How to Buy a Mobile App

Screen Shot 2014-03-17 at 1.39.50 pm

Not sure where to start with buying apps? That worry stops now. 

Buying apps is a simple process, however there’s a common misconception out there that it’s harder than buying a website or domain. Just as well buying an app is easy because iOS apps have been on an upward growth trajectory ever since the concept was first introduced. There have been 1.5 million app submissions to the iOS App Store, and that number just keeps growing. With the recent blockbuster app acquisition of Whatsapp by Facebook for $19 billion dollars, it’s small wonder more people want to get into the app race.

If you feel like you’ve been missing out on the action, don’t worry. It’s never too late to get in the game, and with Flippa’s app auctions you too can buy your own app!

However, before you get all click-happy and start bidding on apps, there are a few things you should know to ensure you make the right investment.

Pick your niche

Apps are not the passive moneymaking machines that some sellers claim them to be. There’s a lot of work involved in building them, marketing them and maintaining them. Of course, since you’re buying it from someone else, it’s already built (hopefully) and some marketing has been done, but there’s still more work for you to do.

Keeping this in mind, it makes more sense for you to acquire an app that aligns with your experiences and interests. You’ll be more likely to put in the work required if you actually like your app. For example, if you like games, or if you have worked with a game dev studio, you’ll be better served by looking at game apps instead of business apps.

Pick your stage

Sellers will either sell their app when it’s in its infancy or when it’s past its peak. It doesn’t make sense, from a rational economics standpoint, for them to sell while the app is still on a growth trajectory. Of course, we aren’t all completely rational, so if you find an app like this, you should give it some serious consideration.

In general, you’ll either find apps that either generate little to no revenue, or that generate a fair amount of revenue but are on a flat or declining curve. The two stages have different risk profiles; so pick the one you’re comfortable with.

For apps that are still at an early stage in the lifecycle and have little to no revenue there’s a higher risk involved. You don’t know whether this app can grow to the point where it makes a good amount of money. The seller might be selling it because he/she doesn’t think it can grow, or because he/she is just tired of working on it.

If you’re comfortable taking on this risk, and you think you can generate money with the app, then it’s a good idea to buy. Apps in the early stage will generally sell for a lot less on account of not generating money, so you can get in with a small investment. This will give you a very good ROI.

Apps that are at the late stage of the lifecycle will sell for more because they generally make more money. The good thing is you know there’s a market for this app, so the risk is lower. However, you’ll probably be buying it while revenues are declining so you’ll need to engineer a turnaround to protect your investment.

This means a lot of marketing work. It’s possible the seller just got tired of continuously pushing the app and so let its revenues fall. With a new marketing campaign in place, you can pull things back. If you’re creative, you can add a few new features and upgrades and increase revenues that way. There might be untapped revenue streams that you can take advantage of.

Do the due diligence

Now it’s time for you to narrow down the choices on the Flippa app auctions page based on the above criteria. This doesn’t mean you can get to bidding straight away. You’ve got to do the due diligence to make sure the app is worth acquiring.

The first thing to do is look at the numbers. Hopefully the seller has added an analytics layer to the app. Dig into this and learn about how many downloads it has, what its rankings are, whether it’s engaging, and how much money it makes. For more information on what to look out for, have a look at our lazy guide.

You also want to actually use the app and see how it works. Download it and sign up for it. Go through the app carefully, play around with it, and note down what you like or don’t like about it. Try to find out if there are any bugs or if the app crashes. The analytics platform will also have some information about this.

In fact, go a bit further and do some user testing if you think the app has potential. Get your friends to use it and document the user flow and engagement. Find out if they like it and ask them if there are any features they’d like to add to it.

Finally, do some research on the seller. Flippa has a seller profile where you can see if there have been any past successful app sales. Make use Flippa’s messaging services and don’t be afraid to ask questions about the seller and the app.

Determine the costs

The last step is to calculate your total ROI and figure out if this is worth it. Your initial investment is not just the auction price; you’re also going to be putting in more money to develop and design the app if needed.

For example, if you’re not a developer and if the app needs some major redesigns or additional features and bug fixes, then you’re going to have some up-front development costs. Add this to the final auction price to get to your initial investment.

Then, there are going to be ongoing costs for maintaining and marketing the app. This will cut into your bottom line, especially if you need to hire people for this. If you can estimate revenue growth and monthly costs, you can come up with a ballpark figure for monthly profits.

With your total initial investment, and your projected profits, you can calculate a realistic ROI. How much time will it take for you to make back your initial investment? If it takes a year and you’re comfortable with that, then go for it. Otherwise, look at another app.

TLDR

Apps require a lot of care and maintenance, not to mention marketing to stand out from the crowd. They aren’t passive income vehicles. If you want to buy an app or two and get into the app game, get ready to put in some work. Start by heading to the app auctions on Flippa and looking at niches that interest you.

Figure out what stage the app is at and look at the analytics associated with it. Play with it, talk to the seller, and do the general due diligence. Once you’ve found a good app, calculate your ROI and determine if you should bid on it.

Good luck!

Now it’s time to view some of our top app auctions live now on Flippa! 

Sellers can also look at our guide to selling apps by clicking here!

(Thanks to Joe for the photo)

    Experienced in sales and restaurant businesses, James Riddle is a freelance writer constantly staying up-to-date with the latest marketing trends, branding strategies, and technologies.

    Recommended for you

    Discover more from Flippa

    Subscribe to our Blog

    Get the latest blog posts, insight reports and news directly to your inbox every week.