A Step-by-Step Guide How to buy apps
In today’s digital-first world, mobile apps have become incredibly lucrative assets for entrepreneurs and investors alike. The idea of buying an established mobile app business is appealing because it provides an opportunity to generate revenue without starting from scratch. However, buying an app business requires careful planning, due diligence, and a solid strategy to ensure success. In this article, we’ll walk you through the process of purchasing a mobile app business, from initial research to closing the deal.
Why Buy a Mobile App Business?
Before we dive into the how, let’s explore why you might want to buy a mobile app business:
Immediate Revenue: Buying an established app means you can skip the development phase and start earning revenue right away.
Established User Base: Acquiring an app with existing users saves you from the challenges of user acquisition, which can be costly and time-consuming.
Proven Concept: An app that’s already in the market has been tested and is likely generating downloads and reviews, giving you confidence in its viability.
Growth Opportunities: A well-optimized app might have untapped potential for growth, whether it’s through new features, marketing, or entering new markets.
Now, let’s break down the steps to buying a mobile app business.
Step 1: Define Your Goals and Budget
The first step in purchasing an app business is understanding your goals and setting a budget.
Goals: What are you hoping to achieve by buying an app? Are you looking for passive income, a quick flip, or a long-term business venture? Knowing your goals will help guide your decisions.
Budget: How much are you willing to invest in purchasing an app? Beyond the purchase price, consider additional costs such as marketing, updates, and maintenance.
By clearly defining your goals and budget, you’ll have a roadmap that will guide your search for the right app.
Step 2: Research and Identify Potential Apps
Once your goals and budget are clear, it’s time to start looking for app businesses to buy. Several online platforms list apps for sale:
Sell App Business.com: Best marketplaces for buying and selling digital businesses, including mobile apps, games or e-shops.
Flippa: One of the largest marketplaces for buying and selling digital businesses, including mobile apps.
Empire Flippers: A curated marketplace for buying established businesses, with a focus on quality listings.
App Business Brokers: Specialized brokers that connect buyers with sellers of mobile app businesses.
When browsing for apps, consider the following factors:
Revenue: How much money does the app make each month? Look for apps with consistent or growing revenue streams.
Niche and Market: Is the app in a niche you’re familiar with or interested in? Consider the potential for growth in the app’s market.
User Base: Examine the app’s user base. Are users engaged and active? Are there signs of user growth or decline?
Monetization Model: How does the app make money? Is it through ads, in-app purchases, or a subscription model? Ensure that the monetization model aligns with your revenue goals.
Step 3: Perform Due Diligence
Due diligence is the most critical part of the buying process. It ensures that you fully understand the app’s performance, risks, and potential for growth before making an offer. Here are key aspects to investigate:
Financials: Review the app’s financial statements. Ensure that the revenue and expenses reported are accurate and verify these numbers with payment processor reports (e.g., Apple App Store, Google Play, Stripe).
Traffic and Downloads: Analyze the app’s traffic and download history. Look for trends in user growth, retention, and engagement. Tools like App Annie, Sensor Tower, or even Google Analytics can provide insights.
Code and Technology: Assess the quality of the app’s code. You may need to hire a developer to review the codebase and ensure it’s well-written, maintainable, and free of bugs or security flaws.
Reviews and Reputation: Check the app’s reviews on the app stores and third-party websites. A well-regarded app is a strong asset, but negative reviews could indicate issues with functionality or user satisfaction.
Legal: Verify the app’s intellectual property rights and make sure there are no legal disputes, trademark issues, or violations of app store policies.
Growth Opportunities: Evaluate the app’s potential for growth. Can you improve its monetization, expand into new markets, or enhance its features to attract more users?
Step 4: Make an Offer and Negotiate the Deal
After thorough research and due diligence, if you’re satisfied with the app’s potential, it’s time to make an offer. Here’s how to approach the negotiation:
Valuation: Determine the app’s value based on its revenue, traffic, and growth potential. Most apps are valued using a multiple of their monthly or annual net profit (typically 2-4 times annual profit).
Negotiate Terms: Price isn’t the only factor to consider. You may want to negotiate terms such as:
- Support Period: Request a support period where the seller helps with the transition, fixes bugs, or answers questions.
- Payment Structure: Some deals involve paying in installments or earn-outs, where part of the payment is contingent on future performance.
- Assets: Make sure the deal includes all necessary assets (source code, app store accounts, website, trademarks, etc.).
Step 5: Finalize the Purchase
Once the terms are agreed upon, you’ll need to finalize the transaction. Here’s what to expect during the closing process:
Legal Agreements: Draft and sign a legal contract that outlines the terms of the sale. It’s advisable to involve a lawyer to ensure all aspects are covered.
Transfer of Assets: Ensure that all assets related to the app are transferred to you, including:
- App store accounts (or ownership transfer of the app on existing accounts)
- Source code and any associated repositories
- User data (if allowed under privacy laws)
- Website, email lists, social media accounts, etc.
Payment: Securely transfer the agreed-upon payment using an escrow service to protect both parties.
Step 6: Transition and Manage the App
Once the deal is closed, it’s time to take over and start managing your new app business.
Smooth Transition: Work closely with the seller during the agreed support period to ensure a smooth handover. Learn as much as possible about how the app has been managed.
Improve and Optimize: Look for ways to improve the app post-purchase. This could involve optimizing user acquisition strategies, enhancing the user interface, or adding new features based on user feedback.
Monitor Performance: Track key performance metrics (revenue, downloads, engagement, etc.) and make data-driven decisions to grow the app.
Buying a mobile app business can be a rewarding venture if done correctly. By setting clear goals, doing thorough research, and performing due diligence, you can acquire an app with strong revenue potential and room for growth. With the right approach, you’ll have the foundation to expand and scale your new digital asset into a thriving business. Happy app hunting!
