What is one way to finance software development in a small business?
To help you find the best resources to finance software development for your small business, we asked business professionals and leaders this question for their insights. From applying for R&G grants to offering to barter services, there are several ways to finance your software development.
Here are nine ways to finance software for your small business:
- Apply for R&D grants
- Set Aside Money Each Month
- Cut Back in Other Areas of the Business
- Consider Venture Capital
- Utilize a Regulation Crowdfunding Platform
- Re-Invest Profits or Try Seed Funding
- UseYour Banking Line of Credit
- Try the Cost Plus Method
- Offer to Barter Services
Apply for R&D grants
You can apply for research and development-related grants. The government and other entities have various grants available that help supports research and development in business. These grants are often tech-related, which makes software development a good fit. The most important thing to keep in mind is that grant applications can take time, so I recommend looking into the programs at least three to six months before you need the funds.
Melissa Kelly, Virtual Team Building
Set Aside Money Each Month
Set aside a little bit of money each month, and earmark it for in-house innovation. Given the ubiquity of smartphones, consider focusing on app development. Providing an easier way to accomplish a process such as completing a loan application or calculating loan amounts will be worth the investment. A small business with its own app is a small business that has an edge against the competition.
Allan Switalski, LendThrive
Cut Back in Other Areas of the Business
One way to finance software development in a small business is to pull back your expenses in other areas of the business. You might need to cut back on your marketing and advertising expenses for a short period of time to help finance the cost of developing your own software. This method will help you finance this project and you will take a short-term hit on pulling resources from other areas. It is a great way to finance a project that you need more money to develop without having to seek outside financing for this project.
John Wu, Gryphon Connect
Consider Venture Capital
If you’re in need of capital to finance a software development project, before running out to your local credit union, consider taking on some venture capital money. VC’s offer so much more than raw funding – they provide deep business expertise, connections, and guidance. Particularly with respect to software development, many VCs have industry contacts and can make introductions that can help you secure top-quality software development partners at an economical price. The obvious downside of VC money is having to give up equity in your business, but in many instances, it can be worth it. Software development is a lengthy, complicated and expensive process, and VCs can help guide your company through it while also funding the initiative.
John Ross, Test Prep Insight
Utilize a Regulation Crowdfunding Platform
Regulation crowdfunding platforms are growing in popularity and community support. If you’re looking to grow your business in any way, platforms like Mainvest can provide debt-based working capital without taking away ownership. In the end, you get the capital you need to finance your software development and your supporters benefit financially as you grow.
Lauren Murdock, Mainvest
Re-Invest Profits or Try Seed Funding
If your business requires customized software that will significantly benefit your operations, it can be brought up in your business plan when attracting investors. Let it be a part of the proposal and develop it using the seed funds budget. But if you consider software development a method to level up your business, then you can finance its development yourself using the first profits you make. Don’t pocket your initial earnings and instead re-invest it into your business.
Kathryn McDavid, Editor’s Pick
Use Your Banking Line of Credit
I would suggest small businesses finance these costs using their lines of credit from their banks. These credit lines often have a much lower interest rate than traditional credit cards. When it comes to paying for the actual work, I’d encourage SMB owners to pay on a milestone basis in phases (not hourly) so they get what they pay for.
Dave Rietsema, Matchr
Try the Cost Plus Method
The cost-plus method of financing involves paying a low rate to the team for the time it spends working on the project, and to cover the basic costs involved during the development process. Additional delivery bonuses are then provided for each usable outcome that the development team produces. This method works great for outsourced software development as it helps spread the financial risk between the company and its development partners. The service provider will only be able to make a profit if it delivers quality software output consistently.
Eric McGee, TRGDatacenters
Offer to Barter Services
If you don’t have the margin to reinvest in your business then another way you can get work done is to barter for it. For example, we are a team-building company and could trade our hosted events in return for software development hours or projects. This approach doesn’t work for every business model – for example, it would be tough to do with haircuts – but it is an interesting and available option that many people don’t consider. Years ago, I started a law practice and traded my services in return for professional photos for my website. This approach helped me start the business in a cost-effective way.
Michael Alexis, TeamBuilding