you an insight into what to change when it’s not too late. 

At this stage, you have to understand whether the market and target audience actually need your software product. Don’t be afraid to find out the absence of demand. It will save you a significant amount of time, money, and resources that you can invest in another project. 

Benefit your competitors

You are not alone in the software world. There are so many software products flourishing around, that chances your product is completely unique are small. So why not get an advantage from it? 

Benefit your competitors

At first, identify your competitors, then evaluate their strategies to find out strengths and weaknesses relative to your own business. Studying major competitors will help you to see how they’re approaching the business and find how to position yourself for the win. 

“If you’re entering anything where there’s an existing marketplace, against large, entrenched competitors, then your product or service needs to be much better than theirs. It can’t be a little bit better, because then you put yourself in the shoes of the consumer… you’re always going to buy the trusted brand unless there’s a big difference.”
Elon Musk

To win the market, you will definitely need to find how to benefit your competitors to the fullest and provide users with the best solutions. If your competitors have been on the market for a long time, their names are trusted among users. That’s why you need a clear understanding of both their weak and strong sides to persuade to use your product. 

Engage developers

When market research is conducted, it’s time to proceed to the software company’s creation. The first thing you need to start from is hiring programmers. But if you don’t have a tech background, it would be hard to understand the scope of work and even approximate costs. Any development team can provide you with technology consulting. But how will you know that they are not trying to benefit from you? That’s why my advice for a non-technical founder would be to find a tech co-founder or CTO first. While choosing the person to work with, make sure there is a full trust between you. Ideally, choose the person you had successful cooperation with before. This person will be able to conduct technology consulting for you and find the most experienced team for the business. Only then you can start looking for a development team. 

Engage developers

Organizing own development team can be an expensive and time-consuming process. To avoid this, you can consider hiring outsourced programmers. This way you can find professional specialists to do the work and also benefit from their lower rates (if to compare with USA developers). Different time zones and language barriers are the hurdles that might appear. On the other hand, they can also be avoided. Choose reliable programmers who know how to organize the development process properly.  

So, while hiring programmers it’s important to:

Invest time into choosing the team
Hiring the first available software team or freelancers can end up with a tedious development process that will draw out your money without any tangible results. To avoid this, don’t rush with making a decision. Spend time to interview different development teams and investigate their reliability. 

Make a list of the most important questions to ask. It can be something connected with their domain expertise, previous experience, management issues, communication practices, and so on. Also, you can prepare a small test to check if they really possess the necessary knowledge. After that prepare answers assessment criteria. Decide which kind of answers will be the most desirable for you.  Then ask all candidates the same questions. Write down all answers and evaluate them up to the prepared criteria.
Based on this, choose the most suitable team for your idea development. 

Take care about code ownership
When working with a software development team, it’s necessary to ensure that ownership of the source code is yours. You can do it by storing the source code in your repository. Then, in case they want to leave, you will not have to start everything from the very beginning. You can continue working with another development team having previously written code.
In addition, it is highly recommended to sign a non-disclosure agreement. It will prevent leakage of any project-related information. Prepare it in advance and choose the development team open to signing it. 

An outsourced team is still your team
The atmosphere is super important for any team, and outsourced one isn’t any different. It doesn’t matter where programmers are located. But it matters if they are excited about working with you and have a clear understanding of what you expect. They might not share your passion for the product but still do their best to deliver a product of high quality. 

Build a Prototype

By building a software prototype you’ll be able to see how your product will look and test it. What is more important, you will save time, money and resources as a prototype is not a finished product. You create a piece of software that is enough to enter the market with only core features. Share it with users and let them test it and bring you the feedback. It will show you whether people will actually use it and what you should improve. It is cheaper and easier to make changes to the product at this stage than when the advanced app is released. Build and share the prototype as early as possible.
Moreover, if you released the product and felt proud of it, you released it too late.

Build a Prototype
That’s how you are supposed to feel

Here are a few extra tips that can come in handy while prototyping a software product.

Be careful with UX outsourcing
In different countries, people have different expectations about what type of user experience and interface will be acceptable. For example, in some countries, people are used to using extremely bright colors in UI, while others find such interface too showy.  

Essentially, while building a prototype, your main desire is to spend less. And outsourcing is the best option to reach this goal. Still, before starting working with overseas designers, make sure they completely understand your target audience and the patterns they used to. 

Test the software yourself
Testing is one of the most important parts of the development process. And it’s not about the final acceptance testing. It’s about testing during the development, which is very time-consuming. It will be cheaper for you to save time for the programmers and do the testing yourself. Moreover, nobody understands how this product should work better than you. By testing early prototypes, you will be able to make sure that developers understand the task and core features work as expected.

Conduct Marketing

It seems that nothing can be harder than building a software product. Don’t want to upset you, but it’s not true. Having a ready-to-market product is only the beginning. Now you have to make people know you. More than that, to make them use your product. And proper marketing is the only way to do that. In fact, poor marketing is in the top 10 causes of startup failures. So it’s vital to start promoting your product as early as possible and put all efforts into it. 

Obviously, having not enough money might seem like a huge obstacle, but don’t feel down. There are many other ways to grow your audience without spending much money. 

Conduct Marketing

Go online
Find communities where your target audience usually spends time and start spending your time there too. Reach out to people, communicate with them and make connections. 

  • Facebook Groups
  • Reddit
  • Quora (find relative topics)
  • Slack Channels

Startup Platforms
There are sites that let you share your products for free. Launch there to make your product publicly visible and available. 

  • Product Hunt
  • HackerNews

Offline events
Nothing can work better for you than personal connections. Make them by attending meetup events that involve your target audience. This is the first step to establishing partnerships with organizations.

Validate the idea

Now your prototype is available for users and this is such an exciting moment. Even though you have just a skeleton of your app, it still will let you have early-stage validation. 

Collect users’ feedback immediately after releasing the product. Find out how things are going by interviewing your users. Define which problems should be fixed and which features should be added.

Assessment of the collected feedback will lead you to 2 options:

Prototype launching was successful
Users’ feedback proved the good performance of your product. You receive feedback on how to improve user experience and other signs of user engagement. It means that launching went well. After this, keep working on the product. Then again release it, test, learn and measure the quality. And keep iterating until it is finalized.
At this stage, you can start attracting investors or venture capitals by presenting the prototype of your future product. 

Successful Prototype Launching

Prototype launching wasn’t successful
Obviously every startup founder wants to build a product that wins out. But not everyone actually manages to do that. If you receive absolutely negative feedback or users don’t need your product, don’t give up completely. Still, you can pivot and completely change the course of your business idea.

Secure your Business

All big companies give one piece of advice: to think about safety first. It means that you should do all legal issues at the very beginning of the development. For big established companies this might work. But for small ones, it makes sense to build a prototype first of all. Once you are sure that you are moving in the right direction, then it’s time to consider legal aspects. 

Protect intellectual property
When you see that your idea has a success, it’s time to consider its protection. Register your trademark and get all the necessary patents. Again, just a reminder. Make sure that you have signed a non-disclosure (NDA) agreement with your technical partner. 

Take care about legal issues
It’s necessary to define the legal structure of your business for the purpose of taxation. You never know what could happen. So think about insurance, as it can save you a lot of money in case something goes wrong. 

Maybe if young entrepreneurs love marketing as much as they love their products, a smaller number of startups will fail. So follow all the steps, fall in love with marketing, and turn your idea into a cash cow. 

Picture Credits to EduBirdie