Small software company is a desired business model for many aspiring entrepreneurs. It’s reasonable, considering the state of the IT industry and the demand for software outsourcing.
- As of October 2018, there were nearly 2.8 million employees in the information sector of the U.S.
- 52% of small businesses plan to outsource a business process in 2019, Clutch study reveals.
Considering the popularity of IT outsourcing these days, and the advantages of feature teams over hiring in-house, it’s not surprising at all that starting small software company yourself may be so tempting.
However, those who have always dreamed about an IT company should remember one thing – starting a business isn’t a problem.
The problem is in running a business.
Personal experience in running small software company
I’m well aware of that because a few years ago I founded a company which specialised in software outsourcing under the name of LemonTea.pl. We have won few significant international awards like Awwwards Honorable Mention although we had only four people aboard.
Eventually, we have decided to join SoftwareHut because we weren’t able to grow bigger.
We were a small IT company, and still, we had a few advantages over larger ones. We also had some problems and limitations which were difficult to overcome. And that’s why we have decided to join forces with SoftwareHut.
I’ve gained valuable experience and thanks to it I can tell you about two sides of running a business in the hyper-competitive IT environment.
Benefits of small IT companies
First, let’s talk about the bright side. What advantages do small businesses have? How can they compete against the bigger ones?
From my point of view, I can highlight 4 benefits:
- Small businesses are agile and have an ability to rearrange rapidly if there is such a need.
- Small companies take care of their customers even more than their bigger competitors. Small ones are built on robust passion!
- Small companies are built by high-quality specialists.
- Small companies are frequently greatly specialised experts in one specific field.
Hitting a “glass roof”
Those days… What a school of life it was. We were learning and doing at the same time. Our actions led to mistakes, and eventually, mistakes were lessons for us. As someone once said, “you either win, or you learn”. I couldn’t agree more.
We have been struggling for two years before we made a profit. We had competencies, but we also had a lack of customers and a few other problems.
Personally, I felt good about selling projects, but a lack of technical skills in project management sometimes caused problems with delivery delay or not providing things we have promised on time. My selling activities resulted in projects which were crossing the capabilities of our team, and personally, I didn’t have skills of a good project manager in the IT industry.
As LemonTea, we won a big contract, but there was no possibility to execute it because we haven’t fulfilled corporate procedures. Our client expected from us – a small company of several people – $2 Million insurance. From a business and technical standpoint, a customer wanted to work with us. Unfortunately, we were too small of a company to take that placing. We hit upon a “glass roof”.
We also had a problem with a continuity of small projects which resulted in problems with cash flow and an inability to recruit new people.
It’s always better to identify problems before they occur. We haven’t done that then, but we did afterwards. Luckily, because I can now share them with you.
Problems of outsourced software development
Main problems small companies may encounter on their way:
- Small companies often have one client thanks to relations they’ve built before, they don’t have a well-established sales department, and they don’t know how to sell software development outsourcing.
- They are often being led by programmers, who have to work as salesmen and they struggle with that.
- Small companies typically work for one kind of client, e.g. digital agency or startup, and they don’t know how to acquire a different kind of a client, e.g. corporate client.
- Small companies don’t have money for marketing and PR.
- Employees in small companies have limited opportunities to improve because they don’t have specialists around to learn from.
- Small companies often have a problem with cash flow.
- Small companies are struggling to work on cash flow to manage bigger projects.
- Small companies may lose a profit from the past few months in the case of a lack of tasks for already employed programmers.
We have analysed our situation deeply at some point in the past. It was when an offer from SoftwareHut appeared on the table. It happened just in time; just when we were ready to move on.
Are you facing similar problems?
If you’re facing one of the problems yourself, either running a small software development company or handling an outsourced software development project that’s too big for you capabilities, there’s a way to solve this issue.
Finding a tech partner, or simply hiring an extended team for your project, can bring in a sense of relief. You don’t have to fully give up on your business, or let go this big project. Adding extra team members or two might help you, while you still remain a small, agile company.
Me myself, I joined forces with SoftwareHut, software development outsourcing company and a part of a TenderHut Group. With over 250 IT pros on board, we’re now able to deliver all kinds of projects for start-ups and enterprise clients.
We can help you, too. Let us know about your project and see how we can assist you with meeting your goals.