305: Selling Apps
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Welcome to under the radar show but independent IOS APP development. I'm mark armant and David smith.

Under the radar is usually not longer than thirty minutes, so it's get started. So I think for today's episode, I thought would be interesting to talk about the topic of acquisitions or selling your APP um or so I guess the ways in which you might wind IT down being in india developer um and we talked to how it's funny.

We ve been doing the show long enough that I like I feel like we ve talked about this before and I looked that up and I think we talked about this on episodes ty two, which is back in march of two thousand seventeen. So probably worth revisiting at this point regardless of where've touched on IT again because I think it's a thing that is important to have a handle on in terms of your approach to your business um because inevitably, eventually, you're going to want to not be in business. I would expect in the sense of one of this is a lovely career that we've both made.

And I think if you can make IT work can be a really satisfying 的 the filling potentially with reasonable renew merry you know job and career。 At some point you might want to move on to do other things that could be at the very end of your career you're sort of retiring um IT could be because um you are of a lost interest in what you're doing or is a lost interest in one of your apps is something that I think is a complicated question for what you do and um something that sort of towards the end of its life, but maybe its still has a little bit of value. You know it's IT worth trying to find a market to sell something or may be you feel like you just just have like looked into a particular opportunity or you know someone of your apps having a moment and you feel like there's this narrow window where you may be you could get a higher return if you sold IT or moved on to someone else.

More at mean, I think the impression I get is just sometimes like the money is really good. And I mean, i've recently this is saw some a top of mind. Apple announced that they were buying the peel matter team apps ea, and is one of those things where I imagine in apple is one of those companies that could just start back in the money truck up to your house and be like here you go. And regardless whether it's necessarily something you were looking for, wanting or planning on at some point, the money you might just be too good and you just it's a opportunity. But I think IT is still nevertheless a useful thing to think about before you're in that scenario of either something is winding down or you feel like you read a hot moment or the money trucker showed up to understand kind of both book that process would look like mechanically and also just sort of reasons why you may want or may not want to pursue IT.

We hear a lot about the high profile acquisitions, things like what happened with this matter. You know, apples buying this big APP company. This is very successful, well known apple company.

Apples buying IT for probably a pretty large sum of money, and they're going to go join apple. And we hear about those and you know those those goal, how we're going to go to get that. But there's also so many other APP sales that we just never hear about in the press.

They don't write SE the level of of being not worthy enough or people keeps them too confidential and no one even knows they happened most yeah most of the time. What we will be approached by or what opportunities will be available to us as the seller of such a business. It's gonna be there is more boring kinds. It's gna be like, you know some company that wants to you know buy your established up and and strip mining with ads and descriptions and things like that. Or it's going to be somebody building a portfolio for a private aequor for more you something like it's those are more likely the kinds of opportunities that people like us generally tend to get.

Yeah and I think those are interesting opportunities because in in many ways like it's I think I become very emotional attached to my apps. But in many ways they are like of an anuwa um in finance terms, which is a financial product where you acquire something and then IT pays you a regular amount of money into the future and in a weird way of development has always kind of fit that model in my head.

Where IT is this thing, we we tend to put a lot of minister of time, energy and effort in up front and then we can have some reasonable expectation of return over time. And that's potentially very attractive to people like i've been approached by minute for all variety of reasons of the last seventeen years that i've been doing this, that had people approach me for saying that they went to buy my apps and and sometimes I get the impression it's like a you know there a fund manager and someone decided that this is a potentially a useful diversion ation scheme that they could by into. Sometimes it's there's companies that seem to just be structured around this, but I think it's most often yeah, I think you're ending up in a situation where someone is going to come and they want to buy your APP because they think they could make more money from IT than it's going to cost them.

And it's entirely a financial transaction in that way. And I think that's interesting. Sometimes when I think of what like these people who are approaching in IT is probable is like, I think sometimes they're just also A A uh, there's a number of people who seem to also just spam developers with any amount success on a weekly basis with sort of pitches that they are going to buy your rapp or that there actually just brokers who you are trying to take ten percent of the sale Price and they're just kind of constantly fishing for these.

And I get this all the time. I've never really responded to them because I am not interested in selling my apps. But there's this weird thing that sometimes in the back of my mind, i'm like, is my know? Am I under valuing or under is my APP under performing verses where I could? And I think some of that is probably necessarily true because the nature of a lot of these acquisitions would be that they're buying IT with the expectation that they can extract more money in the short term from IT than the, you know, they are from Price that are paying you.

Um whereas structuring my business to be long term in a good anuwa into the long term, that doesn't to fall off very quickly. And this is a different you sort of mentality and mindset. And it's possible that over a say, a three year period, I could make substantive more money.

I was structuring my business such that IT was no just extracting every little penny out. But at the end of that three year period, I may not have much left. And maybe that's just an I very view that I have.

But I think it's tRicky to think of if someone's coming trying to buy something from you, um they're thinking that they can make money from that transaction. I don't think, I mean, it's possible that they would be buying IT as part of like a broader branding strategy. And you've had a you can kind of imagine that sometimes that's what's happening, that it's they're trying to find their way in or get a tohoku, an industry or things like that.

But I think will buy in larger someone trying to buy something from you. Um they're expecting that you know after a reasonably short amount of time, they would have recouped their purchase Price because of the wise. There's no reason for them to be doing .

IT in the first place. And now there's all sorts of asteroids and tricks. Well, along with that. Like for instance, like you know when you get those those emails from the people from the approach ers who are like we worked to in buying apps like yours, and we've thought we've seen IT on the rank list and we think you're making x or we think you know you we we be willing to offer you know life for in my experience, the ability for external entities to try to estimate how much money you make with your APP is comically impervious and inaccurate to the point where, like i've never gotten one of those in bound ones to any of my apps that was anywhere close to what I actually made. Usually they dramatically underestimate what I make, which is a good problem to have.

But, but that can right to change, you know what what their interest might be and IT also like so far in my career so far, but look at to specifics later. But but you I have found that usually the APP is worth more to me, then IT is to somebody else. Um but you know there's also there are other reasons why somebody might want to buy your ability.

For instance, if you are retiring from the APP for whatever reason, whether you're through your entire career or just the APP or maybe you're going to work for the apple and you have to divest yourself of your personally owned after whatever. A lot of times, somebody in your customer base who is a developer looking for in their business might buy IT to just take IT over because they just like the product and they want they want the part to continue and they like, you know what, all buy IT. That will be one of my portfolio things.

Now like that does happen. It's not that common, but IT does happen. So there are other reasons why people might want to buy to as well. But that ultimately comes down to they're not going to buy IT if they don't think they can make money from IT within a fairly short time.

yeah. And I think it's also probably work point out that there's an interesting aspect of selling an APP that I think it's sometimes easy for me to think that if i'm selling my APP, what they're buying is like the code and like as though that is the the valuable part, maybe that that's the part that I have. Have you personally that i'm like proud of that or the design or the assets or those kinds of things.

And I think the reality is, is moreover, they are buying its market position beyond the actual sort of code itself, which I think is sometimes tRicky to value and sometimes tRicky to understand that what they're buying is your existing customers more than your actual act like concerns. I think about this just like I have them the the, the mental exercise of how long would you take me to recreate one of my apps from scratch, knowing what the APP is. Now sometimes I haven't been able to buy, pass all of the. Designed that ends that he took to actually build IT in the first place. And all of the things the inefficiency is event, if I SAT down and wanted to make a atomic ter plus plus from scratch, how quickly could I do that?

Um and my suspicion is that know a senior I S developers like myself could probably rebuild IT in forty six months or something along those lines, which is one of those things and you think about IT, if IT becomes like, okay, so that's going to to be a cost of a couple hundred thousand dollars maybe like in terms of if you were to hire someone to do that and that in terms of the actual if someone is buying that code, like that part of the purchase Price is not actually very substantial. But they really are buying is the fact that IT has name recognition, IT has users, IT has subscribers, as I think something you just like this has this this proof in track record because that's why they aren't just saying, let me know, let me hire and I hire a developer. Let me pay them two three hundred thousand dollars, build this APP and put her in the APP store because like that transaction is unlikely to be profitable versus coming in and buying the actual of name and recognition and position in the APP and that they're actually buying. And but that's tRicky because that is very chAllenging to value because this is a femoral thing you can't IT isn't just be whatever one hundred and fifty dollars an hour time, so many hours to create the thing that you could kind of do if you were doing just valuing the actual you know that the swift code itself. This value is much more special and much more emotional and much more complicated um you know beyond that yeah .

and another reason people might want to buy your APP is just to acquire you as a person who is good at making such things, a person with certain talents and certain skills and a certain reputation. Maybe um these are called equal highs where they're requiring your business mostly to get you to come work for them. And this is a dramatically different kind of acquisition as well.

And and usually I think the ones we hear about where a larger tech company is involved, I think this is almost always either legal or at least the biggest part of IT for them. They they often want the talent more than they want the APP or the business itself. And this usually create bad outcomes for customers. Usually this this ends up whether immediately or a little bit down the road.

That's usually what ends up with the APP getting cast into the sunset because usually that you know the company wants the people and usually there is some kind of contract where you might have to go, you might have to work for them for like four years or if you don't work for them first, not in the time you don't get all your money, whatever. You know, some kind of structure like that to try try to keep you there and know that has mixed results in the industry. To know often times people who are echo hired into a company end up leaving one day after all their stuff vests and all those deadlines.

Um but you know that's that's that's part of the game. But if if you are selling a APP know if you're on the selling side of something where somebody wants you to come along with IT, odds are, uh, you know they are probably more and didn't you and and I think you have to you have to wonder at that point, like what what do I want for the future of my APP? You know if if there if you are going along for the sale and the company seems to want you more than the APP, then that probably means your APP is going to go away.

And is that the outcome that you want? And and you know you have to wait and sometimes that's your best option by far, like sometimes the money is good enough from the offer and especially if the APP or business is not doing that well for you, like if it's kind of on its way down or it's past its prime or you know the market has has been too hard for you a lot of times. The offer you get as as the equal higher will be the best outcome that you have.

And so IT would be stupid not to take IT and your customers will just have to understand at that point that just that life. But you know if the numbers are close, if if you know they want to hire you for a certain amount and you're like, well, if I just kept running the APP, I could basically make similar or Better money than you have to consider. Like, well, if I could work for them, my APP is going to die and my customers are going to be screwed in some way.

Maybe that might hurt my reputation in way you. So there's there's other factors to consider there. But you know usually the equal higher is bad for the APP, usually it's good for the people. Um and sometimes I often times that is the best option.

Yeah and and I think is Better to say with those. I think I know many people who have gone the slightly of insert of the echo higher and or the they build an APP as a way to build skills and establish credentials, which their ultimate goal was to get hired by a big company. You but I go to go work at meta or apple or google, one of those companies that though that was a that's a perfectly reasonable approach.

And I think especially for someone who's breaking into the career and starting out that there is nothing I ve never I don't do a lot of hiring, but from talking to a known of people who have our hiring managers or who do that kind of work, IT is usually very IT is a very good sign. If a candidate has an APP that they've made, that put on the APP store, that they've gone all the way from family project to release for sale, that, that experience is very is very helpful. And so it's entirely possible that you would sort of if you're in a position where the aco higher version of this is mostly them just giving you some nominal amount of money to wind down your rapp business because it's not appropriate for you to do that if you are also working for them.

And if that was which your goal was so from the beginning, then great. Um but it's the tRicky thing. I think the point you're getting to more it's tRicky to think that your another company is unlikely to care about the product that you made as much as the product as you do because necessarily, IT is coming into a broader picture with different goals and different alignment, maybe different values in terms of what they're trying to build to the direction they wanted to go.

And so and is the kind of thing where I think it's easy for them to potentially make promises or describe things in a certain way, which ultimately turns out to not be a hundred percent um you know exactly how things are going to go. So it's somethings to go into with sort of open mind with in that perspective. And I think is also important to understand that the be very being very circumspect about the amount that you are be time yourself down with is also something that I like.

I ve had these kind of six things presented to me. It's tRicky for me to imagine a scary words that you ended with, like the golden handcuff situation, where you are tied into a particular company out of one way or the other for the next three years. That's a really tRicky place to be because life is complicated.

Your family needs might be complicated like you're tying yourself into this future promise that could go one way or could not go one way. And you know like whether that makes sense for you is obviously a very, very dynamic. But that aspect of IT always feels little tRicky with those kinds of scenarios because they hire you with these promises and turns out bit market conditions change, the business changes, something changes, which are still stuck there for years um doing whatever is that you need to do to make that happen. And so it's A A really awkward place to to find yourself IT all .

comes down to what are your options. You know if if you're going to get a really good Price from this acquire, who wanted to do a work for them um and your and your uptime making that mark, take the opportunity, take the money. You know honestly, like there's some really big reason not to like you.

I IT red me to advise anybody not to take a good opportunity that comes their way. It's Better than all of other opportunities by a big margin. Um and the good thing know so in terms of how much money you'll actually make from selling your APP IT vars, a lot in cases of aqua irs IT really does like that is all about like what is your value as a person to the business buying you? And typically, if you are if you are going along with the product, that typically increases the value that somebody who's willing to pay for the for the combined package because somebody is just taking on an APP with no one to work on IT and no one familiar with IT like from scratch that that is usually worthless um to them because almost is a very small acquire less unless it's the case of like you you're retiring and some other small developer wants to pick IT up for you. That's a different story.

That's a different kind of money um because the acquire that might not be able to afford to keep paying you as as a as a cellar employee uh, but usually with larger companies being being the purchasers and usually they want you to come along with that because that because you are part of the value if you don't go along with IT, um you you can typically expect you know some multiple of what the APP makes per year, usually in the low into jurors. So you know something like you know one to four x its annual profit that you know might be you and this vars a lot based market market conditions, market what the market is even like. If you're in A A super growth market, you might get text x, your annual your annual profit as your purchase Price, something that's really Young and expected to keep booming ahead of you.

But if you are if you've just been working this APP for a few years and the the kind of the platoon of profitability has already clearly been reached, yeah, you're going to you're looking at like, you know one to four x, maybe you're you're in your profit as your purchase prize, alright. We are sponsored the episode by century. Century are the folks who keep you, who help you avoid your mobile APP being the one that gets deleted.

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an interesting question and it's one that I I I think about regulations like you. What do I want to do um with my with with my career wider, I pursue this and I think ultimately for me the reality of a typical acquisition, say someone came and said, hey, i'll give you three times your last last year's profit to buy a raps from you like that that would be a perfectly reasonable set of transaction for someone to suggest and inevitably when I end up in is the well or I can keep them, continue to work on them, enjoy that process and at the end of the three years, have, in addition to be with the money that they would have paid, me continue to own the asset that will pay money into the future.

And so I think financially, IT works out well as long as you're enjoying the work to continue doing the work. And so in that sense, it's less appealing financially because most of which there you will be of buying is the risk mitigation that the industry goes down very quickly. And so you would have sort of locked in a good Price in that sense, which I don't know at this point. I ve been doing this for long enough that I feel like know my amps. You sort of settle into a very stable place.

And the scenario is where they would be dramatically worse off in three years, tend to look more like large structural changes to the world, which you can predict, rather than, you know, just like the natural market forces that it's like I put on enter pluses almost that was a ten or eleven years old, I think now which smith, up to four years, the whole, which is kind of a wild thing for me. At a certain point, things do tend to settle in to a growth, and you can kind of have some expectation. And so and that sense, I just enjoy having the anuwa.

I'd rather have the money every year rather than trying to you know sort of get IT all of front. Um and I think also there is an element of a lot of these things that and this is I only once gone down the road of expLoring and acquisition. This was seven, eight years ago now was quite a while ago.

And I think to IT didn't IT just didn't really line well with the way that I built my business and the way that I proved business, maybe where IT was. That has some nice conversations with the sort of the initial mergers and acquisitions person who was like against scout for trying to find to find apps to buy. But then IT very quickly turned towards the more like the ma lawyers version of things.

And I hire a lawyer and we've been through IT and IT just turned into business in a way that I didn't enjoy and that I found didn't feel particularly like I didn't feel at home in that I didn't feel comfortable, I didn't feel confident that I was making good choices and ultimately, just like walked away because of getting kind of nasty specific in ways that I didn't enjoy. And it's like it's only IT wasn't necessary like I could continue just making my apps in doing my work in that way because I didn't build my business and structural for that kind of an exit in a way that I think you are people who get into business with the ultimate goal that they want an exit. They want to build this thing up and then it's like, know they are planting seeds in the fields they wanted to grow and then they want to harvest that and move on to the next field.

And that's not really my view that I think I have much more of a garden as a gardener's view in that where I want to every year, continue to investing and growing and developing something in making IT Better and Better. And that model just is different than an acquisition model. It's a different mindset. And so at this point, it's the kind of thing, but I don't expect to ever said something that um i've made other than a scenario where I feel like i've lost interest in IT or I am retiring or moving on or my life sort of priorities and goals have has shifted. But you know these sort of short term financial benefit of IT IT just doesn't really appeal versus just continuing to own the thing that I can continue to grow and nurture and then know whatever after the multiple period into the future and continue to own.

And so I would have to be the kind of silly money kind of scenario, which I mean, you never know, like you couldn't say you, you can never say never that you know someone shows up and says they want to pay you twenty times the annual profit of your apps for your apps and like saying no, that is a very that would be a very complicated thing. But the reality is that scenario is extraordinary, unlikely, I think. And so it's not necessary most of the time, it's going to be the kind of thing that you could much more reasonably rap your arms around of like a two to three years multiple bar for me like i'll just keep doing what i'm doing um and enjoy IT. But I know you've gone on the other side where you have actually sof solve things or transition things on in various ways. So you have a site, maybe a slightly different perspective, or maybe after those experiences, you ve laded more where I am now.

Yeah, I mean, pretty much as the latter. So, you know, I sold, installed and the magazine, the magazine I sold to glam flashed in the editor for almost nothing because, Frankly, IT wasn't doing very well, and he was creating most of the value at that point. And so I was gonna shut, IT down, and he said i'll gave IT a shot.

So I sold to him for almost nothing, and that that was good experience inside paper was more complicated. Now that was, I thought I needed a bigger staff and more resources to really compete in its market. Also, the money had been going down.

You know, I was past my pick, a was past my prime, and also I wanted to work on on a podcast up instead. And so all those factories combined to convince me, right, I think I will sell IT. And that was my first sale.

I was inexperienced. I structured the deal in sexual way that that, like I got money over time and that ended up screwing ly honestly. So I would honestly recommend if you're if you're going to do this kind of thing, get your money up front and no contracts are are not worth a lot.

That was kind of a negative experience for me and that creates a lot of negative emotions like for a while I didn't use in behavior because I was mad about how things went um and that was IT was a very complicated situation that that mostly due to my own inexperience in in getting that deal and negotiating that deal. So I would say keep things simple, get your money up front but even that kind of taught me maybe I don't want to sell my stuff. Maybe this is not the way for me.

And with overcast, i've been unfortunate that after its first few years, I landed on the subscription model description plus ads model I have now. It's a good business and IT IT works, IT makes money. So a combination of IT continuing to make decent money, and also I want to be interested in IT and also there is nothing else I want to be building with that time.

That combination has me sticking with the overcast for for the foreseeable future. Now any other things could change. You know, if IT stops making money, or if some amazing opportunity came up that I want to work on instead. You know, maybe I maybe something different happen but for for the time being i'm more than that annual wy sense of like I like working on this APP. I don't want anyone else to work on IT or run IT or shut IT down um and I still continue to see a lot of potential in overcast like yeah of course I get those emails from people who are you here?

I'm I shouldn't buy your APP and it's never anybody from like the podcast business just know these know private equity people when you get down to like what would they actually pay me for IT would always we don't even get that far, honestly but the reason why is that usually my first response is, well, you would have to pay me x number of figures and it's so it's such an absurd Price that they don't even respond usually. But the reality is like, you know, I keep IT because IT is worth more to me and I think that is the overcasting. I think that overcasting best days are not behind IT.

I think they're ahead. I think there are still growth in this APP. And so I think I can make more money continuing to run at myself then selling IT to one of these companies like you were saying earlier. So that's where I am right now. But again, like that could change.

And I I don't fault anybody for accepting when a truck full of money backs for their house and is like a we want to buy your APP and shut down if you just know, do a little bit of so selling and and may become work for us and that's hey, that's fine. Like if if the money is right, like everything is for sale for the right Price for the most part. Um so if the money was amazing, sure I would sell over cast, but I don't think it's worth that much too. And he would else except me and and i'm for for the foreseeable future. I am fine with that because I enjoy working on IT and it's still doing well.

Yeah, I think an element of that is the reality of its our our apps value to us exceed its financial rewards. Um is I think it's something where we're both saying is in the sense of IT isn't. There's not this like our businesses are worth three times the annual profits.

They're worth more than to us with that. They were emotionally invested. We have, you know, lots of things built into these. We enjoy the process that we know that we will hit on something that succeeds and that value is unlikely to be paid for by someone who wanted to buy IT. And so unless they're doing IT for another reason, it's just not going to work out and isn't going to be worth pursuing. But you never know maybe eventually that the truck gets big enough and like the same way as like, I don't fault anyone who who d accepts that money truck but generally for me, if he just doesn't really make sense.

Congrats to pixel matter. congrats. Thanks your listen, everybody.

and we will talk to you in two weeks by.