Software Development Agency

How Profitable Is A Software Development Agency? (Updated for 2024)

Pat Walls

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Updated: October 5th, 2024

How Profitable Is A Software Development Agency? (Updated for 2024)

So you want to start a software development agency?

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

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

Especially considering:

You could start a software development agency with as low as $169
Based on our data, software development agencies generate an average of $6.53M per year
You could see gross margins as high as 90% with software development agencies

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 development agency.

Let’s dive in!

Is a software development agency profitable?

Yes, a software development agency 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 $6.53M per year with an estimated gross margin of 90%, you could expect to recover your investment within 7 months or even less.

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

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 development agency is doing and if any changes or adjustments need to be made to enhance or maintain your efforts.

Is a software development agency worth it?

If you’re wondering if a software development agency is worth it, the answer is a big YES. With software development agencies, you have the potential to earn $6.53M 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 development agency 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 development agencies case studies.

Examples Of Profitable Software Development Agencies

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

1. Balsamiq ($6.6M/year)

Balsamiq Wireframes, a low-fidelity wireframing tool, was founded by Giacomo "Peldi" Guilizzoni in 2008. The idea for the tool came from Peldi's experience working at Adobe, where he realized the need for a simple sketching tool that could be used by any contributor in product meetings. With a focus on constant learning and improvement, Balsamiq has grown into a team of 33 people with a monthly revenue of about $550,000.

Is it profitable? Yes
How much money it makes: $6.6M/year

How We Started A $550K/Month Wireframing Software Company

How Balsamiq became a $550k/month company through staying focused on simplicity and taking care of their team and community.

Read this case study

Read by 6,198 founders

2. ThirstySprout ($3.6M/year)

David Stepania, the Founder of ThirstySprout, came up with the idea for his business while taking a break on a Hawaiian beach. With a background in startups and a realization that building an extraordinary startup required an extraordinary technical team, David decided to solve the problem of connecting startups with top technical talent they could trust. ThirstySprout was born out of this desire for growth and success, and it has since grown to a team of over 40 people with $2.5 million in gross revenue last year.

Is it profitable? Yes
What's the gross margin? 30%
How much money it makes: $3.6M/year
How much did it cost to start: $500

Starting A $2.5M/Year Top-Tier Technical Talent Marketplace From Scratch

ThirstySprout, a talent acquisition platform, connects remote technical talent with high-growth startups and enterprises, boasting a team of 40-60 remote contractors and $2.5 million in gross revenue last year, with plans to double that in the next year or two.

Read this case study

Read by 3,364 founders

3. Madwire ($102M/year)

JB Kellogg, the Co-Founder and Co-CEO of Madwire, came up with the idea for his business while interning at a travel magazine company. After realizing his talent for website design and seeing the potential for helping businesses grow through digital marketing, JB and his father decided to start Madwire and grew it into a company with over 500 employees and $100 million in annual revenue in less than 10 years. Their mission is to help small businesses grow and make a difference in their local communities.

Is it profitable? Yes
How much money it makes: $102M/year

How I Started A $8.5M/Month Company Providing Marketing Solutions To SMBs

Co-founder of Madwire JB Kellogg grew his business from just the two of them in a tiny office to over 500 employees and $100 million in annual revenue in under 10 years, by focusing on exceptional customer service and a multi-channel inbound strategy.

Read this case study

Read by 14,129 founders

Learn more about starting a software development agency:

Where to start?

-> How much does it cost to start a software development agency?
-> Pros and cons of a software development agency

Need inspiration?

-> Other software development agency success stories
-> Marketing ideas for a software development agency

Other resources

How much can you make with a software development agency?

With a software development agency, you can make an average of $6.53M revenue per year (based on data reported by real businesses).

You can start with an initial investment as low as $169. Then, with proper knowledge and sustained effort, you could have an ROI (return of investment) within 7 months.

How much does a software development agency make a week?

Based on our data, average weekly revenue for a software development agency ranges around $136K. As such, you could see monthly revenues of $544K.

To know if your software development agency 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 development agency.

How much do software development agencies owners make?

The income of a software development agency 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 development agency is about $136K. 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 development agency owner exists, success in this field requires a commitment to providing quality products and services and building a strong reputation within the community.

Software Development Agency Profit Margins

Generally speaking, a software development agency can expect profit margin of around 90%. 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 development agency, 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 development agency 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 development agency owners can ensure long-term sustainability and profitability for their business.

Software development agency owner salary

The salary of a software development agency 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 development agency, in a prime position, might see an average weekly salary around the ballpark of $122K.

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 development agency may be a promising business to start - but the success of your software development agency mostly depends on your effort and your approach.

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

Part of

Starting A Software Development Agency: Everything You Need To Know

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