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Starting Your Own Software Company

If you’ve read the preceding article, So You Want Your Own Tech Start-Up, you’re probably aware of the challenges involved in starting your own software business.  Before we discuss some tips in planning a new business, we’ll quickly review some of the statistics.

Looking at the Numbers

According to the U.S. Small Business Administration, in 2008 there were:

  • 627,000 businesses that opened.
  • Approximately 595,600 that closed.
  • 43,546 went bankrupt.  
  • A small business has a 69% chance of surviving for two years and a 51% of being around for five years.

This doesn’t mean that starting a small business is hopeless – those 595,600 businesses that closed weren’t all fresh start-ups – but it does mean that there is a 41% chance of failure in the first two years.  Two reasons why many businesses fail is a lack of funds and poor business planning.  How can you avoid these?

Tips for Starting Your Own Software Company

Realistically, some aspects of starting a software company are not wholly in your power.  You may not be able to raise as much money as you’d like to, or your product may not instantly attract the notice you think it should.  The following tips are largely adapted from the Small Business Administration’s website (www.sba.gov).  They represent things you can do to give your business a healthy start.

  • Find a Mentor.  Someone with experience in starting a similar business has probably encountered problems you haven’t even imagined.  Even if you have experience in IT and business, tried and tested advice is always valuable.
  • Arrange Financing.  However you choose to acquire the needed money – from savings, borrowed against a house, from a credit card, or as a loan from friends and family – you’ll need some cash in place to begin operations.
  • Choose a Business Structure.  Will you be working alone or as a partnership?  Various forms of corporations are also possibilities; learn about each business structure and choose the one that best suits your needs.
  • Protect Your Ideas.  It is important to study your product and identify what makes it special or better than the competition.  Then take steps to protect it, whether that step is a patent, a copyright, or some other way.
  • Obtain the Needed Licenses and Permits.  This depends on the type of business you’ll be running and where you are working – rules change from state to state.
  • Choose a Location and Purchase or Lease any Equipment.  As a starting business, you probably won’t have a multi-story factory, but you will need somewhere to base your operations.  Remember to factor this into your finances and budget.
  • Have a Business Plan.  Define what your goals are, how you plan to achieve them, and give yourself a basic timeline, but don’t be too caught up in creating the perfect plan.  Just use this to get started; you can perfect it later.
  • Have an Exit Strategy.  What will you do if this doesn’t succeed?  To quote an old adage, don’t put all your eggs in one basket.  If your business does fail, make sure you have a backup plan and enough money to pay the bills for a while.

Finding More Information about Starting Your Own Software Company

It is no coincidence that the Small Business Administration has such a lot of (free) tips on starting your own business.  Admittedly, the information is general, not targeted towards software companies, but the process of starting a new business remains similar.  In addition to much more information on the points listed above, there are a number of free video tutorials dealing with business management, marketing and advertising, starting a business, planning your business, surviving a slow economy, handling finance and accounting, and starting a home-based business.