1. Revenue-Based Valuation
- Apps are often priced as a multiple of their annual net profit (revenue minus expenses).
- Typical multiples range from 2x to 5x, depending on the app’s performance and growth potential.
- Example:
- Annual net profit: $10,000
- Valuation: $20,000 to $50,000
2. User Base Valuation
- If your app doesn’t generate revenue, focus on its user base.
- Typical valuations range from $1 to $5 per active user, depending on the engagement, retention, and niche.
- Example:
- Active users: 10,000
- Valuation: $10,000 to $50,000
3. Cost-Based Valuation
- Consider the cost to build the app:
- Development (time and salaries)
- Design
- Marketing expenses
- Add a premium for a functioning, ready-to-monetize product.
- Example:
- Development cost: $15,000
- Premium: $5,000
- Valuation: $20,000
4. Market Demand and Niche Value
- Apps in high-demand niches (e.g., fitness, productivity, gaming) tend to fetch higher prices.
- Apps with unique features or strong branding may command a premium.
5. Future Potential
- Highlight untapped monetization opportunities, such as introducing subscriptions or expanding to new markets.
- Buyers are willing to pay more for apps with clear growth potential.
Final Pricing Formula
A practical formula combines these factors:
App Value = (Annual Revenue × Multiple) + (Active Users × Value/User) + Asset Value
Example Pricing Scenarios
Scenario 1: Revenue-Generating App
- Annual revenue: $15,000
- Profit margin: 70% ($10,500)
- Active users: 5,000
- Valuation: ($10,500 × 3) + (5,000 × $2) = $46,500
Scenario 2: App with No Revenue but High Users
- Active users: 20,000
- User value: $3/user
- Development cost: $30,000
- Valuation: (20,000 × $3) + $30,000 = $90,000
Scenario 3: Niche App with Potential
- Downloads: 50,000
- Retained users: 10,000
- User value: $4/user
- Valuation: (10,000 × $4) = $40,000