Within the past few years, there has been a huge rise in the app market and that is a gross understatement at best. There simply isn’t a term expressive enough to describe just how big and all-encompassing apps have become and there are very few businesses that can’t benefit from a proprietary app.
If you are an app developer looking to develop and sell mobile apps, the one thing you don’t need at this point is a long diatribe on the various kinds of apps, how they are monetized, and what they can do for the various businesses they are developed for. If you didn’t know that you wouldn’t be trying to develop and sell apps! What we are looking at here are the tips that will help you successfully sell an app once you have either conceptualized it and/or developed it.
1. Get a Basic Understanding of the Process of Valuation
The process of valuation is extremely important in an app that has already been developed and in use by a company for a period of time, usually not less than a year. To this end, pricing strategies for your app will be based on multiples derived from financial metrics that are very specific.
The very best thing you can do if you intend to sell an app that has been available in either the Apple App Store, the Google Play Store, or even for any platform such as Windows, is to understand that although you technically own the app, you will need that app released to a buyer.
2. Lean on the Knowledge and Experience of an M & A Team
All the red tape and legalities are beyond the comprehension of all but those in the legal field and those well versed in M&A, Mergers & Acquisitions. In other words, although it’s yours to sell, you may need “permission” to transfer ownership to a buyer.
The simplest way to sum up the process of valuation is a twofold understanding. First it needs to be determined what was needed to build and run an app and secondly all those factors that must be considered at the time of valuation.
Some of those factors include how the app can make money, is there a business model and what does that look like, how to tell if it will be profitable to buy that app, and an assortment of factors that each will determine the value. But remember, the value of an app isn’t the selling price which is actually the multiples factored from all of the above, and more. This is where an experienced M & A professional is necessary. That would be crunching the numbers.
3. Understand the Difference Between Selling a Concept and a Developed App in Use
Finally, sometimes app developers conceptualize an app that could be hugely profitable for a particular industry, niche or even a particular business. Since there is no app in use but only a concept of an app that would be profitable, it may be a harder sell. At this point, do you want to develop that app and release it so that it can evidence success, or would you prefer to pitch that concept to specific companies within an industry?
Sometimes it is easier to sell an app that has a proven track record of success, but the red tape and process of valuation becomes a little more entangled. In either case, the key to successful selling of a mobile app is in how you can substantiate its ability to provide value to the buyer. Here again, expert representation to a potential buyer is invaluable. You, after all, are the app developer and your expert business M & A advisor has what it takes to establish value and help you sell something that was born and will live in the digital realm.
