So you’ve built an awesome app that has been downloaded from the app store bazillions of times. Congratulations! But now you want to move on — you don’t have time to maintain it, some other projects are calling out to you, or something else has happened that means you can no longer give it the love it deserves. What do you do?
Why don’t you sell it?
Why not get your reward for all the effort you put in to build the app and grow the customer base to where it is now, and let someone else give it what it needs to flourish in future?
Here at Flippa we have facilitated thousands of app sales over the years, and we have thousands of active buyers who may be looking for an app exactly like yours!
The goal of this post is to share the benefit of that experience with you, to help you better understand what your app might be worth and how you could sell it.
How Much Is My App Worth?
The value of your app is the largest sum any one individual is willing to pay for it. If you’re thinking that’s not very helpful, we’re not finished yet! Please read on.
Valuation Type #1: Cash is King!
Have you heard that saying before? It’s certainly true for app valuation — whilst not the only consideration, your net cash flow is probably the most important one.
The only way to work out your net cash flow is to sum up all the cash generated by your app, and subtract all related expenses. Cash generated may include download fees. Costs may include costs to update & maintain the app, licensing costs, app store fees, and so on.
Be sure to include all your costs! For example, if you as the owner/developer spend your own time maintaining the app, that is a cost a new owner will need to incur (either in their own time or in paying someone else to do it), so it should be included.
Once you know your net cash flow, the next step is to convert that into a value for your app. Welcome to the world of valuation using multiples. Pay close attention — this will be your friend (and sometimes, your foe) for any business you ever sell or buy.
Let’s say your app generates $100,000 in net cash flow per year. The “multiple” can vary widely depending on a range of factors, however for the vast majority of apps the multiple will be around 2x – 3x. So your app would be worth somewhere between $200,000 and $300,000. Not bad, right?
The factors that impact your multiple include:
- Growth prospects: if your app has grown consistently and is still on an upward trajectory, and has plenty of opportunities for future growth, you could expect a higher multiple
- Genre/niche: some are considered by buyers to be more valuable than others, based on competition, regulation, growth prospects (again) and other factors
- Proven marketing strategy: how do you market your app? Is that sustainable? What opportunities are there for a buyer to invest and grow customer acquisition even further?
- Time commitment: how much time do you spend on your app? (this one’s a biggie amongst our buyers)
Valuation Type #2: Comparable Sales!
This one is pretty simple … what have similar apps sold for?
The trick here is how to define “similar,” and generally speaking the same factors that go into assessment of a multiple also apply here — growth prospects, genre/niche, marketing strategy, time commitment — as well as a few other considerations such as net cash flow and number of downloads per week/month.
You can look at some of the recent sales here.
Remember that every business is different, so just because Angry Birds sold for $10 million doesn’t mean that your Angry Meerkats app will sell for the same amount!
These two are by far the most common approaches used on our platform. They are not the only two ways to value a business, however they are a great place to start and we would strongly recommend using them for all but the biggest and most complex businesses.
All this goes to what you, as a seller, can expect a buyer to pay for your app. However, it is important to remember that the true value of your app is the largest sum any one individual is willing to pay for it.
How Do I Sell It?
You should now have an idea of what your app is worth, and therefore what sort of price you would be willing to accept for it. From here on out, it’s all about your sales pitch.
Your mission should be getting maximum exposure. The more exposure you get for your listing, the higher the likelihood of finding the buyer who is willing to pay the largest sum for your app.
It’s now time to get Flippa involved. Flippa is the #1 marketplace for buying and selling digital businesses. We are well-established and have been in the market for several years now. We get more than a million visits each month and our user database has over a million potential buyers and sellers. A good listing generally gets snapped up quickly, making our sellers and buyers very happy!
We have made the selling process very easy and it works like this:
Rules of the Road Towards the Highest Multiple
Rule #1: The most important thing to remember is do not mislead. This never ends well. In the end, the buyer will find out and it is likely that you will end up not selling.
Rule #2: If you have had a bad few months from a profit point of view, be honest. Tell the buyers what happened, what you have learnt from it and how they can avoid the same situation.
Rule #3: Backup all your claims (revenue, costs and profit) with evidence! You don’t need to trust a stranger and they don’t need to trust you!
If you’re ready to sell your app or want to get started with your research, come and check out Flippa, the #1 marketplace for buying and selling websites and apps.
Sid Galada spends a lot of time analysing valuations based on actual transactions to predict the market value of any given asset on the Flippa marketplace. Sid is the Head of Growth at Flippa.com, a marketplace that brings opportunities to current and prospective business owners. Previously, Sid worked as a Strategist and Head of Analytics for SEEK. He has graduated with a Masters in Finance and an MBA.