Software Company

How Profitable Is A Software Company? (Updated for 2024)

Pat Walls

•

Updated: October 6th, 2024

How Profitable Is A Software Company? (Updated for 2024)

So you want to start a software company?

And the first question that came to your mind was, “well, are software companies actually profitable?”

With a market size of $581B - there’s plenty of business to go around.

Especially considering:

You could start a software company with as low as $199
Based on our data, software companies generate an average of $4.5M per year
You could see gross margins as high as 85% with software companies

There’s money to be made. Don’t worry.

But, I don't want to spoil it all. Below we’ll cover everything you need to know when it comes to the profitability of a software company.

Let’s dive in!

Is a software company profitable?

Yes, a software company is generally a profitable business. However, you still need to consider several factors since these things always impact the overall outcome.

For instance, since average revenue is $4.5M per year with an estimated gross margin of 83%, you could expect to recover your investment within 12 months or even less.

But of course, it all comes down to how much you earn compared to the potential revenues of your software company.

To determine whether your business is profitable, you should earn more than your expenses in the beginning months. However, while you're in your first month, it can be challenging to know what to expect.

Therefore, you should maintain a record of your monthly expenses and income to determine whether you're meeting your goals. By doing this step, you can see how your software company is doing and if any changes or adjustments need to be made to enhance or maintain your efforts.

Is a software company worth it?

If you’re wondering if a software company is worth it, the answer is a big YES. With software companies, you have the potential to earn $4.5M per year (this is based on data reported by real founders).

Further, you could have your initial investment back within months. Simply put, it’s a business worth a shot, especially if you have the resources and make the necessary efforts to achieve or surpass the target.

With a market size of $581B, it will be possible for you to build something that grows and turns into a flourishing business. As such, it’s the type of business you might want to consider starting.

Of course, you must learn and understand every aspect of running a software company to ensure success. Still, as long as you have the initial investment and can endure a few months before your actual gains, this business could be worth it.

You might want to consider reading more specifics about successful software companies case studies.

Examples Of Profitable Software Companies

Here are a few examples of profitable software companies, and a few more details about them:

1. Autoklose ($7.5M/year)

Shawn Finder, the co-founder of Autoklose, identified a gap in the market during his tenure as a VP of Sales. He observed that many businesses were purchasing lists that had low-quality data, which was frustrating for sales teams who relied on that data for outreach. This pain point inspired him to create a service that combined accurate B2B data with email sales automation, eliminating the need for separate services and improving efficiency.

Before fully committing to the idea, Shawn used his previous business, ExchangeLeads, as a foundation by integrating its database into the new platform. This not only validated the market demand but also helped in funding and informing the development of Autoklose. He continuously refined the initial product through feedback from early adopters, offering discounts in exchange for insights, which helped tailor the tool to meet real customer needs.

Despite facing challenges like high churn rates and the necessity of educating small businesses on the value of the service, Shawn's strategic approach, including hiring customer success teams to reduce churn and employing a methodical pricing strategy, helped in quickly growing the business. His key lesson was leveraging existing resources while being open to pivot based on customer feedback, ultimately culminating in building a product that suited the market's needs effectively.

Is it profitable? Yes
How much money it makes: $7.5M/year

How 2 Founders Bootstrapped Autoklose, Sold for 5x ARR in 2 Years

Read this case study

Read by 28 founders

2. Chili Piper ($40M/year)

Alina Vandenberghe and her co-founder Nicolas began Chili Piper in 2016, inspired by their extensive backgrounds in product development and sales processes. They identified a common pain point for sales teams: the inefficiency and frustration involved in scheduling meetings and managing sales leads. Through attending numerous industry events and engaging directly with potential customers, they validated that there was a significant need for a solution that could streamline this process.

Their initial approach was very hands-on; at these events, Nicolas would secure interest and demos on the spot, then Alina would handle onboarding and support, allowing them to gather critical real-time feedback. This feedback loop helped them continuously refine their solution, ensuring it met the actual needs of their users. One major challenge they faced was conceptualizing their brand and logo, which Alina sketched over a hundred times before they landed on the right design, overcoming this through persistence and external design help.

Key lessons from their process include the importance of deeply understanding their customers’ problems and remaining adaptable based on direct user insights. They learned early on that personal engagement and a customer-centric approach were crucial components in developing an effective, valued product.

Is it profitable? Yes
How much money it makes: $40M/year

How Alina Vandenberghe Grew Chili Piper to $40M Revenue

Aspiring founders will learn how Chili Piper's founders bootstrapped their way to $3 million ARR without paying salaries, raised over $54 million in funding, and secured rapid growth through strategic partnerships, personalized customer service, and effective influencer marketing campaigns.

Read this case study

Read by 52 founders

3. Appetiser ($8.4M/year)

Jamie Shostak, the co-founder of Appetiser App Development, came up with the idea for the business when he met Michael MacRae, who had apps with millions of users but was looking for a new challenge. They both shared a passion for building and growing tech products, and saw a need for speed, data-driven insights, and top-level quality in the industry. After landing two great clients, they realized the importance of setting up predictable growth systems and started reaching out to prospective companies through outbound sales tactics. They are now on track to make over $8,000,000 annually with over 200 employees worldwide.

Is it profitable? Yes
How much money it makes: $8.4M/year
How much did it cost to start: $0

We Started An $8.4M/Year App Development Agency [With $0]

Appetiser App Development grew from a startup with $0 to now making over $8,000,000 annually with over 200 employees across the globe, serving clients that have billions in valuations like Pointsbet and Good Empire, by helping startups succeed with their app development needs.

Read this case study

Read by 4,495 founders

Learn more about starting a software company:

Where to start?

-> Software company plan
-> How to finance a software company?
-> How much does it cost to start a software company?
-> Pros and cons of a software company

Need inspiration?

-> Other software company success stories
-> Marketing ideas for a software company

Other resources

-> Software company tips

How much can you make with a software company?

With a software company, you can make an average of $4.5M revenue per year (based on data reported by real businesses).

You can start with an initial investment as low as $199. Then, with proper knowledge and sustained effort, you could have an ROI (return of investment) within 12 months.

How much does a software company make a week?

Based on our data, average weekly revenue for a software company ranges around $97.5K. As such, you could see monthly revenues of $390K.

To know if your software company achieves the weekly profit target, you need to keep track of the total earnings you get per day. Afterward, you'll want to consider subtracting the expenses you have daily.

Learning your weekly profit can also show whether you're hitting your target goal for your software company.

How much do software companies owners make?

The income of a software company owner can vary depending on various factors such as location, size, competition, and the owner's business skills.

But to give you some idea, the weekly revenue of an established software company is about $97.5K. But this can be lower or higher depending on so many factors - it's almost impossible to say exactly.

While the potential for earning a good income as a software company owner exists, success in this field requires a commitment to providing quality products and services and building a strong reputation within the community.

Software Company Profit Margins

Generally speaking, a software company can expect profit margin of around 83%. Profit margins refer to the percentage of revenue that remains after deducting all expenses associated with running a business. In the case of a software company, profit margins can vary depending on various factors, such as the type and quality of products sold, the size of the store, and the level of competition in the area.

However, these figures can vary depending on the pricing strategy, inventory management, and overall efficiency of the business. To maintain healthy profit margins, software company owners must focus on managing costs, negotiating favorable supplier terms, and providing high-quality products and services to attract and retain customers. By doing so, software company owners can ensure long-term sustainability and profitability for their business.

Software company owner salary

The salary of a software company owner is an unpredictable figure. It's significantly influenced by numerous factors, including the store's location, its size, and the degree of competition. An owner of a well-established software company, in a prime position, might see an average weekly salary around the ballpark of $80.9K.

But it's worth noting, such numbers aren't always consistent. The earnings can vary wildly, potentially swinging by as much as 80% either way.

Achieving consistent success and maintaining a reliable income stream in this industry requires a deep commitment. It's imperative to offer high-quality products, deliver impeccable customer service, and nurture a trusted bond with the community you serve.

Conclusion

In a nutshell, based on many of our examples, a software company may be a promising business to start - but the success of your software company mostly depends on your effort and your approach.

If you focus on these, you'll have a much higher chance of a profitable software company.

Part of

Starting A Software Company: Everything You Need To Know

‹

›