Sell Your App Business at This Moment

Introduction

Selling your app business can be a pivotal decision, and timing is crucial. Many app owners mistakenly believe that selling at peak profitability is the optimal strategy. However, this can backfire, as potential buyers often want to see room for growth in addition to current profits. Timing your exit when you notice your app's profits consistently climbing (rather than plateauing or declining) can yield higher valuations.

Recognizing the Right Moment

As an app owner, it's easy to become emotionally attached, believing the app's traction will continue indefinitely. An objective assessment about when to explore a potential exit is essential. If profits are on an upward trend, now may be a good time to consider selling, rather than waiting for an uncertain peak.

From a buyer's perspective, the fear of hitting a peak is also significant. Including potential growth in the valuation is a top concern for buyers, leading them to assess how quickly they can recover their investment and whether the app can meet their profit expectations.

Common Mistakes Made by App Owners

Several common missteps can affect the selling process:

Discontinuing Marketing: Once you receive a Letter of Intent (LOI) to sell, don’t halt marketing efforts. Ongoing marketing can keep profit levels stable during the sale.
Neglecting Costs: Ensure all expenses related to running the app are accurately documented. Avoid including irrelevant expenses not associated with the app, such as personal travel or entertainment costs.
Changing Subscription Models: Switching to a weekly subscription model to inflate profits can be perceived as a deceptive strategy by buyers. Stick to tried-and-true monthly or annual subscriptions to maintain credibility.
Assuming Earnout Will Be Achieved: An earnout strategy should not be assumed without solid due diligence. Investigate how the new owner plans to achieve growth to ensure realistic expectations.
Ignoring Tax Implications: Understanding your tax liabilities before finalizing a deal is vital. Surprise tax bills at a critical moment can derail the transaction.
Choosing Between Asset or Share Deals: An asset deal typically simplifies the process for the buyer, as they purchase only the app and its related assets. In contrast, a share deal includes all company liabilities, which can be a deterrent for buyers.
Last-Minute Marketing Strategies: Organic marketing efforts should not be launched haphazardly before a sale. It requires significant time to yield results and can jeopardize your valuation.
Emotional Disconnect: Address emotional biases regarding your app’s potential trajectory. Buyers will analyze metrics objectively.
Failure to Communicate: Ensure any shared ownership or revenue streams are clearly reported. Undisclosed information can create trust issues later in negotiations.

Keyword

App business
Exit strategy
Profit trends
Buyer concerns
Marketing efforts
Tax liabilities
Asset deals
Share deals
Earnouts
Emotional attachment

FAQ

1. When is the best time to sell my app?
The best time to sell your app is when profits are consistently increasing, rather than at a peak where growth potential appears limited.

2. What common mistakes do app owners make when selling?
Common mistakes include discontinuing marketing after receiving an LOI, neglecting to properly document costs, and making last-minute changes that can raise red flags for potential buyers.

3. What is the difference between an asset deal and a share deal?
In an asset deal, only the app and its assets are sold, which simplifies transactions. A share deal involves selling the entire company, including liabilities.

4. How can I ensure a successful sale?
Maintain consistent marketing, track expenses accurately, and communicate important information transparently throughout the process.

5. What should I consider regarding earnouts?
Evaluate how achievable the earnout is by discussing with the buyer the strategies they plan to implement for growth and assess their track record before accepting.