Software Tool

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

Pat Walls

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Updated: October 5th, 2024

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

So you want to start a software tool?

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

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

Especially considering:

You could start a software tool with as low as $100
Based on our data, software tools generate an average of $24.6M per year
You could see gross margins as high as 75% with software tools

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 tool.

Let’s dive in!

Is a software tool profitable?

Yes, a software tool 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 $24.6M 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 tool.

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

Is a software tool worth it?

If you’re wondering if a software tool is worth it, the answer is a big YES. With software tools, you have the potential to earn $24.6M 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 tool 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 tools case studies.

Examples Of Profitable Software Tools

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

2. Data Fetcher ($276K/year)

In 2020, Andy learned about a Google Sheets add-on called API Connector, which imports your data into a simple Google sheet.

Around the same time, Andy noticed the rise in popularity of Airtable.

Since Google Sheets and Airtable were close in compatibility, Andy decided to build a similar type of data integration tool for Airtable.

Andy’s 3-step method for coming up with ideas is helpful context for understanding how he came up with the idea: - Find a platform that is already growing massively. - Look at already successful tools for more mature platforms. - Build an equivalent tool for the new platform.

Is it profitable? Yes
What's the gross margin? 75%
How much money it makes: $276K/year
How much did it cost to start: $100

How I Built An Airtable Plugin That Lets Users Manage Their Data Better [$80K/Year]

Data Fetcher is a no-code tool that imports data into Airtable which has reached 190 paying customers in just over a year after launch and is making $6500 in MRR, with a goal of reaching $30k+ in MRR, for aspiring founders looking to bootstrap an app to life-changing revenue as a solo founder.

Read this case study

Read by 5,299 founders

3. Snappa ($1M/year)

Christopher Gimmer, the co-founder of Snappa, came up with the idea for the business after struggling to create graphics for his blog posts. As he searched for a simple and powerful graphic design tool, he realized there was a need for one geared towards marketers and entrepreneurs. He leveraged his viral blog post about free stock photos to market Snappa and collected feedback from potential users before building the prototype.

Is it profitable? Yes
How much money it makes: $1M/year

How Two Friends Bootstrapped A SaaS Business To $55K MRR

Learn how two friends bootstrapped a SaaS business to $55k monthly recurring revenue (MRR) by creating a simple graphic design tool for non-designers and focusing on content marketing for customer acquisition.

Read this case study

Read by 21,522 founders

Learn more about starting a software tool:

Where to start?

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

Need inspiration?

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

Other resources

How much can you make with a software tool?

With a software tool, you can make an average of $24.6M revenue per year (based on data reported by real businesses).

You can start with an initial investment as low as $100. Then, with proper knowledge and sustained effort, you could have an ROI (return of investment) within 12 months.

How much does a software tool make a week?

Based on our data, average weekly revenue for a software tool ranges around $513K. As such, you could see monthly revenues of $2.05M.

To know if your software tool 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 tool.

How much do software tools owners make?

The income of a software tool 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 tool is about $513K. 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 tool owner exists, success in this field requires a commitment to providing quality products and services and building a strong reputation within the community.

Software Tool Profit Margins

Generally speaking, a software tool 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 tool, 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 tool 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 tool owners can ensure long-term sustainability and profitability for their business.

Software tool owner salary

The salary of a software tool 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 tool, in a prime position, might see an average weekly salary around the ballpark of $426K.

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

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

Part of

Building A Software Tool: Everything You Need To Know

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