I’m a huge advocate of planning. Whether for your personal life or your business, you need to have a vision for 3 months, 6 months, and even 2+ years down the road. Not only is this beneficial to your moral and motivation, it’s an important step for handling all the possible curve balls life throws at you.
For example, I never built my first app business thinking I was going to sell it. Let alone go on to sell two more! And since I hadn’t planned for the possibilities, I had a HUGE mess to deal with when I realized that selling my app business was a great option for me – and extremely lucrative!
Funny (more like cringe-worthy) thing is even though I sold my app company for a lot of money, I completely missed out on additional revenue because I hadn’t set up my businesses as thoroughly as a buyer would want.
So now the FIRST thing I tell people when they want to build their own app empires – build your business with the end in mind
No, I don’t mean the end of the world and I definitely don’t mean the end of your app career. I mean with the goal of selling your app company or portfolio even if you don’t plan on selling your app business.
There’s a lot more that goes into appealing to buyers than having great revenue or downloads. Buyers have certain qualifications and systems they look for in app portfolios, and if your company is lacking these elements, its value drops. Granted, the app market is extremely HOT right now for acquisitions so most people are able to sell their companies but do you want to sell it for a couple thousand or hundreds of thousands? I think we can all agree the latter sounds pretty amazing.
While there’s a lot to consider when selling your app business, I asked Eric Owens, my friend and app lawyer who helped me sell my own companies, to list out the 5 MOST important factors you should keep in mind to get the highest offer for your apps:
Make them want you!
1. ANALYTICS
This is the most important element to selling your app company. Analytics provide data on the number of sales, active users, session times, return users, and much more that plays a pivotal role to marketing. You should be using analytics, like Flurry or App Annie, in all your apps right now to help with your own marketing, but buyers love to see this type of information. High conversion rates, loyal users, and steady eCPMs are great indicators of an app with long-term potential. Not to mention, this insight is exactly what you need to optimize your marketing and understand your customers, which is why buyers will need to know have this information as well. You’re essentially passing the money-making torch to them.
Your well-oiled team in action.
2. FULL-TIME TEAM
When most companies are acquired, employees from that company will transition to the new one. However, in the app world it’s a little different as many teams are made up of independent contractors and remote workers. However, there are ways you can add this benefit to your buyer, which will provide extreme value to buying your portfolio. If you have full-time developers and designers that have been working on the apps in your portfolio and they can be transitioned for your buyer, either as full-time employees or as consultants for any questions during the transition, then that provides unparalleled value to your portfolio that many other offers won’t have.
3. CROSS-PROMOTIONS AND PARTNERS
This is particularly great if you don’t have a large app network of your own, or if transitioning your network to a new owner may hurt your numbers initially. If you have partnerships or deals with successful apps that see a lot of traffic, you can carry these deals over to your buyer. That provides instant value and an extended user base than your portfolio alone.
4. CREDIBILITY
You will need to have your company for at least 6 months before buyers would be interested. In normal industries, this would be 3 – 5 years but since apps are so hot right now, and it’s still a very young market, buyers have been swooping up portfolios in as little as 6 months.
5. CASH FLOW
We get asked, “what level of cash flow should my business be producing before I sell it?” That will depend on your goals for how much you want to sell your business for. Unless you are pursuing the quick sell model (3 – 6 months) or looking to sell a single app, you likely will want to make sure your app business is producing at least $50,000/year (approximately $4‐5,000/month) or more before you sell it. That will help ensure you get at least $50,000 to $150,000 for it. There is no right or wrong answer here, it depends on your goals. But we find in general that many appreneurs don’t want to go through the process of selling their business unless they are going to get $100,000 or more for it.
As you can see, the way you build your app business from the start is crucial to getting the most value.
No matter where you are in your business, you should be focusing on these building out these 5 elements to your portfolio. You’ll not only see the value when you’re valued, but you’ll see your app revenue improve tremendously.