The mobile app market is booming and showing no signs of slowing down. In 2023, there were 255 billion mobile app downloads, according to Data.ai’s report. So if you’ve got a mobile app on any of the app stores that you’d like to exit, you can rest assured there are buyers hungry to get their hands on it.

Source: Data.ai State of Mobile 2023 Report

“But what’s the value of my app? How much can I sell my app for?” I hear you. I feel you. I’ve written this article to show you how to find your mobile app’s valuation. Keep in mind that I’ll use the word ‘app’ to refer only to mobile apps.

You’ll learn how to determine your app’s market value and market it to potential buyers, maximizing your returns and ensuring a smooth transition during the sale. Without further ado, let’s dive in. 

Factors to consider when valuing an app

Before determining your mobile app’s value, we need to consider certain factors: the key valuation drivers that influence your app’s worth. 

• Financial data: The first metric potential buyers will look at is your financials. How much revenue and profit does your mobile app make monthly and yearly? They’ll also be interested in how much it costs to keep the app running smoothly as well as abnormalities in the financial history.

• App features: When talking about features, we’re referring to the app’s unique selling points and market positioning. What does it do that’s difficult to replicate? Has it got a trademark, patent, or other intellectual property? Does it have a solid brand equity that will make it stand out against competitors? Having any or all of these can guarantee a high valuation for your app.

• Revenue model: How does your app make revenue? Are you charging users a subscription or a one-time purchase fee? Steady cash flow as subscriptions often lead to higher valuation as they promise recurring revenue and appeal to buyers looking for long-term investments. On the flip side, one-time purchase apps can generate quick revenue but miss out on ongoing income, which can lower their overall value. Buyers will also be interested in knowing the other revenue streams like ads, in-app purchases, affiliates, etc., through which your app makes money. 

• User metrics: The number of active users and their behavior also impact your app’s valuation. The higher the engagement rate, retention rate, and user acquisition rate, the higher your app’s valuation. Despite WhatsApp not making any money, Facebook bought it for $19 million because of its active user base. Today, WhatsApp boasts over 5 billion downloads and around 2.7 billion monthly active users.

• Market trends: Understanding the growth potential of your app and keeping an eye on the competition can provide valuable insights into where your app stands. If you’re in a rapidly growing sector with few competitors, your app might fetch a higher price. However, if the market is saturated with similar offerings, you may need to adjust your expectations.

READ: Micro-SaaS valuation techniques

Mobile app valuation methods

After understanding what influences your app's value, it’s time to get into the nitty-gritty of determining its value. Fortunately, several effective valuation methods exist to help you do just that. Let’s explore four popular approaches.

Mobile app valuation earnings multiplier

The earnings multiplier valuation method considers the app’s value by subtracting its earnings from its expenses. In other words, it factors in the EBITDA (earnings before interest, taxes, depreciation, and amortization) before multiplying with the appropriate multiple.

App valuation = EBITDA * multiple

Income approach: Discounted Cash Flow Analysis

The income-based approach, also known as the Discounted Cash Flow (DCF), is used to value an app by considering its potential future earnings. This takes into account factors like expected revenue growth and expenses. After analyzing the future income (around 5 - 10 years), the amount is discounted back to its present value to cover risks. 

This method works best for subscription-based apps generating good recurring revenue: however, it’s more complex than the earnings multiplier approach. 

READ: Best profitable micro-SaaS Ideas

Market approach: comparables in the industry

The market approach entails comparing your app with similar apps in the industry to gauge what they’ve sold for recently. To use this approach effectively, you’ll want to find apps with similar features, user base, and revenue models. This valuation method is ideal for mobile apps with good market share.

App valuation = revenue * multiple

This helps you set a competitive price for your app based on real market conditions. Keep in mind that this approach works best in active markets where there are enough comparable sales to draw meaningful conclusions.

Cost approach: development costs vs. potential market value

This valuation method factors in the app’s development costs (such as design, marketing, app testing, and development) to find its potential market value. This is probably the best method for early-stage apps. While this might seem straightforward, it’s important to consider ongoing expenses like maintenance and update costs. 

App valuation = (development costs + maintenance costs + update costs) - depreciation

However, relying solely on development costs can be misleading. Although it provides context, it doesn’t always reflect true market value as it doesn’t factor in the app’s prospects. The cost approach is best used as a supplementary method alongside income and market approaches. 

READ: How to evaluate a newsletter’s worth

Preparing your mobile app for sale

With a clear understanding of how to value your app, here are steps to ensure you’re ready to exit your app.

Optimize your app’s performance and user experience

First and foremost, buyers want to see that your app runs smoothly and efficiently. Having technical stability and a good user experience are important.

A sluggish app with frequent crashes will raise red flags and could deter potential buyers. Take the time to identify and fix bugs, improve loading times, and ensure all features work as intended. Ensure your app is compatible with the latest devices and operating systems. A polished app gives buyers confidence in their investment. You can use tools like Google Analytics and Flurry Analytics to analyze your app’s performance.

Prepare a solid documentation and presentation

As you prepare to sell your app, creating comprehensive documentation and an engaging presentation cannot be overlooked. This is your opportunity to showcase not just what your app does, but why it’s a smart investment for potential buyers. Next up is your pitch deck — in the material, don’t only talk about your app’s features and positioning, but also highlight its target audience. Include testimonials to add some credibility and show its impact.

Legal considerations

When it comes to selling your app, navigating the legal side is just as important as preparing the app itself. The two critical areas are intellectual property rights and user data privacy compliance. 

• Intellectual property rights

Intellectual property (IP) rights are your first line of defence in protecting your app. They safeguard your unique ideas, designs, and code from unauthorized use. Before putting your app on the market, double-check that you own everything. If you’ve used third-party assets, ensure you have the appropriate licenses or permissions. Buyers will want assurance that they’re investing in something secure and free from legal complications. 

• User data privacy compliance

Compliance with regulations like GDPR (General Data Protection Regulation) is essential if your app collects personal information. Ensure you outline how you manage user data and always obtain user consent before collecting information. Plus you’ll need to allow users to access or delete their data upon request.

Marketing your mobile app for sale

You can either market your app the traditional way by posting about it on social media or get it enlisted in a marketplace. The former can be quite daunting: however, listing your app on a platform like our marketplace puts your app in front of a pool of interested buyers. The sales cycle typically lasts around 30 days.

READ: Shopify Exchange marketplace alternatives

Setting the right price

When setting a price for your mobile app, finding a balance is key. Too high, and you might scare off potential buyers; too low, and you risk undervaluing your hard work. So what do you do? Consider similar apps on the market. Look at what they charge and how they position themselves.

Negotiation tactics

Negotiation is a trick you should have up your sleeve. Usually, the more confident you are in your app’s value, the better you can negotiate. But beyond that, you should pay attention to what potential buyers say. Understanding their needs and concerns can help you tailor your responses and find common ground.

Sometimes a buyer may not meet your initial asking price but could offer other valuable concessions that make the deal worthwhile.

You can draw inspiration from Rovio's "Angry Birds." In marketing their games portfolio, they highlighted their unique gameplay experience and successfully closed deals that expanded their reach while maximizing value.

Wrapping up

Now you know how to evaluate your mobile app’s worth, if you’re ready to take your app sale to the next level, you can list it on our marketplace and get connected with serious buyers, making it easier for you to find the right match for your app. 

Start your journey toward a successful transaction today!