How can I work out how much my mobile app is worth from these earning figures?
A CEO of a bigger company has contact me today asking if I am interesting in selling my Android application. He is asking for the numbers straight away and how much I want to sell it for.
The app has been in the market for almost a year. These are the earnings from the app for the last three months
July: $2300
August: $2700
September: $3800
How can I workout how much it is worth?
Should I tell him the earnings, and number of users etc?
Saas Partnership Business Selling Mobile Apps
1 Answer
DO NOT GIVE HIM NUMBERS!!!!
Until he signs an NDA, beyond that do not discuss any operations until a Letter of Intent is signed.
What usually is of interest in an M&A are full details. I.E. your financial statements, your accountant would need to work those out, but they are for later.
What he likely needs is earnings, i.e. revenue, and expenses. To basically see what is profitable.
They will also likely need a number of users, number of paid users, etc
As far as estimates go, it's difficult to figure out. Rule of thumb it's 3 years EBIDTA, but gets wayyy more complicated with intellectual property, branding, etc
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So what do I tell him now and what can I give him for now? – 578841441 11 years ago
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for now just ask him to sign an NDA. It's a standard business practice. When he does, give him users, revenues, and expenses totals. Then ask him, what further drill down he will need – User60812 11 years ago
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FYI NDA is a Non Disclosure Agreement. Basically saying he wont take your numbers and disclose them to people not privy to current transaction – User60812 11 years ago
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Pardon me for asking, but what why is a NDA important. what if he discloses this information with others. Why is it bad for me? – 578841441 11 years ago
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If he reveals your earning and expenses, it may compel other companies to get into business. It would also increase a chance of you getting "shafted" in an acquisition. Basically if I know what your company is worth prior to negotiation, I have more time to lower the valuation with a variety of strategies – User60812 11 years ago
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Even with an NDA, the other company could just be fishing to see if they should copy your app. If your numbers indicate it is profitable, they just go away and clone your app. The NDA needs to cover that situation as well. – Gary E 11 years ago
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very true Gary, I missed that – User60812 11 years ago
