Financing and starting a software development business

Question

This question is a follow up to this question, except this is specifically about how to finance a small software development business (one person) without taking a huge loan or venture capital, but rather by financing it from your own savings. Basically, the question is, does it make any sense from a business perspective to start a software development company in this way?

I’d like to develop some software on my own and start selling it. To do this I’d naturally have to stop doing other things (like contract work) or having a regular job to support myself during that time it took to start selling the software. If I took a loan or borrowed money from someone else, then I’d be able to count that (and the interest paid) as an expense, but if I want to play it safe and just borrow from myself, I don’t think that counts as business expense in a sole proprietary or a one person LLC?

Have you started a software business by yourself? Did you create your own product? How did you get started?

I’d appreciate any advice, tips, book references or comments. I just play with computers all day and know very little about business at the moment. Thanks for your help!

Answer 1

"What are common pitfalls for startups driven by software developers?" may have some useful answers.

Answer 2

Check out this new StackExchange based site - you are likely to find a lot more information there about software business-related questions.

Answer 3

If you aren't already a reader of Software by Rob, he's definitely worth checking out. He's created this site on software entrepreneurship also.

Answer 4

Here's what I'd suggest you try:

1. For a while, do as much consulting as you can, and try to save like crazy.
2. Slowly scale back on the consulting (for example, take Fridays off). This way you still make good, but can slowly lay the foundation for a more focused development effort.
3. At the same time, try to start the marketing of your software and try to get to a first sale.
4. Balance consulting (to make money) and development (to enhance the product and make more sales).

This way, you can try to get to 1.0 without getting broke if your idea bombs. Of course, this is tricky if your 1.0 requires some long development effort, but using only limited time helps focus you on what's really important (both for the software and the required marketing etc.)

Hope this helps!

Answer 5

I've been building my own company with my own saved money complemented by freelance website building.
The freelance stuff is noting special, but it brings in some money.

The big questions that you need answers before starting out are:

• How is my product going to generate money.
• How will I get people to know/use my product: marketing!!
• How long will it take before it will generate money.

(business plan stuff, it really does help) Based on this information you can make an estimation about how much time it will take you to start earning an income based on you own work.
So you can calculate the amount of money you will need to get there Now double the amount and you should have a somewhat realistic investment cost.

But before you quit your current-job, make sure you have a Plan B: How are you going to feed yourself if your new product does not generate the money expected.