November 21, 2022

4 Factors to Consider When Valuing Your Mobile App

As an app founder or owner, it’s vital to know how much your app is worth. Having a clear understanding of your app’s value can help you determine if it's a good idea to try and sell in its current state or if it needs further development. Working from a mobile app evaluation checklist can make this a quicker, easier process.

Regardless of whether you decide to sell or not, evaluating your mobile app gives you the chance to take a closer look at its structure and functionality to determine where it’s performing well and what areas need improvement. It provides invaluable insight into your app’s overall performance.

Generally, when valuing a mobile application, you would subtract VAT and the commission (which is paid to Apple or Google) from its gross revenue to get its net revenue. You would then take the net revenue and apply a multiple. Determining an accurate multiple is what Appic specialise in. We take into consideration the profitability of the company, the current product and potential upside to arrive at the app's estimated worth. 

It’s important to remember, though, net revenue is not the only factor potential buyers look at when determining its value and potential (and neither should you). An app’s value extends beyond financial metrics to include factors like profitability, app structure, functionality, user growth and churn rate.

Let’s take a closer look at four factors you should consider when valuing your mobile app. 

4 factors to consider when valuing a mobile app

1. App Category

Your app’s category counts for more of its inherent value than you might realise. The more popular an app’s category or subcategory is with users, the more likely it is to see ongoing user and revenue growth, and the higher its perceived value.  Is it part of an app category growing more popular with users over time or is it in a category that’s losing user interest and relevance? 

Some of the most popular IOS app categories in 2022 include:

  • Gaming
  • Health and Fitness 
  • Business
  • Education
  • Lifestyle (dating, travel, etc.)
  • Food and drinks

If your app falls into one of these categories, it will likely be viewed as more valuable by potential buyers thanks to high demand from users. 

2. Financial performance

Your app’s financial data tells the story of how successful it’s been since its launch, as well as how much it costs to run and maintain. Its value is directly tied to how well it has performed as a business asset, which is why you need to pay close attention to the financial metrics below when assessing it:

  • The app’s age (when it was officially launched and/or when you bought it).
  • Its development costs (from discovery to launch).
  • Its maintenance costs (monthly overhead expenses).
  • Customer acquisition cost (CAC).
  • Monthly recurring revenue (MRR).
  • Annual recurring revenue (ARR).
  • Average Revenue Per User (ARPU).
  • Monthly active users (MAU)
  • Return on Investment (ROI).

It’s best practice to begin recording them as soon as your app launches, to save yourself the hassle of pouring over multiple spreadsheets and reports in one go. Gathering these metrics into a profit and loss (P&L) statement that records monthly revenue, operating costs and profit will make it easier for you or anyone else to value the app’s profitability and potential worth at a glance.

3. User acquisition, retention and growth

How many downloads is your app getting per month? Is this number increasing or stabilising? Your acquisition and growth metrics give insight into how many users are downloading and installing your app on their devices. 

However, acquisition is only half the battle - how many of these users are logging in and continue to use it after the initial download? This is your user retention rate and it helps you identify if your app adds value to users or if users aren’t finding what they’re looking for and logging out. 

When evaluating your app, you should pay close attention to the acquisition and retention rates, to determine daily active users (DAU) and monthly active users (MAU). If these are increasing, it proves that your user base is growing, which improves its worth.

4. Developer dependency

When assessing your mobile app, it’s important to factor in how quickly a new owner could get it up and running. How user-friendly is the app to a prospective buyer? Does it depend on support from one or a team of developers or can it operate independently? Does it require an extensive tech stack to keep it running?

The more your app depends on developers and external software to run it, the lower its value will likely be. This is because the additional support and maintenance costs make it more expensive to operate. 

If your app does currently require a developer or team to maintain it, consider how you could reduce your support needs and support costs. 

Ready to discover your app’s value?

While it’s important to do the math and keep track of performance, evaluating your app goes beyond arriving at a final number. Beyond assessing its profitability, a comprehensive evaluation should also pinpoint existing limitations within your app and identify opportunities where you can improve its structure, functionality, services and positioning in the market. 

At Appic, we understand the development that goes into creating an app and the complexities that help determine its worth. If you’re feeling unsure about how to accurately measure and evaluate your mobile app from top to bottom, contact us and we’ll perform a free assessment for you to help you understand your app’s value and potential.

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