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App valuation: A guide on how your app is valued on the open app market

Updated: Dec 28, 2022

The mobile application development industry plays a crucial role in the online sector due to the enormous usage of data by mobile devices or smartphones. The most important aspect of app design is concentrating on the app development process. The second most crucial stage after the development process is understanding your application's worth. An app's valuation is a sign of how successful it is. When it comes time to sell a mobile app, its value is determined by how much it is worth.


Several variables can affect an app's value. It is crucial to comprehensively understand the valuation process and the numerous factors influencing what the market is prepared to pay. This article will discuss the factors that determine how an application is valued in the open app market.



How an app is valued on the open app market

App developers may have hugely varied expectations about what buyers will be willing to pay for their apps when they first enter the market. These app developers have put a lot of time and effort into developing and maintaining their apps, and they can get quite devoted to them. However, regardless of how hard a developer has worked, app buyers will evaluate several factors when deciding whether to purchase an app.


App buyers will consider what financial return they can expect from an app purchase. The evaluation can be influenced by various criteria, such as user base, revenue, and the length of time the app has been available. Before entering the app market to sell your application, it is vital to consider how your app performs for each criterion.


Even though you might not be thinking about selling your business just yet, knowing what attracts buyers to an app can help you add value to the company both before and after the sale. Below are some key variables that determine the worth of your app.


Key variables used in app valuation

Baseline Earnings

The more features your app has, the larger the software codebase. Even when you build your app with a third-party template and framework, it ultimately results in more code. Hence, increased complexity. Consequently, with higher complexity comes heightened mobile app maintenance cost.


Another factor influencing software complexity is the technology used to build and maintain mobile apps. Whether you build for Android, iOS, or cross-platform, determine the cost structure of mobile apps. Third-party services integration also adds to the cost.


Growth

Growth is one of the most critical factors that every prospective buyer would consider. An app with increasing growth rates is likely a more appealing candidate for purchase than one with flat or declining growth. The daily installation of the app is one approach to gauge growth because it reveals any promotion peaks and reveals whether the app has traction consistently.


Active Users

A user's activity and engagement level should be highly measurable with apps. This indicator, which provides a more precise picture of how the target market utilizes the app, is often even more crucial for many apps than the number of downloads. This information will not only help with a more accurate appraisal but should also be extremely helpful for updating and enhancing the look and functionality of your mobile app.


Star ratings & reviews

Building social proof through positive ratings and reviews is one of the most significant and cost-effective ways to increase app adoption. The review reveals what customers think of your app and can significantly impact your conversion rate. Additionally, this variable is quickly becoming one of the best marketing tools that an app owner can use at a low cost to promote downloads and sales.


Quality of Code and Documentation

Code is the foundation of any app. As part of their due diligence procedure, every prospective buyer will insist on performing a comprehensive review of an app's code, data architecture, and supporting documentation. One of the best strategic investments you can make is to develop your app from scratch utilizing industry-accepted coding best practices. Any concessions could result in high costs if the code or documentation has to be substantially updated to meet a buyer's requirements.


Time in the marketplace

The longevity of an app is a significant element in determining its value, even though this variable cannot be artificially improved. Buyers demand consistency and sustainability and verified financials indicating sustained profitability over time speak for themselves.


Consistent performance over time demonstrates an app's longevity in a market where several apps come and go. However, most apps have a time limit. The fact that an app has been accessible for a long time can be an issue unless you can establish consistency.


Thinking of Selling your app?

You may wish to determine your app's value for several reasons. The most typical explanation is that you've decided to sell it. However, figuring out your app's worth is not that simple. This is because there are numerous factors to consider while analyzing it. To help know the exact worth of your app before selling, you can use the free valuation provided by Top Apps.


Top Apps' mission is to find, evaluate, purchase and grow mobile apps. They are taking extraordinary apps to the next level. Top Apps nurture android apps with real value and potential in the best niches on GooglePlay through AI acquisition algorithms, big-data-based monetization, and creating killer features.


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