Feasibility Study for a Software, Web and App Development Company in Egypt

How a software company makes money, and where it loses it

A small software company sells its team's hours, whatever the form of the contract. The biggest cost, salaries and social insurance, is fixed every month, while revenue moves with two things: how many paid hours were actually sold, and when the client pays for them.

So a software company feasibility study starts with three figures, not the number of projects: utilisation, meaning hours billed to clients divided by hours paid; the cost of a developer's hour including the employer's social-insurance share; and the payment milestones in project contracts. A company can be profitable on paper and still be unable to pay next month's salaries, because the large payment is waiting on a stage approval.

Four revenue models, each with a different effect on cash

• Fixed-price project: the value is usually split into an advance, a payment on delivery of a stage and a payment on final acceptance, so cash comes in lumps and a late approval delays the payment.
• Monthly maintenance and support contract: a smaller amount, but recurring, covering a fixed part of payroll whatever happens with projects.
• Product or SaaS subscription: you pay a team to build the product for months before the first subscription, so the question is how many months you can fund until recurring income covers the team.
• Developers placed with a client abroad: the client is billed monthly per developer, so utilisation and income are steady, but the invoice is paid after the work, and losing one large client stops most of your income. If the contract is in a foreign currency, work the study in Egyptian pounds at a cautious rate and test a scenario with a lower rate.

The three figures that decide feasibility

The cost of a developer's hour. Start from the salary and add what the employer pays on top. The private-sector minimum wage is EGP 7,000 a month from 1 March 2025¹. The employer pays 18.75% of the insurable wage and the employee 11%². The insurable wage has a ceiling, which the National Organization for Social Insurance raised from EGP 14,500 to EGP 16,700 from 1 January 2026³. So do not apply 18.75% to the whole salary if it exceeds the ceiling: for a salary of EGP 40,000 the employer's share is EGP 3,131.25, based on EGP 16,700, not EGP 7,500. If your study runs into 2027, check the ceiling announced for that year before you calculate.

Then divide the cost by hours. We assume 176 paid hours a month per person (8 hours × 22 days) and a target utilisation of 70%, because leave, meetings and estimating new projects are paid hours that cannot be billed:

Break-even utilisation = total monthly cost ÷ (paid hours of the billable team × hourly rate). Payment milestones, meaning the size of the advance and the time between acceptance and payment, decide how many months you fund salaries out of your own pocket.

Illustrative example: a 6-person company mixing projects and maintenance contracts

This is an illustrative example. Its figures are assumptions to explain the method, not market prices. The owner handles sales and project management and draws no salary in the first year, with 5 billable people as in the table above:

• Monthly cost: salaries EGP 123,000, the employer's social-insurance share EGP 15,337.5, and other expenses EGP 53,000 (coworking desks 18,000, software and cloud subscriptions 10,000, internet and phones 3,000, accountant 5,000, marketing and sales 12,000, miscellaneous 5,000). Total EGP 191,337.5 a month.
• Start-up costs: EGP 276,000: devices 200,000, premises deposit 36,000, incorporation and registration 25,000, website and sales material 15,000.
• Price: EGP 400 an hour before VAT, for projects and monthly contracts alike.
• Maintenance contracts: EGP 20,000 a month per contract for 50 hours, paid in the same month. Two contracts in months 1–3, 3 in months 4–6 and 4 from month 7.
• Projects: 7 projects as in the next table, with hours spread evenly over each project's duration, paid 30% on signing, 40% on delivery of the middle stage and 30% on final acceptance; the last two are collected one month after they fall due.

Monthly capacity is 5 × 176 = 880 hours, worth 880 × 400 = EGP 352,000 at full utilisation. So break-even utilisation is 191,337.5 ÷ 352,000 = about 54.4%, or about 478 billed hours a month. That is the floor; any month below it loses money. Note that the cost per billed hour in the earlier table (EGP 224.57 for the team) leaves out the other expenses; once they are added, the full cost per billed hour at 70% utilisation is about EGP 310.61, and that is the figure to compare your price with. Here is the cash month by month:

(Cash out is a constant EGP 191,337.5 a month; the balance starts at minus the EGP 276,000 of start-up costs; amounts are rounded to the nearest pound.)

Average utilisation over the year is 60.9%, above break-even, and the operating profit for the year is EGP 275,950 before taxes, start-up costs and any salary for the owner, about 10.7% of the value of work done. But look at three points:

• The deepest cash need is EGP 467,213 in month three, about 2.4 times the whole monthly cost and EGP 191,213 more than the start-up costs.
• Month seven has the highest utilisation (73.9%), yet its net cash is minus EGP 111,338, because the stages the team is working on are not collected until the following month or later.
• At year end the cumulative balance is still EGP 151,250 negative, because the year's profit (EGP 275,950) barely matches the start-up costs (EGP 276,000) and EGP 151,200 of work done has not been collected yet: the final payment on the largest project.

For more on the gap between profit and cash, see our articles on cash flow for small businesses and break-even and working capital.

What if utilisation drops or a payment is late?

The same example, changing one assumption:

Projects 20% smaller push utilisation below break-even and the profit turns into a loss. Delaying a single payment of EGP 83,200 does not change the profit but raises the deepest cash need by EGP 61,075, and payments of 50% / 30% / 20% cut it by EGP 87,200.

The levers specific to a software company

• Payment terms before price: the payment split changes the capital you need, as the table shows. Tie every payment to a defined deliverable, and put a period in the contract after which a delivery counts as accepted if the client has sent no written comments.
• Scope control: if projects take 25% more hours than they were priced on, the effective hourly rate falls from EGP 400 to EGP 320, and break-even utilisation rises from 54.4% to 67.9%. Any change outside the written scope needs a change order with a price and a timeline. Cost-based and value-based ways to price a service are explained in our article on how to price your product.
• Monthly contract coverage: from month seven the four maintenance contracts bring in EGP 80,000, about 41.8% of the monthly cost. The higher this share, the less a month without projects hurts, like month nine (39.8%).
• When to add a person: a mid-level developer costs EGP 28,131.25 a month with the social-insurance share and needs 70.3 billed hours a month at EGP 400 just to cover their own cost. Add someone when signed projects cover those hours, not after the first busy month.
• Dependence on one person: if the only developer who knows the code leaves, delivery and payment slip; keep the code documented in a repository the company owns.

VAT on local and exported services

The general rate of tax on goods and services is 14% from fiscal year 2017/2018, and the same article provides that "the tax rate shall be (zero) on goods and services that are exported, in accordance with the conditions and situations set by the executive regulations"⁴. The mandatory registration threshold is EGP 500,000⁵; anyone whose sales reach it must register within 30 days of reaching it, and Article 16 adds that every "exporter ... must register with the Authority regardless of the size of its transactions"⁴. In the example the value of work in the year is EGP 2,572,000, far above the threshold. So a project for a local client worth EGP 240,000 is invoiced for a total of EGP 273,600, of which EGP 33,600 is tax and not your income.

For exported services, the Egyptian Tax Authority issued Executive Instructions No. 45 of 2025 and a guide⁶. According to the guide, remote services rendered by a company in Egypt to a business customer not located in Egypt are zero-rated, except services related to real estate in Egypt and services that require the physical presence of both the provider and the recipient in Egypt⁶. One of the guide's examples warns that the service is treated as local and taxed at the standard rate if the contract names the foreign client's branch in Egypt as the recipient and user of the service, even when the foreign client pays from abroad⁶. The guide covers business-to-business transactions, and to classify a service as exported it asks for a written contract setting out the service, the parties, the payment terms and the duration; a detailed electronic invoice; and proof of payment such as a bank transfer or bank statement⁶. The law provides for a refund of tax previously paid on the inputs of exported services within 45 days of a documented application, provided the export proceeds are remitted to a bank supervised by the Central Bank or settled by payment methods set by the executive regulations⁴. In practice: match the foreign client's contract and payment route to these conditions before you sign, and check your tax position with an accountant or with Maher Consulting Firm.

From Maher Consulting Firm's own incorporation files for this activity (2026), registration with the Chamber of Information Technology Industry is required when incorporating a company whose activity is programming. Requirements can change, so check them when you incorporate; Maher Consulting Firm can handle the formation.

Common mistakes in a software company feasibility study

1. Counting capacity at 100% of hours, when in the example break-even alone was 54.4%.
2. Applying the social-insurance share to the whole salary, or forgetting it altogether, instead of applying it to the insurable wage within its limits.
3. A large final payment tied to an open-ended approval, which lets the client control your cash.
4. Pricing a project on an optimistic estimate of hours with no margin for changes and testing.
5. Treating any contract with a client abroad as automatically zero-rated without the required contract, electronic invoice and proof of transfer, or even when the actual user of the service is the client's branch in Egypt.
6. Capital that covers salaries only until the first project, not until its payments are collected.

If your main model is providing whole teams to clients abroad by the hour or by the seat, also see an outsourcing company feasibility study.

Frequently asked questions about a software company feasibility study

Sources

1. Ministry of Planning and Economic Development. الاجتماع الأول للمجلس القومي للأجور: رفع الحد الأدنى لأجور القطاع الخاص إلى 7000 جنيه (in Arabic) (2025-02-09). Checked 22 October 2026.
2. Andersen Egypt. Social insurance in Egypt (contribution rates under Law 148/2019) (2026-06-30) — secondary source. Checked 22 October 2026.
3. National Organization for Social Insurance (NOSI). التأمينات: رفع الحدين الأدنى والأقصى لأجر الاشتراك التأميني بدءًا من أول يناير 2026 (in Arabic) (2025-11-30). Checked 22 October 2026.
4. Financial Regulatory Authority. قانون الضريبة على القيمة المضافة رقم 67 لسنة 2016 وفقًا لآخر تعديل (in Arabic). Checked 22 October 2026.
5. Egyptian Tax Authority. ما هو حد التسجيل الإلزامي لضريبة القيمة المضافة، وما هي الأنشطة المعفاة منها؟ (in Arabic). Checked 22 October 2026.
6. Egyptian Tax Authority. آلية تعامل المكلفين مع الخدمات المصدرة (التعليمات التنفيذية 45 لسنة 2025 والدليل الإرشادي) (in Arabic); Egyptian Tax Authority. Guidelines for Exported Services in Egypt (First Edition). Checked 22 October 2026.