Mobile App Value Calculation
Updated: Dec 3, 2019
If you are launching a mobile app, you may be wondering how to determine its value.
Of course, many factors go into calculating something like this, and it isn’t so easy as a set in stone number.
Some things you’ll need to consider are:
● The worth of your business
● Its evergreen status
● Earning power
● Niche competition
● Customer acquisition
● Active users
● Churn rate
● App operations
● Trademark and licensing
Whether or not you’re intending to sell your business any time soon, you will want to stay aware of your app's value.
Below, we will discuss all the components of value calculation for your mobile app.
There are two formulas that most people use to calculate app earnings.
The first one is called the Seller’s Discretionary Earnings (SDE.)
You can apply this formula effectively if your business is owner-operated.
Generally, with owner-operated businesses, you’re charging some personal expenses to your business and also chunking out a salary for yourself.
When calculating SDE, you’re including these expenses in your value calculation, which gives you a better view of what your app is really worth.
If your business is not owner-operated, you can use a formula called Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA.)
That’s a mouthful!
But, it’s easy and straightforward to calculate.
And, it gives an accurate estimation of your company’s value.
Using one of these formulas to determine your business’s value is one essential piece of determining your app’s value.
Mobile App Abandonment and Active Users
Did you know?
25% of all applications are never used again after the first use?
Calculating your abandonment rate is an important component of figuring your app’s value.
If you find that you do, in fact, have a high abandonment rate, you might want to see how you can improve this number.
Find out how you can get repeated use out of your app.
You can always increase your app’s value and performance once you troubleshoot where people are falling off!
On the flip-side, track your active users as well.
How much time are your users spending on your app, how are they using it, and how frequently are they using it?
Financial Records and Growth
Make sure you’re keeping track of all earnings and expenses generated from your app right from the very beginning.
Additionally, make sure you’re keeping track of your application’s growth over time.
Apps that have a proven growth rate are ultimately more valuable.
Make sure you are using the best high-quality coding processes for your application, as this ensures that your app is running smoothly and effectively.
Wonky, glitchy coding will drastically decrease the value of your mobile app.
Make sure your app is up-to-date as well.
Coding is always getting an upgrade, and you need to make sure you are keeping up.
The longer your app has been around, the more trustworthy it appears.
Younger apps are, of course, subject to more risk, because no one knows how it’s going to perform.
Older apps with a proven track record of uses and growth have more value.
Customer Acquisition Cost and Customer Lifetime Value
CAC is, of course, the cost of acquiring new customers, and the CLTV is the amount of money you make from a lifetime customer.
Obviously, the higher your CLTV is in comparison to your CAC, the most valuable your application.
Downloads, Reviews, and Traffic
The number of downloads is the most commonly known way to measure a mobile application’s value.
Download conversion rates can vary widely, and it’s something you need to measure based on your industry.
If your app is failing to convert to downloads, make sure you’re looking at your reviews, your content, and your business vertical.
Make sure you’re solving a problem for your ideal consumer.
Also, make sure that your application works well and is easy to use.
A mobile app that people struggle to use will not lead to positive reviews, and therefore will affect your conversation rate.
That being said, make sure your app has reviews!
Reviews establish social proof, which ultimately leads to more downloads and higher value.
In-app, you can ask people who use your app to leave a positive review.
This will facilitate the reviewing process.
If people are happy with your app, chances are, they will love to help out by leaving a review.
But, you can’t be annoying about it either!
Find a balanced way to ask that doesn’t feel like you’re pressuring them.
See how much traffic you are driving to your app and from where.
The more people see your app, the more people download, and the more conversions you achieve.
Take note of your main traffic sources and capitalize on them as necessary!
Standard Operating Procedure
Make sure your application is operating to the industry-standard.
Ensure proper documentation and bookkeeping so that if you ever do sell your app, the next owner doesn’t have a mess on their hands.
Good bookkeeping increases sell value!
As you can see...
Plenty of factors go into determining the value of your mobile app.
But as long as you keep this list handy, it shouldn’t be too difficult.
Your app may not have a hard and fast number value, but when you can determine the value based on all of these different elements, you will have a good idea of what it’s worth.
From there, you can easily figure out how to increase your app’s value, ensuring your growth and success!
At GrowSalesIQ, we exist to grow your customer acquisition, repeat purchase, and ROI with mobile marketing services such as omnichannel marketing automation, B2B lead generation, and custom-branded mobile app development.
Contact us to find out more about our custom-branded mobile app service and schedule your free demo today!