Companies are buying iPhone Apps from independent developers every day. What’s it worth?
The since the launch of the iTunes App Store, the question has always been “What is my app worth?” If a company is showing interest in purchasing your product(s) here’s a few tips to get the biggest bang for your buck:
The company is going to make your pay-app a free-app.
Chances are the company is looking at doing a “value add” to an existing product, or a “hook” to purchase a product. The company is just interested in the code for the app and it’s up to you to make sure your future revenue is added into the sale price. Also determine the cost to develop your app. If your average daily downloads is 50 on a $2.99 app, your annual revenue (after Apple commissions) is approximately 45k. Remember, this does not include any additional development time for enhancements, bug fixes, etc. A 1 year average of revenue is a good minimum asking price.
My app is just ramping up, should I ask for more?
Unfortunately the fact that your app is just starting to ramp up is not particularly important to the purchasing company’s offer. If for the past year your app has continuously increased 10% each month, the company will probably be interested only in the average revenue of the past year. Depending on the size of the company looking to purchase your app, they may provide a revenue analysis, and offer a percentage of projected sales into the sales price. Their goal ultimately is to profit on that growth.
Is asking for 1 year of average revenue asking too much?
Maybe. If your app downloads are slowly declining, you may want to rethink and lower your annual average. Same applies for app downloads slowly rising, raise your annual average. Another good scale to measure is how much the company will benefit from your app. It’s not out of line to ask what they would like to do with the app; after all, it’s your app.
A few ways to help raise the final offer.
Don’t sell like your app is on sale. If one company is interested in your app there are surely other companies that will be interested also. You might even want to consider e-mailing some of those companies, and seeing if they have interest. The ideal situation for the sale is to have bidding between multiple companies.
Make sure to include initial and ongoing development costs. It’s easy to focus on revenue and forget all the tedious hours spent developing.
Be careful of non-compete agreements
Chances are, as the developer, the company is not going to want you to turn around and create an almost identical app as soon as you sell yours. Make sure the stipulations still allow you to develop apps! If you make an app that compares prices of gas in a given area, you want to make sure you are still able to develop an app that compares restaurants in that same area, should you decide to do so. Staying away from the company’s industry is a common practice and can last anywhere from 6 months to a few years. Make sure to ask lots of questions, you may even want to have the non-compete reviewed by an attorney.
Should I ask high and negotiate?
The company probably has a limit on what they’re going to spend. Asking $100,000 dollars for an app that generates $10,000 might scare potential buyers off. If you have a high visibility app that generates lots of interest, you may want to let low offers walk away and focus on your higher offers.
Good luck!
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