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(Part 3/3 - 6 Figure App Exit) Strategies to sell your cash-generating app

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App Masters10:47Open on YouTube
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The bottom line

An app sells for its trailing twelve months profit times a multiplier, and growth and honest numbers raise that multiplier. Sellers who organize their data early, use a broker and keep acquiring users get a better price.

Key takeaways

  • Buyers value an app on trailing twelve months profit times a multiplier, not on sales. 2:17
    • An app with $100,000 in yearly revenue but $60,000 in profit is valued on the $60,000. At 2.5x that gives $150,000.
    • Do not expect 10x or 11x. A multiplier of 2.5x is described as reasonable.
  • A growing trend earns a higher multiplier than a plateau. 8:43
    • Buyers pay for current revenue plus the hope of growth. A flat 50k a month and a climb from 20k to 50k over four months are valued very differently.
    • The speaker starts contacting a broker around 80k TTM, aiming for 100k TTM with decent profit and a rising chart.
  • Organized numbers and a broker make the sale credible. 0:04
    • Keep conversion rates, spend, and D30, D60 and D90 payback in one spreadsheet. Share a Google Drive with everything from day one so the buyer is not confused.
    • A broker gives a realistic valuation and vetted buyers. Many developers feel they are selling their kids.
  • Keep user acquisition running and tell the truth while selling. 3:40
    • The buyer watches the numbers every day until the contract is signed. A drop brings questions about conversion, compliance or an Apple block.
    • One seller claimed $11,000 a month was all organic. The buyer found Google ads in the traffic sources, and the price and multiplier changed.
  • Expect a slow sale with staged payments and a capped handover. 3:27
    • Negotiation takes 4 to 12 weeks, often with two or three buyers. Payment can be cash or a plan such as 50% up front and 25% twice later.
    • Knowledge transfer usually runs three months. Agree a fixed number of hours, for example 40, so you are not on call.

Most of the developers think they are fathers and they are selling their kids. Please wake up, it's a business transaction.

Serial app buyer and guest speaker

Chapter summaries

0:00 Organize your numbers and code before you sell

A buyer trusts an app whose data, tools and code are already in order.

  • Track every metric in one place from the start. 0:04
    • The sheet shows what $1,000 of spend returns and how long it takes to come back.
    • Subscription and event tools, such as in-app purchase SDKs and Firebase, feed that data.
    • The weekly report follows two conversion rates, the store listing and the paywall, to show whether last week beat the one before.
    • The sample spend chart peaks at $8,000 on Google in one week, and the numbers are real.
    • Code goes on GitHub. Collecting material after the deal is agreed is a bad sign.

2:17 Price the app on profit, not on sales

Sellers who argue from sales figures misread how buyers price an app.

  • Many developers wrongly expect a sales multiplier. 2:29
    • The speaker has bought many apps and tries to educate sellers on this point.
    • The multiplier depends on many factors, and a separate video lists them.
    • The example app averages about $8,000 a month in revenue, and that figure is ignored.
    • The 2.5x multiplier comes from a real deal, not a promise.

3:27 Stay honest and active until the deal closes

Dishonest or neglected numbers during the sale cost more than they gain.

  • Keep updating the app and show the true traffic sources. 4:15
    • Revenue is not profit, because costs exist at that scale.
    • The buyer asked for the Google Ads account so he could copy the campaigns.
    • Buyers who come through a broker are vetted and safe.
    • A staged payment plan is normal, so don't panic.
    • Three months of handover does not make you a slave, so agree the hours in advance.

5:24 Selling channels, localization and reinvesting the cash

Open marketplaces waste a seller's time, while local content and reinvested sale money keep growth going.

  • Open marketplaces are only a Plan B for selling. 5:40
    • A past attempt with another app meant talking to many people at once.
    • Most buyers there just keep listings as a backup option.
    • Everyone asks for access to the data, which the speaker calls a huge waste of time.
  • Local UGC creators are the cheap way to localize. 5:58
    • An agency for the Middle East and North Africa matches creators to a specific accent and gives 15% off.
    • Arabic differs across the region, so the accent should be chosen on purpose.
    • A creator costs about $100, at most $200. German and other local agencies exist too.
  • Sale money can fund equity partnerships and research tools. 7:16
    • Buy an app, bring in a developer, and pay them a percentage on exit instead of a salary.
    • Big Spy shows competitors' ads for gaming and non-gaming apps.
    • It filters by network and recent days, and shows views and whether the ad is video or photo.

8:22 Why sell instead of keep earning

A good cash offer for a fast-rising app is worth taking, because nobody can guarantee the trend lasts.

  • Honest, clean data protects the price. 9:00
    • Messing with the numbers makes buyers lose interest or offer a lower multiplier.
    • Showing growth is the whole pitch, so the chart must be real.
    • A seller who keeps the app instead has no guarantee the trend stays.
  • A strong offer on a young app is a risk-management choice. 9:17
    • A client launched last August, grew from a few hundred to a six-figure offer, and the speaker advised selling.
    • The app could tank, or more competition could arrive.
    • The growth was all organic, which a seller can prove and which makes the offer stronger.

In the growth library

Steve P. Young and a guest serial app buyer and seller (name not given), Steve P. Young hosts App Masters, an app growth agency; the guest has bought and exited multiple apps. Explains how to prepare, value and negotiate the sale of a profitable app, from clean data and broker use to deal terms and timing. The worked example values an app at 2.5x trailing twelve month profit, and the guest says to start listing around 80k TTM revenue.

Lessons that draw on this:

More from App Masters · The whole library, and ask it anything

Transcript294 lines
0:00

how to sell your cash generating app first of all you have to consolidate your numbers in one place I have a YouTube video in my channel that you can find in my Instagram value where I explain or I share my spreadsheet where you can save your numbers for later on you can follow your conversion rate what's happening and everything let's say you want to know if you spend $1,000 at this conversion percentage at this payall conversion at this trial conversion how much I'm getting back and how long will take me to get my money back so I have the D30 D60 and D90 which is Day N day 30 day 60 day 90 you this will be automatically calculated based on your input and I have a video where I explain this in my YouTube channel go there subscribe watch it and we'll know how to do it course third party SD Cas for in up purch are very important up has explained Revenue cut everyone knows about this tracking event fire base or

0:56

others if you tag still in 12 24 months you have to get organized from the beginning so you don't you don't confuse the buyer you have the Google Drive that you share in boom you he has everything from day one try to avoid collecting stuff after you said it's it's not good GitHub for code obviously hire a broker to represent you and help you with a realistic valuation because most of the developer think they are fathers and they are selling their kids please wake up men up it's a business transaction if you are getting into these kind of things I will get you a real example later on but this is my recommendation if you really want to say get advice from professionals like a broker don't get trippy about valuation 10x 11x no it doesn't work like that I will explain in the next slide so this is the reporting slide you will find a video where I explain how to report weekly basis or high VA to uh to feel it for you each

1:45

week so you know where are you going with your conversion rate the two blue lines are the conversion rate from I think the listing and the conversion rate of the payall those are my main where I Look to let's say see hey did we do better last week or not so go ahead my spends by the way you know like I mean this is per week but like you know the most you spent was Google 8,000 one week but it was a few th000 those are real numbers and it's included in my sheet in YouTube so you can get that sheet with real numbers get it for yourself or can make a copy so how to okay so up valuation it's a TTM profit which is trailing 12 months profit multiplied by the multiplier that we are going to talk about as I said TTM profit not sale people or develop I spoke with a couple I was buying some I purched a lot of apps and developers think that they will sell based on the sales multiplier which is not good I was

2:38

trying to do some education along the way and convince them that it's about profit not sales so if your app is doing 1,000 100,000 a year let's say average 8,000 a month but that's average but doing 60k per profit per year DTM our multiplier is starting talk we start talking about 60,000 we ignore your 100,000 doesn't matter I took 2.5x value the multiplier many factors you you had the blue Throne guys speaking with you in the channel everyone watching you go look for that video where they go through exact items where to look for to generate your multiplier and in this case 60 MTI 2.5 is 150k of valuation and this is a real let say real time real example but it's a good example this is a reasonable multiplier like don't expect anything negotiation can take up to 4 to 12 weeks with different buyers so you are not talking if you hire a broker you are not talking to one buyer you may talk to two

3:35

three uh you need to slow down take your time and this is a lengthy process it's not overnight process don't stop user acquisition while negotiating I saw it many times with the when I was trying buying if you are doing advertisement your numbers are good don't if you start selling don't stop your user acquisition because the buyer will keep look into your numbers every day until they sign the contract and once your number drops you are in big trouble they will start asking questions especially if they are paying you a lot of money they if they know they they will pay you a lot of money they will start asking question what happened up to the conversion is it compliance issue does app Apple block you so don't do stupid stuff while you are selling don't stop updating the app don't lie about the organic versus paid user acquisition we did 100,000 in sale it's all profit no it's not obviously it's not you have

4:22

cost at that scale and you have to present your number because someone tried to do this for me I was buying an app from him and he told me it's all organic $11,000 per month then I check the I iTunes connect up store connect traffic sources there is a lot of Google I told them hey you have Google ads running show me the account so I know what you have been running as campaign so at least I can copy those campaigns for myself so all in the game shifted so the pricing and the multipliers changed and I got that up from 50k he was asking for for 12,000 nice okay so this is a real real example so a buyer can buy o cash or can ask for payment plan so don't panic this is Norm they can pay you 50% 25 25% later on all in the contract back to the broker usually buyers coming from your broker are vetted and safe you don't have to Panic it's fine agree on specific set of hours know of know transfer so if you sell

5:13

your app most of the contracts will include three months of knowled transfer but what does it mean three months you are now slave no you have to agree on hours valid for three months for example you can offer 40 hours of knowledge transfer if the developer needs help whatever you can start the account sir hey we have this specific set hours to use for the next 3 months if your team failed to be available in the next 3 months it's not my problem he is a very professional answer to this kind of kind of situation avoid selling via these the platforms I mentioned because most of the buyers are just keep them as Plan B because I tried that with another app SMS but you have to talk a lot with a lot of people at the same time everyone is looking to access the data and it's a huge waste of time let me give you my secret weapon ugc or Arabic in North Africa BR scale and get local ugc content creators it's our digital they

6:07

are specialized in ugc for Middle East North Africa and you can get the 15% off from them you can email them and tell them you are coming to me and give that a discount code and they will figure out local creators if you need from KSA if you need North Africa you can give them the local and they will get you someone with that specific accent get to do your videos because Arabic is not the same cross Middle East North Africa you can be very specific with them they will help you with this as more localizations this market so are you running ads for these markets North Africa middle in my last exit I was running ad so as I said okay my last exit was my my huge point was Arabic where were your sales country was it more us midle and I think that's where you know your advantage comes into because you speak Arabic right yeah inch in German so I can I already listed German uh company for y Branch company

7:00

for your GC so all these are locals where you can generate it's the same almost the same price it's not that expensive around $100 for per Creator maximum 200 which is fine if you are scaling add more localizations B localization listing screenshots in a up so three parts so once you have the money because this is the section up sold you can partner with developer for equity on exit so you can buy an app get another developer from the community hey I have this project can work on it I do the growth you do the code and you are not getting paid oh you get a percentage when you sell this yes I like that I like that idea so once you have the money also you can invest in a tool called Big spy they are add add spying for apps gaming and non- gaming they are specialized in this kind you can filter Google admob in iOS and search sh GPD for example all the shb apps but they are running as videos where they're

7:53

running as photos how many views per video What's popular right now if you can filter per last days so it's very very practical to see what's going on right now as Steve said you can join the group for Unique unpublishing tips UPS deals job description if to communicate with FIV people don't get off by Freelancers just tell me hey I got this offer is it within the norm or it's uh it's not brain rejection reason and rejections rejection Reasons I'm going to leave that up so you guys can put that code in George says if the app is making good revenues why sell it why not continue to get that every month so can you guarantee that this trend is staying or not so because if you are not selling while growing the de valuation is different if you are plateauing if you are Plateau like 50k each month or 20 30 40 50 in the last four month it's two different valuations you are not same but because selling the up for Revenue

8:46

plus the hope of growth if you don't display hope of growth for the buyer you you will get a very different valuation this is the point if my shart is showing growth that's where where I'm selling around 100K per year in a sh so grow BR emotions around this kind of stuff because if you mess with the data buyer is not interested anymore or they will offer a lower multiplier because you are in a plate situation yeah you're going to have to make that decision but bet you said it best man I think a lot of times we think we're the parents and the the app is the child I'll give you a real example and I don't think my might would R me sharing this but we worked on a client and here's you know like we've been able to really grow the sales a lot and he got an offer so he launched it last August and now it's growing he got an offer for mult like a sixf fig exit really decent and I was like dude I think you should exit this like you

9:37

don't know the trend and it's a pretty good cash offer for something that just really took off now it's starting to hold that Trend but something that really just took off recently and so don't get you know for me I'm it's like Risk Management I take risk but I also like I don't know it could completely tank and more can competition come in it's a nice offer it's a really great offer assuming these details too and so we we helped it grow really fast this is one of my favorite case studies it was just making a few hundred and then boom using some of our tactics we got to grow and this is all organic right now but like I'm like dude that's a great offer like really think about selling this yeah especially if it's all organic and you can prove it that's a pretty good offer vure how long do you typically wait after your app starts generating Revenue before you consider selling it I aim always for 100K per year 100K TTM as

10:27

explained and with a decent profit within those 100K TTM so maybe I start listing and contacting my broker around 80k the good trajectory going up and that's a good chart to show to potential buyers hey check this out it's growing can buy it yeah