Many app developers don't think of their mobile apps as an asset. Yet mobile apps, like any other revenue-generating business, are valuable and are routinely acquired and sold. With all the advancements in the realm of mobile app development, it has become easier to turn this idea into a 6-figure-a-year cash stream.
Selling a mobile app may sound unusual at first, but according to Serp Watch, mobile apps could generate up to $935 billion by 2023. Since 88% of mobile internet time is spent on apps, making money from apps - and selling them - is a smart decision.
Within a mobile app, you can make money by collecting a subscription, charging for downloads, in-app purchases, or via the usage of adverts.
In this article, we will share helpful tips on how to sell a mobile app, how investors evaluate mobile apps, who to sell to, where to sell, and the tax implications.
Why Sell Your Mobile App?
One of the tricky aspects of selling anything at all is that it might never make financial sense. However, there are lots of reasons for selling your mobile app, many of which are highly personal.
There may also be tax advantages to selling. In the United States, some or all of the earnings from the sale of an app could be classified as a capital gain and taxed at a lower rate than the profit earned monthly. If you're concerned about how the sale of an app could affect your tax status, consult a tax specialist.
Another interesting reason to sell an app is to seek other business options that may be more profitable than continuing to invest time and/or money in the app.
Conducting Market Research
Getting to know the market that interests you and where your app will boom should be your primary focus.
A mistake you should never make is to sell in a market you know nothing about. However, if you'd like to sell in an unfamiliar market, having a background check and proper research of what thrives in that market must be your priority.
There are a few checks you should have before drawing up your preferred list:
- Does the market have the right audience size?
- Is the market easy to contact and responsive?
- Does the market have an effective use for a mobile app?
Another thing that market research will help you achieve is knowing where your competitors are. This will help you to be proactive in dealing in the market.
How Do You Understand the Value of an App?
In the business world, the value of your product is only as high as the willingness of someone to pay for it. But that will not help you sell at the highest rate. Hence, you must value your business. Getting an accurate valuation of your business will help you easily identify what your app is worth, and what price tag you could potentially attach to it.
If you’d like to understand more about the worth of your app, and you have financial details ready, you can get a realistic valuation online.
What sellers do is that they multiply your monthly or annual earnings by a factor. This coefficient typically ranges from 12 to 36 months. After deducting the app stores’ commission, traffic, and other costs for the operating system fees, you should then note your revenue.
Some applications sell and buy at a significantly greater price. The usual strategic purchases are made through M&A - large transactions in which the developer team is transferred to another company.
Note that you may bargain in both directions, however, it's occasionally wiser to lose a little money now to save a lot of time later.
How Do You Find a Buyer for Your App?
There are different ways to get buyers for your mobile app. Here are the major ways to find buyers:
- Cold emailing
- LinkedIn prospecting
Cold emails have proven to be one of the most effective outbound marketing strategies. About 34% of the marketers attest to its efficacy over other outbound tactics. If you have money over time, there are sites where you can purchase email leads to make your work easier.
When using this method, you must be direct in pointing out problems and the many values and solutions your mobile app offers. You can't afford to get it wrong with your first mail. Also, you can offer to send a working prototype or a mockup of your mobile app.
LinkedIn is a platform where you can have easy access to CEOs, CTOs, and directors of companies. However, you must optimize your profile and the company’s profile to be more corporate and project what you're offering.
You must also explore the advanced search option to narrow down the people you want to connect with. After connecting with your prospective buyers, present your cause to them in the most attractive and modest manner.
How Should You Negotiate?
The first thing to know during a negotiation is to always look out for your interests in the transaction. Although app brokers may assist you and provide some guidance, their legal obligations to you are restricted to what is stated in the listing agreement you signed. This is not real estate.
It's a good idea to work with a lawyer and other professionals with experience in these types of transactions before going into talks.
Another thing to keep in mind when negotiating is that the initial offer will almost certainly undervalue your app. Many app purchasers would undervalue attractive programs that come up for sale hoping to get a fantastic deal from an inexperienced seller. Even if you can't start a bidding war, receiving many proposals will help you get closer to an average amount for the app.
Closing the Deal
When an app is released or delivered to be published, the sale is complete. That's when your buyer should have been paid you. However, avoiding a communication breakdown is a key stage in the process of selling small businesses. When communication breaks off, the sale goes cold quickly.
The simplest approach to avoid this is to schedule your subsequent calls while on the present one.
How BusinessesForSale.com can Help You Sell Your App
You can sell your business online with us, exposing your business to thousands of buyers.
If you’d like to use a broker to support your selling journey, you can request to speak to a broker through the site.