Software Business Plan Template
If you want to start a software company or expand your current software business, you need a business plan.
The following business plan template gives you the key elements to include in a winning business plan for a software company. In addition to this template, a well-crafted plan will include market research to help you better understand the software industry, market trends, your competitive advantage and your target market. It will also help you craft a smart marketing strategy and a strong financial plan.
Example Business Plan For Software Companies
I. Executive Summary
Business Overview
[Company Name] is a new software company located in [Location]. The company develops a cloud based software package that combines an efficient communication platform with project management software. Customers who buy our product will be able to communicate with their teammates via messaging or video chat while also organizing their project with the software’s project management tools. Whereas our competitors need to create two separate products to offer these benefits to their customers, we have been able to integrate both these features into one incredible product.
[Company Name] is founded and led by [Founder’s Name], who has been a programmer for 20 years. One thing that frustrated him throughout his career is the need for multiple programs to do his work. Many companies need project management software and communication software, but rarely are there products that offer all the benefits and features of both products. During COVID, he began designing and developing a program that included all the communication and project management features that most businesses need. He recently finished developing the software and is now ready to launch his business.
Products Served
[Company Name] develops and sells a software product that incorporates all the best features of communications software and project management software. Clients who purchase our software can track all their goals and projects and easily communicate with their teammates and employees.
Customer Focus
[Company Name] will primarily serve small and large organizations in need of easy communication and project management tools. These organizations will have dozens to thousands of employees that all have major projects they need to keep track of and communicate with each other about. We expect many of these businesses to make $5 million or more in revenue annually depending on the size of the organization and the industry they are in.
Management Team
[Company Name] is founded and led by [Founder’s Name], who has been a programmer for 20 years. He was inspired by personal experience to create a program that integrates communications software and project management software seamlessly. He has been working on this idea for several years and is now ready to sell his product to other companies.
In addition to his programming experience, [Founder’s Name] has worked several years as a manager at a major software firm. So not only does have the technical expertise to create and manage our product, but he also has the management and leadership experience needed to run the company.
Success Factors
[Company Name] is uniquely qualified to succeed due to the following reasons:
- [Company Name] is creating a software product that is hard to find but in great demand.
- [Company Name] will fill a specific market niche in the software industry. In addition, [Founder’s Name] has surveyed businesses in the target market and received extremely positive feedback saying that they explicitly want to make use of [Company Name]’s products.
- The location is in an economically vibrant area where new businesses are starting at a fast rate.
Financial Highlights
[Company Name] is currently seeking $800,000 to launch. Specifically, these funds will be used as follows:
- Office design/build: $250,000
- Software development and management: $200,000
- Equipment and supplies: $200,000
- Working capital: $150,000 to pay for marketing, salaries, and lease costs until [Company Name] reaches break-even
Top line projections over the next five years are as follows:
| Financial Summary | FY 1 | FY 2 | FY 3 | FY 4 | FY 5 |
|---|---|---|---|---|---|
| Revenue | $560,401 | $782,152 | $1,069,331 | $1,379,434 | $1,699,644 |
| Total Expenses | $328,233 | $391,429 | $552,149 | $696,577 | $776,687 |
| EBITDA | $232,168 | $390,722 | $517,182 | $682,858 | $922,956 |
| Depreciation | $7,000 | $7,000 | $7,000 | $7,000 | $7,000 |
| EBIT | $225,168 | $383,722 | $510,182 | $675,858 | $915,956 |
| Interest | $6,016 | $5,264 | $4,512 | $3,760 | $3,008 |
| Pre Tax Income | $219,152 | $378,458 | $505,670 | $672,098 | $912,948 |
| Income Tax Expense | $76,703 | $132,460 | $176,985 | $235,234 | $319,532 |
| Net Income | $142,449 | $245,998 | $328,686 | $436,864 | $593,416 |
| Net Profit Margin | 25% | 31% | 31% | 32% | 35% |
II. Company Overview
Who is [Company Name]?
[Company Name] produces software that integrates the features of the best communications software and the most popular project management software. Customers who buy our product will be able to communicate with their teammates via messaging or video chat while also organizing their project with the software’s project management tools. Whereas our competitors need to create two separate products to offer these benefits to their customers, we have been able to integrate both these features into one incredible product.
[Company Name] is founded and led by [Founder’s Name], who has been a programmer for 20 years. He was frustrated with juggling various platforms just to do his job, so he developed software that is two products in one. He has been working on this software since the early days of COVID and is now ready to sell his product to other companies.
Soon after finishing the product, [Founder’s Name] began researching what it would take to create his own software company and did a thorough analysis on the costs, market, demographics, and competition. [Founder’s Name] has compiled enough information to develop his business plan in order to approach investors.
[Company Name]’s History
Once his market analysis was complete, [Founder’s Name] began surveying the local vacant office space and located an ideal location for his new company. [Founder’s Name] incorporated [Company Name] as a Limited Liability Corporation on [Date of Incorporation].
Since incorporation, the company has achieved the following milestones:
- Located available office space for rent that is in a busy commercial district
- Developed the company’s name, logo, and website located at [website]
- Determined equipment and necessary supplies
- Began recruiting key employees
[Company Name]’s Products/Services
[Company Name] develops and sells a communications and project management program. On one end, the product operates much like Slack or Teams, allowing colleagues throughout the organization to communicate easily with one another via messaging or video chat. On the other end, the product operates like Asana or ClickUp, allowing customers to create projects, set goals, and track their progress. While many software products only offer one feature or the other, our product will integrate both seamlessly.
III. Industry Analysis
The variety of business software and services available has completely revolutionized the workplace. Software has replaced in-person meetings with virtual ones, physical whiteboards with virtual project management tools, and memos with email and messaging. Now, it’s hard to imagine any business operating without the help of software.
Business software includes a variety of tools that keep businesses running efficiently. These include communications platforms (like Slack or Teams), project management tools (like Asana or Monday), and accounting software (like Quickbooks or Xero). Every aspect of business requires some software to remain efficient. Companies cannot hope to compete in the global market without incorporating technology into their processes. Software helps automate these processes, increase efficiency, and improve accuracy. Because of this, businesses that don’t utilize technology or software are outcompeted very quickly.
According to Grand View Research, the business software and services market was valued at $474.61 billion and is expected to grow at a CAGR of 11.9% over the next 10 years. This projected growth is due to the increased automation of business processes across multiple industries, including retail, healthcare, and transportation. These industries are dependent on software for rapid communication, payment processing, and many other essential functions in their business. Therefore, business software is not just in demand; it’s required for businesses to stay relevant in the global market.
IV. Customer Analysis
Demographic Profile of Target Market
[Company Name] will serve businesses in need of communication and project management software. We expect that these businesses will have at least a few dozen employees and earn at least $5 million or more in annual revenue.
Customer Segmentation
[Company Name] will primarily target the following three customer segments:
- Startups: Businesses who have been in operation for two years or less often need efficient software that has multiple uses and works with their budget. Our software can help these businesses with many of their needs and will be offered at an affordable price.
- Small to medium-sized businesses: The area has a lot of small and medium-sized businesses with less than 1000 employees. Many of these businesses are looking for ways to increase their efficiency through business software.
- Large businesses: [Company Name] will also target larger organizations who are looking to replace their current communications or project management software.
V. Competitive Analysis
Direct & Indirect Competitors
The following businesses are located within a 20-mile radius of [Company Name], thus providing either direct or indirect competition for customers:
Slack
Slack is a popular communications platform that is faster, more efficient, and more secure than email. Teams can interact with each other quickly and easily in their own channel, and members can message each other directly through direct messaging.
Though Slack will remain a powerful platform for many companies, it currently does not have a project management tool and only has limited video chat options. Companies that need these features have to rely on other products. Our product will offer all the benefits of Slack but also incorporate seamless video chat options as well as project management tools.
Asana
Asana is a powerful project management tool that allows organizations to create, track, and manage all their tasks. This software offers numerous tools for organizations to utilize, including a calendar, timelines, kanban boards, and automation options. No matter what a team needs to get their projects finished, Asana has the tools to help them manage their processes and workflow.
Though Asana is a powerful application, it has limited communication options. Many companies that use Asana seek the help of Slack, Zoom, Teams or other programs to manage more efficient communication across the organization. We will have an impressive communications feature built into our project management software.
ClickUp
ClickUp is a cloud-based project management that is utilized by businesses of all sizes and industries. It has numerous features, including communication and collaboration tools, task assignments and statuses, alerts, and a task toolbar. To communicate, users can add comments and assign them to teammates working on the project. Comments can be marked as resolved, in progress, or in a unique custom status that users can create.
Though ClickUp is a great tool, its limited communication features mean that businesses have to utilize other programs to discuss their projects more thoroughly with their team. Customers who buy our product will not have this issue.
Competitive Advantage
[Company Name] enjoys several advantages over its competitors. Those advantages include:
- Management: [Founder’s Name] has been extremely successful working in the software industry and will be able to use his previous experience to provide the best service experience. His unique qualifications will serve customers in a much more sophisticated manner than [Company Name]’s competitors.
- Relationships: [Founder’s Name] knows many of the local leaders, business managers, and other influencers within [Location]. With his [X] years of experience and good relationships with business leaders in the area, he will be able to develop an initial client base.
- Multiple tools in one: Our product integrates a messaging system, video chat, and project management tools all in one product. Other competitors only offer one or two of these features.
- Client-oriented service: [Company Name] will have full-time customer service and sales managers to keep in contact with clients and answer their everyday questions.
VI. Marketing Plan
The [Company Name] Brand
The [Company Name] brand will focus on the company’s unique value proposition:
- Products that incorporate all the benefits of both communications software and project management tools
- Service built on long-term relationships
- Big-firm expertise in a small-firm environment
- Thorough knowledge of the clients and their varying needs
- Providing a unique software product that is in high demand
Promotions Strategy
[Company Name] expects its initial target market to be businesses within a 20-mile radius of its location. [Company Name]’s promotion strategy to reach these individuals includes:
Targeted Cold Calls
[Company Name] will initially invest significant time and energy into contacting potential clients via telephone. In order to improve the effectiveness of this phase of the marketing strategy, a highly-focused call list will be used, targeting startups and small businesses. As this is a very time-consuming process, it will primarily be used during the startup phase to build an initial client base.
Referrals
[Company Name] understands that the best promotion comes from satisfied customers. The company will encourage its clients to refer other businesses by providing economic or financial incentives for every new client produced. This strategy will increase in effectiveness after the business has already been established.
Additionally, [Company Name] will aggressively network with business incubators, small business development centers, small business accountants, and others in a position to work with small businesses and startups. This network will generate referral leads.
Social Media
[Company Name] will invest heavily in a social media advertising campaign. The brand manager will create the company’s social media accounts and invest in ads on all social media platforms. It will use targeted marketing to appeal to the target demographics.
Publications
The company will place print advertisements in key local publications, including newspapers, area magazines, and business newsletters. Additionally, [Company Name] will print brochures and place them in specific locations frequented by target individuals, such as small business development centers.
Website/SEO
[Company Name] will invest heavily in developing a professional website that displays all the features and benefits of our software. It will also invest heavily in SEO so that the brand’s website will appear at the top of search engine results.
Direct Mail
[Company Name] will blanket businesses with direct mail pieces. These pieces will provide general information on [Company Name], offer discounts, and/or provide other incentives for companies to try out our software.
Pricing Strategy
[Company Name]’s pricing will be on par with competitors, so clients feel they receive great value when purchasing our software. We will price our products on a membership basis, where organizations can opt for monthly or annual billing.
VII. Operations Plan
Functional Roles
In order to execute [Company Name]’s business model, the company needs to perform several functions:
Developer Functions
- Develop and maintain products
- Create new features, additions, and updates
- Fix bugs
Administrative Functions
- Marketing functions
- Bookkeeping functions
- Hiring and training staff
Other Functions
- Sell products to potential clients and customers
- Provide excellent customer service and support
Milestones
The following are a series of steps that lead to our vision of long-term success. [Company Name] expects to achieve the following milestones in the following [xyz] months:
| Date | Milestone |
|---|---|
| [Date 1] | Finalize lease agreement |
| [Date 2] | Design and build out [Company Name] |
| [Date 3] | Hire and train initial staff |
| [Date 4] | Kickoff of promotional campaign |
| [Date 5] | Launch [Company Name] |
| [Date 6] | Reach break-even |
VIII. Management Team
Management Team Members
[Company Name] is founded and led by [Founder’s Name]. [Founder’s Name] has been a programmer for 20 years. One thing that has frustrated him throughout his career is that he had to use multiple programs to do his work and many of those products did not work well with each other. Many companies need project management software and communication software, but rarely are there products that offer both features. Once he realized this, he began working on his new idea.
In addition to his programming experience, [Founder’s Name] has worked several years as a manager at a major software firm. So not only does have the technical expertise to create and manage our product but he also has the management and leadership experience needed to run the company.
Hiring Plan
[Founder’s Name] will serve as the President of [Company Name]. In order to launch, he needs to hire the following personnel:
- Developers (3 to start)
- Administrative Staff (2 to start)
- Marketing Staff (2 to start)
IX. Financial Plan
Revenue and Cost Drivers
The key revenues for [Company Name] will come from the sale of our software products.
The major cost drivers for the company include marketing expenses, labor, equipment purchasing and maintenance, and overhead costs.
Capital Requirements and Use of Funds
[Company Name] is currently seeking $800,000 to launch. Specifically, these funds will be used as follows:
- Office design/build: $250,000
- Software development and management: $200,000
- Equipment and supplies: $200,000
- Working capital: $150,000 to pay for marketing, salaries, and lease costs until [Company Name] reaches break-even
Key Assumptions
The following table reflects the key revenue and cost assumptions made in the financial model:
| Number of Clients | Average | Total Revenues | |
|---|---|---|---|
| FY 1 | 42 | FY 1 | $246,153 |
| FY 2 | 63 | FY 2 | $386,667 |
| FY 3 | 96 | FY 3 | $646,556 |
| FY 4 | 162 | FY 4 | $1,178,480 |
| FY 5 | 243 | FY 5 | $1,954,570 |
| Revenue Stream | Average Rates | Cost Transactions | |
| Advisory Session | $100.00 | FY 1 | 10% |
| Project-Fee Services | $4,000.00 | FY 2 | 10% |
| Webinars | $500.00 | FY 3 | 10% |
| FY 4 | 10% | ||
| FY 5 | 10% | ||
| Annual Rent | $36,000.00 | Yearly Rent Increase % | 25% |
5 Year Annual Income Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| Revenues | ||||||
| Product/Service A | $151,200 | $333,396 | $367,569 | $405,245 | $446,783 | |
| Product/Service B | $100,800 | $222,264 | $245,046 | $270,163 | $297,855 | |
| Total Revenues | $252,000 | $555,660 | $612,615 | $675,408 | $744,638 | |
| Expenses & Costs | ||||||
| Cost of goods sold | $57,960 | $122,245 | $122,523 | $128,328 | $134,035 | |
| Lease | $60,000 | $61,500 | $63,038 | $64,613 | $66,229 | |
| Marketing | $20,000 | $25,000 | $25,000 | $25,000 | $25,000 | |
| Salaries | $133,890 | $204,030 | $224,943 | $236,190 | $248,000 | |
| Other Expenses | $3,500 | $4,000 | $4,500 | $5,000 | $5,500 | |
| Total Expenses & Costs | $271,850 | $412,775 | $435,504 | $454,131 | $473,263 | |
| EBITDA | ($19,850) | $142,885 | $177,112 | $221,277 | $271,374 | |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 | |
| EBIT | ($56,810) | $105,925 | $140,152 | $184,317 | $234,414 | |
| Interest | $23,621 | $20,668 | $17,716 | $14,763 | $11,810 | |
| PRE-TAX INCOME | ($80,431) | $85,257 | $122,436 | $169,554 | $222,604 | |
| Net Operating Loss | ($80,431) | ($80,431) | $0 | $0 | $0 | |
| Income Tax Expense | $0 | $1,689 | $42,853 | $59,344 | $77,911 | |
| NET INCOME | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 | |
| Net Profit Margin (%) | - | 15.00% | 13.00% | 16.30% | 19.40% |
5 Year Annual Balance Sheet
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 | |
| Accounts receivable | $0 | $0 | $0 | $0 | $0 | |
| Inventory | $21,000 | $23,153 | $25,526 | $28,142 | $31,027 | |
| Total Current Assets | $37,710 | $113,340 | $184,482 | $286,712 | $423,416 | |
| Fixed assets | $246,450 | $246,450 | $246,450 | $246,450 | $246,450 | |
| Depreciation | $36,960 | $73,920 | $110,880 | $147,840 | $184,800 | |
| Net fixed assets | $209,490 | $172,530 | $135,570 | $98,610 | $61,650 | |
| TOTAL ASSETS | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 | |
| LIABILITIES & EQUITY | ||||||
| Debt | $317,971 | $272,546 | $227,122 | $181,698 | $136,273 | |
| Accounts payable | $9,660 | $10,187 | $10,210 | $10,694 | $11,170 | |
| Total Liabilities | $327,631 | $282,733 | $237,332 | $192,391 | $147,443 | |
| Share Capital | $0 | $0 | $0 | $0 | $0 | |
| Retained earnings | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| Total Equity | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| TOTAL LIABILITIES & EQUITY | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 |
5 Year Annual Cash Flow Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| CASH FLOW FROM OPERATIONS | |||||
| Net Income (Loss) | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 |
| Change in working capital | ($11,340) | ($1,625) | ($2,350) | ($2,133) | ($2,409) |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 |
| Net Cash Flow from Operations | ($54,811) | $118,902 | $114,193 | $145,037 | $179,244 |
| CASH FLOW FROM INVESTMENTS | |||||
| Investment | ($246,450) | $0 | $0 | $0 | $0 |
| Net Cash Flow from Investments | ($246,450) | $0 | $0 | $0 | $0 |
| CASH FLOW FROM FINANCING | |||||
| Cash from equity | $0 | $0 | $0 | $0 | $0 |
| Cash from debt | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| Net Cash Flow from Financing | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| SUMMARY | |||||
| Net Cash Flow | $16,710 | $73,478 | $68,769 | $99,613 | $133,819 |
| Cash at Beginning of Period | $0 | $16,710 | $90,188 | $158,957 | $258,570 |
| Cash at End of Period | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 |
