Why a Software Business?

Out of the different industries, the software industry is one that fascinates me the most, due to the very quick scalability/growth potential.

A hard set rule is that a business can only grow to the extent it adds MORE VALUE to MORE CUSTOMERS. With most other industries, most things have to scale as you do this. For example, for a dental business to grow, it will have to scale it’s teeth cleaning specialists, and if enough customers, more dentists. More employees, more administrators, more office space, etc. The operations/overhead scales almost proportionally to the number of customers.

With a software company however, unlike most other industries, you can typically add more value to more people with very little additional resources.

The majority of the expenses are the initial development, ongoing development and maintenance, and sales/marketing. For a Software as a Service (SaaS) business, you just have to plug in more servers (if your software was designed to scale). This may equate to very little cost to scale besides purchasing another server, or paying someone else for their server, i.e. Amazon Web Services. Depending on your overall business strategy, the cost of server resources can be so small as to be considered negligible in comparison to the other costs of the business.

Then, if you focus on making sure your initial and ongoing maintenance costs are low by choosing the right software and people/strategy, your overall costs of the production/operations (ongoing development & maintenance) will remain low. That leaves you hopefully with much operating cash flow to spend with sales/marketing to drive growth, at levels that are for the most part unheard of in any other industry. Exciting, isn’t it!

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