Tips for Starting your own Software Business in 2016
Posted on:January 02 2016
In the comment section of my 2015 review post the question came up how I make money by creating software. I get asked this by quite a lot of programmers. So, if you are planning to develop and sell software on your own, here are a few tips about how to create a software business in 2016:
Creating the product is only 50% of your work
Since I'm working mainly on old-school desktop software and sometimes on games and websites, the most important step is of course to create a product which
solves a problem people actually have, or fills a need. People need to want to give you money for it. Obviously. But although creating a working, bug free and polished software is already a difficult task for itself, it is not the most work you have to do. It is about 50% of the work, I'd say. The tricky part is to market and sell it. Throwing an app into an app store and hoping that it sells for itself doesn't work anymore today.
You won't create a super star app
Your first software is not likely to sell anything. And it is highly unlikely that you create a very successful app. In fact, most people developing software won't create something which sells at all. If you think you could create a hit, think again. Take a look at the lucky developers: Even companies which created a top seller usually struggle to repeat this success. A nice example is Markus Persson, who had massive hit with Minecraft and wasn't able to create a second success. Or Rovio: Before they had created Angry Birds, they had created dozens of other, mostly unknown games, for 6 years. So be prepared for this.
Be prepared to fail
I am creating sofware since 18 years, and doing it with my own company for 8 years now. Around the time when I started
my own business, about a dozen of people I know also did the same. Of all of those only two other persons still managed to 'survive' with their own business. It's is not that easy.
I've created lots of software, about three times more products than listed on my companies website. Only two of the products listed on my website are really successful. (Guess which of those are the successful ones, if you like.)
What I'm trying to say: It is likely that you will fail. Be prepared for that. Have some money sitting somewhere, in case you don't make it.
Charge a sustainable amount of money for your software
You are a programmer, you should be able to do the math: If you need about a minimum of 1500 euro per month to live (might vary from place to place), then you need to generate an income of about 3000 euro per month before taxes (that's the tax rate where I live). Because you are just starting up, you are not likely to make this by selling a cheap smartphone app for just one euro, because for that you would need 3000 new customers per month. You probably will have more something like 2. Or 10. Sounds low, but - depending on your type of software, distribution method and marketing budget (which is likely 0 at the beginning) - that's a realistic amount when just starting up.
So assuming after a bit of time, you get about 100 customers per month, you need to charge at least 30 euro for your software, in order to just make your minimum amount of money to live from it. Doesn't sound to bad, but it could get difficult to achieve this.
Use a real payment processor
Don't Use PayPal. Repeat: Don't use PayPal. I've heard numerous times now that PayPal froze accounts for about half a year after a software business somehow
broke through. Which is extremely bad. So don't use them. Use a real payment processor. I'm personally using BMTMicro (which are great, btw!), but there are numerous other options out there. Payment Processors handle VAT for you, Refunds, Invoices and more. There is no need to risk your companies income and to use a company with a bad reputation, just because they are big and popular.
Do your own marketing
Marketing is essential, and important. And it is really, really difficult to get it right. I'm now trying since 8 years, and I'm still not good at it. Don't rely on Twitter doing marketing work for you. Twitter and other social media help, but my experience has shown that this isn't enough. You need to do your own ads, blog, press releases and more. Maybe this doesn't sound very 2016-y, but this is how it still works. The internet is a moving target, and new options (like Facebook ads) pop up and vanish all the time, and you have to try them out. Don't rely on other peoples reports, telling you that ads on "that website" or "this ad network" don't work. Try them out yourself with a very small budget. For me, ads worked on some pages where people told me they are just scam, and the other way round.
I could probably write a book about this topic, but this is a blog. But I hope this short blog post might have helped you, if you think of creating and selling your own software. And by the way, if you are looking for a nice website or game editor, take a look at my software. :)
Creating the product is only 50% of your work
Since I'm working mainly on old-school desktop software and sometimes on games and websites, the most important step is of course to create a product which
solves a problem people actually have, or fills a need. People need to want to give you money for it. Obviously. But although creating a working, bug free and polished software is already a difficult task for itself, it is not the most work you have to do. It is about 50% of the work, I'd say. The tricky part is to market and sell it. Throwing an app into an app store and hoping that it sells for itself doesn't work anymore today.
You won't create a super star app
Your first software is not likely to sell anything. And it is highly unlikely that you create a very successful app. In fact, most people developing software won't create something which sells at all. If you think you could create a hit, think again. Take a look at the lucky developers: Even companies which created a top seller usually struggle to repeat this success. A nice example is Markus Persson, who had massive hit with Minecraft and wasn't able to create a second success. Or Rovio: Before they had created Angry Birds, they had created dozens of other, mostly unknown games, for 6 years. So be prepared for this.
Be prepared to fail
I am creating sofware since 18 years, and doing it with my own company for 8 years now. Around the time when I started
my own business, about a dozen of people I know also did the same. Of all of those only two other persons still managed to 'survive' with their own business. It's is not that easy.
I've created lots of software, about three times more products than listed on my companies website. Only two of the products listed on my website are really successful. (Guess which of those are the successful ones, if you like.)
What I'm trying to say: It is likely that you will fail. Be prepared for that. Have some money sitting somewhere, in case you don't make it.
Charge a sustainable amount of money for your software
You are a programmer, you should be able to do the math: If you need about a minimum of 1500 euro per month to live (might vary from place to place), then you need to generate an income of about 3000 euro per month before taxes (that's the tax rate where I live). Because you are just starting up, you are not likely to make this by selling a cheap smartphone app for just one euro, because for that you would need 3000 new customers per month. You probably will have more something like 2. Or 10. Sounds low, but - depending on your type of software, distribution method and marketing budget (which is likely 0 at the beginning) - that's a realistic amount when just starting up.
So assuming after a bit of time, you get about 100 customers per month, you need to charge at least 30 euro for your software, in order to just make your minimum amount of money to live from it. Doesn't sound to bad, but it could get difficult to achieve this.
Use a real payment processor
Don't Use PayPal. Repeat: Don't use PayPal. I've heard numerous times now that PayPal froze accounts for about half a year after a software business somehow
broke through. Which is extremely bad. So don't use them. Use a real payment processor. I'm personally using BMTMicro (which are great, btw!), but there are numerous other options out there. Payment Processors handle VAT for you, Refunds, Invoices and more. There is no need to risk your companies income and to use a company with a bad reputation, just because they are big and popular.
Do your own marketing
Marketing is essential, and important. And it is really, really difficult to get it right. I'm now trying since 8 years, and I'm still not good at it. Don't rely on Twitter doing marketing work for you. Twitter and other social media help, but my experience has shown that this isn't enough. You need to do your own ads, blog, press releases and more. Maybe this doesn't sound very 2016-y, but this is how it still works. The internet is a moving target, and new options (like Facebook ads) pop up and vanish all the time, and you have to try them out. Don't rely on other peoples reports, telling you that ads on "that website" or "this ad network" don't work. Try them out yourself with a very small budget. For me, ads worked on some pages where people told me they are just scam, and the other way round.
I could probably write a book about this topic, but this is a blog. But I hope this short blog post might have helped you, if you think of creating and selling your own software. And by the way, if you are looking for a nice website or game editor, take a look at my software. :)
Comments:
Robin
Quote2016-01-02 14:36:00
Thanks for the write up, very useful!
Thela
Quote2016-01-02 16:40:00
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It seems everyone thinks their product should be mass-consumer to be successful, but its usually the opposite imho.
A niche-product targeted at a specific clientèle can make much higher margins, and your customers are usually much more willing to interact with you. So my 2 cents would be to really spend time on understanding who will buy your product, what they can spend, how they interact, and how they make their decisions. (e.g. 30 eur is a lot for a teenager, but no issue for an employed person)