Choosing a software business model requires understanding the methods used to sell software, such as standalone or subscription models. Traditional models involve selling licenses per CPU, while web-based apps are sold on a subscription basis. Consulting businesses must quote queries on an hourly basis. Marketing is crucial due to low development costs.
Choosing a software business model for your company requires a basic understanding of typical methods used to sell software. First, you need to determine what kind of software you intend to design and how you plan to distribute it. Will the software be sold as a standalone single product or will it be sold as a subscription model? You can also be part of the software project with consultancy for other companies.
The traditional software business model involves selling software licenses per central processing unit (CPU). The customer pays to install the software on his personal computer (PC) and receives a key code to validate it. The fee is one-time and technical support is usually provided free of charge. The software is delivered in compact disc (CD) format. If you plan to release desktop software for individual use, consider this template.
If you intend to release enterprise software for commercial use, consider a similar but improved version of the traditional software business model. Enterprise software is usually sold per site or per user. A one-time fee is paid to install the software, and an additional fee is paid for technical support and long-term consultation. Like the traditional model, the software is usually sold in CD format.
Many companies now operate on a software business model designed to sell web-based applications. If you intend to sell web apps, the model you want to use is a little different than the traditional software business model. Web apps are generally sold on a subscription basis. In addition, there is usually a setup fee charged. The software is provided as a hosted web application and accessed via a password.
If you plan on operating a consulting business, you will need to select a model that will increase profitability. Queries must be quoted on an hourly basis. The software is developed based on customer instructions and goes through many testing phases until the customer is satisfied. The downside to this model is that custom software is typically sold only once. As a result, the software must be priced high enough to make a healthy profit.
Product development costs vary greatly depending on the type of software you choose to develop. An advantage of the software business is that less money is required for the development process than in most other industries. As a result, marketing is often the number one expense for software companies as there are many competing software released due to low development cost. You will need to create an adequate marketing budget to ensure that you rise above the many competitors.
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