Software development is increasingly in demand in today’s market. Software developers earn an average of $110,140 per year. And this is expected to have a 22% increase yearly from 2020 to 2030. So, starting a software development company today is a great way of getting income.

Before you proceed, there are a few things that you need to understand first. This article will help you understand what software development companies do. Furthermore, it will highlight the steps to creating your own software development company.

What Do Software Development Companies Do?

A software development company creates unique software applications and tools. They are designed to solve a problem or meet a specific goal. Most companies include software developers, product owners, and project managers.

Software development companies are not only in charge of bringing a product to life. They also need to ensure that the product is high-quality. That’s why software testing is an important part of the software development process.

Software testing is conducted to check if the product meets the expected requirements. It consists of a series of manual or automated testing that evaluates points of interest in a product. 

As a software startup company, you should know a thing or two about software testing. You need to understand that not all software are perfect. However, all of them are prone to bugs and errors. You don’t want your customers to leave your company because of a small error in your software.

There are automation testing guides for beginners that you can look up online. They’ll be able to help you understand how you can deliver a quality product of your own. A quality product will not only build customer trust but also give your company an edge in the market.

Software testing is just one of the processes in software development. To understand more, the software development process is categorized into four steps:

  • Identifying the problem. First, the firm will attempt to understand the significance of the software they’re developing. Why is it important? What characteristics of the software should be included? How would the software affect its users?


  • Creating and developing the software. The company will, then, design and create the software based on the criteria they have identified. SaaS products, mobile apps, and desktop solutions are among those they work on.


  • Testing and troubleshooting. After the software has been developed, it must be tested and put to use. The product owner will test the program by noting any problems that arise. These include bugs, random shutdowns, and sluggish loading rates.


  • Releasing and maintaining the software. Finally, the product is ready to use. The company may perform maintenance on the software to ensure proper functioning.

10 Steps in Starting a Software Development Company

When it comes to starting a business, there are no specific steps that guarantee success. An idea can come to you on the spur of the moment, or you can also research them for years. In the same manner, establishing a company successfully does not ensure long-term success.

There is no success without making an effort to achieve your goals. With that being said, here is what you need to do to start a software development company.

1. Identify a Problem

Every business is created to solve a specific problem. Consider some of the big businesses today. Steve Jobs thought that average citizens can have computers in their houses. And this ushered in a new age of technology. Apple is now known to be a pioneer of the PC Revolution.

This isn’t to say you have to come up with completely new technology. There are endless ways where you can improve existing technologies. Consider the idea of e-commerce utilizing Artificial Intelligence (AI). Although AI isn’t new, incorporating it into business processes is.

2. Plan Your Business

Planning is a good way to start your business. As an entrepreneur, you should have a thorough understanding of the following points:

  • Business Summary. This is where the details of your company’s goals and leadership are stated.


  • Product Description. In this area, you need to include information on the products you’re offering. Pricing, functionality, and consumer benefits are also outlined here. You can also include information about the production and manufacturing processes.


  • Your Target Audience. The term “target audience” refers to a group of people who are interested in your product. This section contains a competition analysis as well as industry trends.


  • Pricing Models. Most businesses now utilize Software-as-a-Service (SaaS). This model requires users to pay only for the amount of time they use the software. Other pricing models exist, such as subscription-based and service-charged-based. As a business owner, you need to know how to offer and price your services.


  • Pricing. This is mostly determined by the intricacy of the service you’re providing. Simple apps are given free of charge, with pricing limited to specific features. However, enterprise solutions require a monthly fee for high-end clients. You’ll learn more about this by analyzing market and competitors’ pricing.


  • Profit Forecasting. After establishing a pricing system, the next step is profit forecasting. This means you have to project how much money you’ll make from your business. For a software business, the profit potential is huge. However, it’s best to be realistic in the beginning.

3. Establish a Legal Entity

After creating a business plan, the next step is to establish a legal business entity. Some of the most common business structures are sole proprietorship, partnership, and corporation. This step is important in starting a business since it provides legal protection to the company.

4. Get Fundings for Your Business

Once you’ve worked out your plan, you can now put your strategy into action. However, you might be putting your plan to waste if you can’t mobilize it. 

Raising money for a software company is extremely tough. This is especially true if the amount you’re raising exceeds your credit limit. Creating software testing tools can be quite expensive. Not to mention some costly preparations for starting a business.

In this case, you’ll have to look for other ways to get money. Fortunately, there are options for finding investors for your business now. 

5. Register Your Business for Taxes

Owning a business also means you have to pay taxes according to the law. To do this, you need to get an Employer Identification Number (EIN). 

There are different categories of business taxes. Understanding how each of these works will help you run your business.

6. Have a Separate Bank Account for Your Business

Protecting your personal assets means using business banking and credit accounts. If you don’t have a separate business account, your personal assets are in danger. This is referred to as penetrating your corporate veil in business law. 

Furthermore, understanding how to get business credit helps fund your business. Alongside this, it also aids in lowering interest rates and increasing credit lines.

7. Get the Required Business Permits and Licenses

You don’t need a business permit working as a freelance software developer. You can offer services such as web testing without these since it’s not a regulated activity. However, if you’re going to start a business around that, you have to get one. 

Aside from registering for taxes, licenses and permits are required for your business to operate. It would be best to differentiate these two first.

A license is issued by state governments for many professions. It is only given after taking a certain test proving your proficiency in the field. As of the moment, software developers are not required to have a license.

On the other hand, permits are a sort of license that is used to control public safety. Following an examination, permits are usually given by a government agency. For example, a fire department can offer you permission to open a business facility to the public.

Each state has its own set of regulations regarding permits and licenses. Certain types of businesses also get different licenses issued by different government agencies. For a software development company, you will need a Certificate of Occupancy.

8. Have Your Business Insured

If you want to operate safely and legally, you need to have your business insured. Business insurance protects your company’s financial well-being.

There are different insurance plans designed for various types of businesses. And all of these come with specific risks. If you’re not sure what dangers your company may face, start with General Liability Insurance.

Worker’s Compensation Insurance is also important coverage that many businesses require. If your company employs people, it’s likely that your state will require you to have this.

9. Determine Your Brand 

After meeting every business’ requirements, it’s time to focus on growing your brand. You need to spend a considerable amount of time and effort to do this. Your brand identity should reflect your core values and principles. Make it memorable enough for your prospects and consumers to give it a unique sense.

There are millions of companies that offer software testing tools for end-to-end testing. If you’re still a startup company, it would be difficult to compete with established brands. To do so, you need to take certain steps to build a strong brand identity.

After establishing a brand, devote your time and resources to expanding online. Being on every social media platform helps build your online presence. In the digital world, it is important that consumers can reach out to you easily. And to attract potential clients, you should invest in your social media marketing.

10. Create a Website

Websites are a great way of establishing an online presence. While this is true, some businesses believe that it is impossible to do so. Simply because they lack website-building skills. With technological advancements today, business owners don’t need to worry about this.

The following are the major reasons why you should go and create a website for your business:

  • Websites are required for any legal business. It doesn’t matter what size or sector your business is in.
  • Social media accounts are not a substitute for having your own website. It’s true that platforms like Facebook and Twitter are great sources of customers. But having a website can open up more opportunities for your business to grow.
  • The internet and the digital world are always evolving. Today, we have different kinds of web development tools to help beginners like you. 

You can look for tips in website creation online. But to give you a summary, every website should:

  • Attract visitors with a good layout. Good design means your visitors will stay longer on your site. It also means they can navigate easily through your website. You can look up some web design ideas for your website on the internet.
  • Have a clear description of your services and products. If you’re offering software for UI testing, it should be stated clearly.
  • Have a direct call to action
  •  Include an about page. It also helps build brand loyalty if your customers know who they’re buying from.
  • Be optimized for search engines. Blogs are a great way of increasing your SEO rankings. Not only that, but they should also meet what your customer needs. If you stuff your blogs with too many keywords, it won’t be good for your ranking. High-quality content means it is relevant to your customers.
  • Be mobile-friendly. Most of the web traffic today came from mobile internet users.



It takes a lot of time and effort to start a business. If you want your business to thrive, you need to exert effort to do so. This guide will help you achieve your goals of establishing a software development company. In the end, hard work will surely pay off.

However, getting into business should not only be about generating money. You should also enjoy the process of doing so. Otherwise, you’ll wear out your enthusiasm and just waste your time.