How Can You Calculate the Value of a Mobile App?

Calculating the value of your mobile application will always ensure that you sell it at the appropriate price on the market places. Here are the common metrics you can use.

Due to the rise in the demand for mobile apps, there is an increase in mobile app development marketplaces. Most of these marketplaces sell a lot of monetizable applications and others can also help you in the process of developing custom mobile applications for your brand. The mobile application development in Dubai is also growing at a faster rate with new entrants into space. Here, we are going to refer to the common elements that can be used to determine the profitability of a mobile application.

If you own a profitable mobile application with a track record of success, you might have wondered what you need to do to determine the worth of your mobile application. It is difficult to answer this question since you need to take into consideration the complexities associated with the app before you determine its accurate value.

Some of the valuation factors are related to the industry so it is important for you to consider the appropriate planning of your mobile application before considering mobile application development in Dubai and releasing it. There are also other crucial factors such as the age of the industry or the niche can be improved after determining the specific industry and how you will penetrate it.

There are a number of valuation factors that are taken into consideration and they have been explored in detail in the content below.

Establishing the Baseline for the App Earnings

This is the first step when you want to determine the value of a mobile application. Earnings are the baseline upon which other valuation factors will be applied. Depending on the gross revenue and business structure, there are two main methods that can be used to determine the baseline earnings for your mobile application: EBITDA and SDE.

SDE- Seller Discretionary Earnings

It is usually applied to the mobile apps that have a valuation which is below $5 million and it is operated by the owner. Since the owner is the one who is leading the business, it is common for them to charge the personal expenses for the purposes of the tax. They will also pay themselves a salary.

The personal expenses and the salary can be used to determine the growing revenue. When SDE is used, this can be added back to the final earnings to determine the accurate value.

EBITDA- Earnings Before Interest Taxes Depreciation and Amortization

It is used when the value of the mobile application exceeds $5 million. It is usually an industry standard that is set to evaluate the performance of larger companies.

Since the discount of expenses such as the taxes and the interest, an accurate value about the operational efficiency and its earnings can be obtained easily.

Once a clear picture of the earnings of the mobile application has been established using the above two main methods, it is now time to utilize the following valuation factors.

Abandonment of the Mobile App

This is usually related to the number of downloads. It refers to the failure of the customers to utilize the mobile application once they have downloaded it. Abandonment of the app is still a challenge in mobile development and the marketing industry.

If you realize that the rate of abandonment is high, take your time and evaluate the onboarding process. Look at a number of factors and design it in such a way that you can entice the customers to utilize your mobile application.

The Financials

Appropriate financial records will help you to determine the accurate value of your app. Most people can fail to follow the appropriate accounting procedures in the early stages of the launch.

Make use of the accounting tools to accurately keep all the financial records and make sure you update these financial records on a regular basis.

Growth

Another important factor that the potential buyer of your mobile app will look at is its growth. An app with the growth features that tend to grow upwards is attractive than a mobile app with a declining or a stagnant growth curve.

From the early stages, make sure you have utilized the growth tools available in your industry such as the Google Analytics tool to determine the growth of your app.

When you have more details about the performance of your mobile application, there are high chances that you will build it and get the best out of the analytic tools.

Involvement of the Owner

Using outsourced employees to manage your business is one of the best ways of increasing the value of the business. Most buyers are looking for a passive source of income. They are not willing to acquire a business which requires their full involvement, so keep that in mind. In the end, the mobile application developmentis growing at a faster rate. As a business owner, you can utilize the above metrics to determine the value of your application before getting it into the marketplace.