Software Company

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

Pat Walls

•

Updated: September 13th, 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 $2.13M 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 $2.13M 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 $2.13M 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. 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 4,362 founders

2. Sync2Sheets ($108K/year)

Leandro, a former freelance software developer from Buenos Aires, pivoted from freelancing to building Sync2Sheets, a tool syncing Notion databases with Google Sheets. Launched rapidly in just two weeks, the product now boasts $9k MRR and over 400 paying customers, including Canva and Wix.

Is it profitable? Yes
What's the gross margin? 85%
How much money it makes: $108K/year
How much did it cost to start: $0

My Google Sheets Add-On For Notion Hit $9K MRR

A Software Engineer turned SaaS founder shares the journey of building Sync2Sheets, a Google Workspace Add-On that syncs Notion databases with Google Sheets, generating $9k MRR with over 400 paying customers, strategic marketing tactics, and plans for expansion into other services.

Read this case study

Read by 2,788 founders

3. Twelvedevs ($1.2M/year)

Andrey and his co-founder Alexander were working as programmers in a software development outsourcing company when they decided to start their own company. Inspired by stories of small teams achieving success, they came up with the idea of creating a small team of 12 top developers. However, they soon realized that they needed to expand their teams to grow the company, leading to the formation of Twelvedevs, an IT consulting and custom software development company. Since its launch in 2012, Twelvedevs has completed over 70 projects in various industries, including Fintech and logistics, and has become one of the leading custom software development companies with over $100k in revenue per month.

Is it profitable? Yes
How much money it makes: $1.2M/year
How much did it cost to start: $300

These Two Friends Met In College And Started A Custom Software Development Company [$1.2M/Year]

Twelvedevs, an IT consulting and custom software development company, shares its success story after 9 years of completing more than 70 projects across various industries, having over $100k revenue per month, fifty employees, and a soon-to-be-opened branch in the U.S. for Fintech and logistics.

Read this case study

Read by 2,735 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 $2.13M 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 $44.5K. As such, you could see monthly revenues of $178K.

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 $44.5K. 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 $36.9K.

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

‹

›