Under the Radar

72: Selling Apps


00:00:00   - Welcome to Under the Radar,

00:00:01   a show about independent iOS app development.

00:00:03   I'm Marco Arment.

00:00:05   - And I'm David Smith.

00:00:06   Under the Radar is never longer than 30 minutes,

00:00:08   so let's get started.

00:00:09   - So last week we talked about one way to structure

00:00:13   your individual app business and it kind of focused on

00:00:17   building up a portfolio of apps over time

00:00:20   that kind of just run indefinitely

00:00:22   and provide you with decreasing over time revenue,

00:00:26   but that still stays,

00:00:28   the sum of which can stay substantial enough

00:00:30   to keep you going.

00:00:31   So you kind of just let apps slowly fade into the sunset

00:00:34   over a long period of time.

00:00:36   An alternative to that for some apps or for some people

00:00:40   is selling apps to people, to acquirers in some form.

00:00:44   We'll talk about that this week.

00:00:46   More about how you build an app for sale,

00:00:50   how you consider what it would be like to sell it

00:00:52   later down the road,

00:00:54   and then certain different considerations you might take.

00:00:57   And then how to structure that deal

00:01:00   and what kind of, how to value your app

00:01:02   and how you expect to get paid over time.

00:01:06   So I think the first thing to look at is building an app

00:01:11   with sale in mind, so with future sale in mind.

00:01:15   One of the most obvious things is legally,

00:01:18   and you should be doing this anyway,

00:01:20   it is beneficial to have a separate business entity

00:01:23   for your apps.

00:01:25   Whether you have one entity with all your apps under it

00:01:27   or separate entities per app,

00:01:29   that's between you and your accountant and your lawyer.

00:01:32   By the way, please hire an accountant and a lawyer

00:01:35   to set this up for you.

00:01:36   And I don't really have a strong opinion either way,

00:01:40   whether you do things under separate LLCs or not.

00:01:42   I have done separate LLCs for most of my big things,

00:01:46   but then I have one kind of catch-all

00:01:49   that has everything else,

00:01:51   all the podcasts and blog income and everything.

00:01:53   I can see the advantages of both systems.

00:01:56   In reality, when it comes time for acquisitions,

00:02:00   there's not a lot of strong opinion one way or the other

00:02:03   because doing separate LLCs for everything

00:02:07   is a lot of overhead, and a lot of times an acquirer

00:02:10   doesn't want to buy the business,

00:02:11   they wanna buy the business's assets.

00:02:13   So it might not even be worth it in the long run.

00:02:16   One area where it is very helpful to have separate accounts

00:02:21   is the Apple developer account.

00:02:24   Because if you sell an app,

00:02:27   Apple has a way that you can transfer an app.

00:02:29   Now they didn't for a long time.

00:02:30   They have a way you can transfer an app

00:02:32   to an acquirer from your developer account,

00:02:34   but there's a lot of limitations on that.

00:02:36   One of the biggest ones that is still standing today,

00:02:40   and I'm not sure, I don't know if they've ever said

00:02:42   if it's gonna go away in the future or not,

00:02:44   but they probably haven't,

00:02:45   is that if your app has ever used certain entitlements,

00:02:48   such as iCloud, it just can't be transferred ever.

00:02:52   And so there's a lot of reasons why

00:02:55   having separate Apple developer accounts

00:02:58   for separate apps makes sense.

00:02:59   And the easiest way to do that

00:03:01   within the bounds of what Apple allows

00:03:03   is to have them be separate business entities.

00:03:05   So that is one big advantage there.

00:03:07   But other than that, I don't really have a lot to say

00:03:09   on that topic, do you?

00:03:11   - No, I mean, I think the biggest thing with that topic is

00:03:14   if this is something that you can see yourself

00:03:17   wanting to do down the road,

00:03:19   it's good to have that end in mind

00:03:22   when you're setting things up initially.

00:03:24   Because whatever approach you take,

00:03:27   and that will vary wildly depending on all kinds of things,

00:03:30   and I imagine it varies by country.

00:03:32   If you're a developer in a country

00:03:34   other than the United States,

00:03:35   you may have different rules

00:03:36   or different requirements for things,

00:03:37   but it's something that you wanna keep in mind.

00:03:40   And then as you're developing,

00:03:41   it's something that you wanna keep

00:03:42   in the back of your mind too.

00:03:46   After Apple announced that they have this new

00:03:49   you can transfer apps, but not if you've enabled iCloud,

00:03:52   for example, I think long and hard about

00:03:56   if I ever wanna push that button in the developer portal

00:03:59   to enable the entitlement,

00:04:02   because I have in my mind that like,

00:04:04   is this an app that I could see selling?

00:04:07   Is this an app that I would like to have

00:04:09   that opportunity to easily transfer it to another account

00:04:12   or not?

00:04:13   And I think it's good to be conscious of that

00:04:15   as you're going through that

00:04:16   rather than just like you go into the developer portal,

00:04:19   you're setting up an app and it's like,

00:04:20   oh yeah, let me just check all the boxes.

00:04:23   Like that approach is not great in this case,

00:04:27   'cause you may find yourself stuck down the road

00:04:30   even if you've never used iCloud.

00:04:32   And it's not the kind of thing that you can like

00:04:33   pull iCloud out of your application

00:04:35   and then suddenly you can transfer it.

00:04:37   It's like, if you've ever pushed that button once

00:04:40   in the developer portal,

00:04:41   the app will be forever ineligible for transfer.

00:04:44   And so you'd have to then,

00:04:45   be doing things that are more like

00:04:47   transferring the business entity,

00:04:50   or like creating a subsidiary of the company

00:04:52   that the app is then like moved into,

00:04:55   or then they purchase just that like subsidiary,

00:04:58   like things would get more complicated.

00:05:00   And so if this is something that you would ever want to do,

00:05:03   be thoughtful about that.

00:05:04   Be thinking about it

00:05:05   in terms of how you set up your business stuff,

00:05:07   as well as how you set up your stuff

00:05:09   within your developer account.

00:05:11   - Exactly.

00:05:12   And beyond the developer account question,

00:05:15   everything else about keeping things separate

00:05:17   is generally just like a good idea to do anyway

00:05:20   for accounting reasons or for legal reasons.

00:05:22   So for instance, like obviously have like

00:05:24   a separate business bank account.

00:05:25   That's step number one.

00:05:27   And hopefully as some kind of entity,

00:05:29   whether it's an LLC or incorporated,

00:05:32   that's up to you and your accountant and lawyer again.

00:05:34   But also things like service accounts,

00:05:37   like your web host, like I use Linode for all my stuff.

00:05:41   I don't have just one Linode account.

00:05:42   I have two.

00:05:43   I have one for one LLC that has like my blog

00:05:46   and podcast stuff.

00:05:47   And I have a separate account for Overcast

00:05:49   'cause that's a separate LLC, it's a separate business.

00:05:51   And then if Overcast later gets acquired,

00:05:54   which by the way I don't foresee happening

00:05:56   in the near future, but if for some reason it would,

00:05:59   theoretically, then it's easier

00:06:01   because everything is already separate

00:06:03   from other business assets.

00:06:06   And again, it will depend on what kind of style

00:06:09   of business you run, like how much of a burden this is.

00:06:12   If you have tons and tons of small apps,

00:06:14   this is gonna be hard to do.

00:06:16   But if you have a smaller number of bigger apps,

00:06:19   this will be easier and more worthwhile.

00:06:22   And chances are, if you have bigger apps,

00:06:25   that's gonna be more likely to be up for the question

00:06:28   of whether you wanna sell them to begin with.

00:06:30   So that's probably more of what you're looking for here.

00:06:32   So another thing to think about is,

00:06:37   when you're building an app for potential future sale,

00:06:41   how much do you want to sacrifice revenue now

00:06:45   for potential revenue down the road in an acquisition?

00:06:47   So that might inform decisions about pricing, for instance.

00:06:51   So if you want, if you're aiming for an acquisition

00:06:54   down the road, what you want more of anything of is users,

00:06:58   because users are valuable for acquirers, usually.

00:07:00   If you wanna get big up front,

00:07:03   then you're gonna need to probably take less money up front

00:07:06   than you could if you just made a nice productivity app

00:07:11   and charged $10 for it and sold it in the store.

00:07:14   If instead, you build up a whole community of users

00:07:17   that all came for free, 'cause it was easy,

00:07:19   'cause it was free, there's no barrier there to entry,

00:07:23   that would be better for an acquisition down the road,

00:07:25   but that's a riskier bet, because you might not get acquired

00:07:27   down the road and then you've made nothing.

00:07:29   This is why that model is usually funded by VC,

00:07:32   because it's a huge, risky gamble

00:07:36   and probably an ill-advised one

00:07:38   to do that with your own money backing it.

00:07:40   So the VC model, one of the reasons why acquisitions

00:07:44   happen more often in VC than outside of it,

00:07:47   at least as far as we can see,

00:07:49   is that it is easier to build up a big company faster

00:07:54   if you are not concerned about making money immediately.

00:07:58   And if you are, if you try to make money from day one,

00:08:00   like we do, that's going to be a slower growth period,

00:08:04   in most cases.

00:08:05   That being said, that might also inform things

00:08:07   like where you make your money.

00:08:09   So, you know, Overcast has been profitable since day one,

00:08:13   but also on day one, I decided to make the app free.

00:08:17   So if it's free up front, and I had in-app purchase

00:08:20   for other stuff, and that's been the model since day one

00:08:22   for lots of reasons, but mainly I wanted to maximize

00:08:26   the audience of the app, and I decided profit

00:08:28   was secondary to that.

00:08:29   I still needed profit, but that it was secondary to that.

00:08:32   And that will also help you, you know, if down the road

00:08:34   you decide to sell an app, having taken that kind

00:08:36   of approach will probably benefit you in a lot of cases.

00:08:39   Because you will have more users, you'll have a bigger

00:08:42   audience behind it, and that will all add to its value

00:08:45   to an acquirer.

00:08:46   - Yeah, and I think too, it's a difference of mindset,

00:08:52   where if you're trying to groom an application

00:08:56   for potential sale, you need something to sell it on

00:09:00   that's impressive.

00:09:02   And like, inevitably, this is going to, you know,

00:09:04   like you're going to attract somebody's, you know,

00:09:07   typically it's going to be, you know, some large corporation

00:09:11   is going to buy your app because it has something

00:09:14   that they want, that they can't easily get themselves,

00:09:17   and it's cheaper for them to purchase, you know,

00:09:20   as a bundle rather than like compete with you directly.

00:09:23   And, you know, more often than not, the thing that they

00:09:26   are going to be wanting is your user base,

00:09:29   is your customer base.

00:09:31   You know, if your app is, you know, is high in revenue,

00:09:36   you know, sort of with a small user base,

00:09:39   then it's probably going to be less, in some ways,

00:09:41   less appealing to refer a company to buy because

00:09:45   they're going to have to pay so much for it.

00:09:48   You know, if your app is making lots and lots of money

00:09:50   for you, in order for someone, for you to want to part

00:09:53   with it, they're going to need to pay you very well for that.

00:09:55   And so, if it's, however, if it just has a large amount

00:09:59   of sort of relatively unmonetized users,

00:10:03   that is a more straightforward thing, I think,

00:10:07   for someone to view as it's valuable to them because

00:10:09   they have other ways to monetize it, or the value to it

00:10:11   isn't in direct monetization, it's in something else.

00:10:16   You know, it's more of a brand move, or who knows what.

00:10:19   Like, there's lots of things that larger companies,

00:10:21   their goals might be different than your goals.

00:10:23   You know, with, for most small independent businesses,

00:10:26   like my goal is mostly just income.

00:10:28   I'm not having these kind of these big, broad things where,

00:10:32   you know, a larger company may have, you know,

00:10:35   several million dollars in advertising budget that,

00:10:39   for them, acquiring an application for one or two million

00:10:42   dollars, if it's just like, could just be an advertising

00:10:44   expense, essentially, and they just want to put their name

00:10:47   on something that is in front of a group of irrelevant

00:10:50   demographic of people.

00:10:52   And so, like, their goals may not be your goals directly,

00:10:56   but I think the more important thing to keep in mind is,

00:10:59   you know, you're going to, if you want to sell an application

00:11:02   you need to be selling it based on something that's,

00:11:05   you know, some impressive metric.

00:11:07   You know, there's probably gonna be discussions about things

00:11:10   like the KPIs, the key performance indicators,

00:11:13   and you know, what's your retention rate,

00:11:15   what's your growth rate, you know, what's your rate rate?

00:11:19   I don't know, like, all of those numbers are things

00:11:21   that you're probably going to need to have, like,

00:11:24   good, nice graphs that, you know, go up and to the right.

00:11:27   (laughing)

00:11:28   Like, that's ultimately what you're going to want

00:11:30   if you're going to sell it, and so, you know,

00:11:32   structure your application to maximize those things.

00:11:36   And, you know, at a certain point it can start to get,

00:11:38   you know, you start to get kind of sketchy and things,

00:11:40   like, if you want, if that's all you're trying to do,

00:11:42   if you're doing the, what is it they call it,

00:11:44   the growth hacking, like, if that's your goal,

00:11:46   is just to get the most number of people in your app,

00:11:49   you start doing, you know, funny things, like, hey,

00:11:51   here's lots of push notifications, here's lots of things

00:11:54   to pull you back in, maybe not so great,

00:11:57   but in a weird way, like, if those numbers are the things

00:12:00   that you're optimizing for, those behaviors and approaches

00:12:04   are the things that make the most sense as a result.

00:12:07   - Exactly, and, you know, as you mentioned, like,

00:12:10   if you, if there's something about your app

00:12:13   that would make a company pay a premium for it,

00:12:17   you know, that's almost kind of luck,

00:12:19   like, whether that will happen to you or not,

00:12:21   like, one of the, like, an example of this is, like,

00:12:23   when Facebook bought Instagram, you know,

00:12:26   Facebook was clearly freaked out because photo sharing

00:12:29   is core to Facebook's business, and they were losing

00:12:32   a bunch of photo sharing on, like, the new hot growth

00:12:35   platform of the smartphone to this little startup

00:12:37   called Instagram that was kind of eating their lunch,

00:12:40   so Facebook freaked out and threw a massive amount

00:12:42   of money at them, and that's, anytime you can scare

00:12:46   a large company about threatening their core business,

00:12:49   that's a pretty good way to get, like,

00:12:51   an extra high valuation of your app, or, you know,

00:12:54   you can do things like, like, when a tech giant,

00:12:57   like, an old tech giant, like AOL or Yahoo, you know,

00:13:01   these companies tend to have a lot of money

00:13:04   from, like, their old businesses and old revenue streams,

00:13:07   but they don't tend to have a lot of modern relevance,

00:13:10   or, like, especially with younger audiences,

00:13:13   or, like, modern growth areas, so those big companies

00:13:16   will often trade some of their giant old money

00:13:18   for modern relevance or modern growth,

00:13:21   but for the most part, the kind of apps

00:13:24   that you and I make, the kind of apps most of our listeners

00:13:26   make, are probably not going to be big enough to,

00:13:29   or strategically important enough for most acquirers

00:13:33   to wanna pay a massive premium for them,

00:13:34   so I'm gonna be talking with the rest of this episode

00:13:36   mostly about, like, boring app valuations, basically,

00:13:40   like, how to value an app that you're just selling,

00:13:43   basically, just to get rid of it,

00:13:45   or to try to make some cash out of it.

00:13:47   - Yeah, and I think it's probably fair to say

00:13:48   that that version of selling, of, like,

00:13:51   the million dollars or multi-million dollars deal

00:13:55   to a big company is, like, it's the big fancy version

00:13:58   of this, but there is certainly the selling an app

00:14:03   for a modest amount of money for the purposes of getting,

00:14:07   either it's you've decided you don't want

00:14:10   to be developing it anymore, and it's kind of more of the,

00:14:13   not like a fire sale, but it's that kind of a,

00:14:16   I've reached the end of my interest in this app,

00:14:18   or I, like, a classic one where this will come up is,

00:14:21   so you get a, you decide you wanna go back

00:14:24   into the traditional workforce, like, you take a job at Apple

00:14:27   and suddenly you can't, you're usually not legally permitted

00:14:32   to continue developing an app like this,

00:14:35   you need to find, you're finding a home for it,

00:14:37   and so you're trying to work out what's a reasonable way

00:14:39   to value it, or, there's a much more modest version

00:14:43   of this, too, that is just the, I have this thing,

00:14:47   I don't wanna just pull it from the store

00:14:49   and have the value that it has disappear and evaporate,

00:14:53   but I can't, for whatever reason, keep working on it,

00:14:56   so I'm gonna find a new home for it.

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00:16:34   So, building on what you were just saying about

00:16:37   if you're just gonna go work for someone else

00:16:39   and you're trying to sell your app that way,

00:16:41   one of the most common acquisition styles

00:16:44   is called the acquihire, where basically a company

00:16:48   is acquiring your app mostly because as part of the deal

00:16:52   you are gonna come work for them.

00:16:54   This is very common for big companies

00:16:56   when they acquire small apps.

00:16:58   Big companies have trouble attracting talent,

00:17:00   talent is very valuable to them, so it might be worth it

00:17:02   if they can pay you a certain amount for your app

00:17:05   and as part of the deal you come work for them,

00:17:07   that's basically just like a big hiring bonus for you,

00:17:10   like that is often worth the trade off for a big company.

00:17:14   And oftentimes, like the acquisitions are kind of presented

00:17:17   in the press maybe as being something else,

00:17:20   but oftentimes it's really more about

00:17:22   the acquihire aspect of it, especially if the company

00:17:25   wasn't doing that well before, like if the acquired product

00:17:28   was not setting the world on fire, or if the big company

00:17:32   wants you to come work on their version of that,

00:17:34   so like when Google buys an email app and shuts it down

00:17:37   so the people can go work on Gmail,

00:17:39   that is very, very commonly the case

00:17:42   and you kind of can't think of this as like an input

00:17:45   to selling your app if you don't wanna go work

00:17:47   for a big company, you can kind of safely ignore

00:17:50   the goings on in the acquihire market

00:17:52   and the pricing thereof.

00:17:54   This is also very, very common for VC funded companies

00:17:57   as kind of a graceful PR exit.

00:18:00   VC funded companies don't often just fail

00:18:03   and shut down out of the blue, usually they get acquired

00:18:05   for some undisclosed sum and the people go join up

00:18:08   and go work for the big company, this is usually

00:18:10   because their investors usually have the connections

00:18:13   and motivation and the infrastructure set up

00:18:17   to easily make these kind of deals with maybe other companies

00:18:20   like larger companies they've invested in

00:18:21   or their associates or whatever else.

00:18:24   It's a way for investors to get kind of a graceful exit

00:18:27   from companies that have basically failed.

00:18:30   So, selling an iOS app like ours, anything less than

00:18:34   like a few million users is really a pretty small app

00:18:38   by acquisition standards.

00:18:39   Valuation for small apps like ours is generally not going

00:18:44   to be a massive amount of cash up front.

00:18:47   This is not like Santa Claus blessing you

00:18:50   with a ton of money for no reason.

00:18:52   You really have to look at the value of your app,

00:18:56   what it actually would be worth to someone else paying

00:18:58   for it who isn't totally in love with it,

00:19:01   who just is looking at it as a business

00:19:03   and whatever you can do with it, they can do with it.

00:19:06   If you can't do something with it,

00:19:08   chances are they can't do it either.

00:19:10   So, usually the most common way I've heard of

00:19:14   and experienced to sell an app is to basically sell it

00:19:17   for a small multiple of its current annual revenue

00:19:21   and what you expect the annual revenue to be

00:19:24   in the next few years.

00:19:25   So, you might say it might sell for like three times

00:19:28   its annual revenue and that's the sale price

00:19:30   or something like that, right?

00:19:31   The multiple there depends on a number of factors.

00:19:35   Obviously, one of the ones right up front is

00:19:38   how much the acquirer will need to spend to keep it going

00:19:42   or to build it up, to improve it and grow it over time.

00:19:45   If it's an app that needs a lot of staff

00:19:47   or a lot of server costs or a lot of other costs,

00:19:49   that's going to reduce the amount they can pay for it

00:19:51   because the acquirer will, again,

00:19:53   they're looking at it as a business.

00:19:55   They're not Santa Claus.

00:19:55   They're looking at it as a business

00:19:57   and you have to know when you're going into this,

00:20:01   are you actually offering them something

00:20:02   that's an easy business to run

00:20:03   or that's a low cost business to run

00:20:04   or is it going to be really hard for them

00:20:06   to extract money out of it?

00:20:07   Because chances are, if you couldn't make it succeed

00:20:11   or if you didn't feel like it's worth maintaining,

00:20:13   why would they, you know?

00:20:16   And as you mentioned before,

00:20:17   whether the revenue is going up or down over time

00:20:21   is a huge indicator for figuring out the valuation

00:20:24   because if it's going up,

00:20:26   then both you and the acquirer can make

00:20:30   really optimistic guesses and projections

00:20:32   about its future potential.

00:20:33   This is why you want those graphs to be going up

00:20:34   because you might be able to say,

00:20:35   well, look, it's going up clearly

00:20:38   and so you can pay me five or 10 times the annual revenue

00:20:41   and you'll make it up in like three years or less.

00:20:44   So you might be able to get a higher multiple there

00:20:46   on your price.

00:20:47   If it's going down over time,

00:20:50   then it's probably worth very little,

00:20:53   probably a lot less than you expect.

00:20:54   If your revenue's going down over time,

00:20:57   you'd be lucky to get like one or two times

00:21:01   its annual revenue in a sale price

00:21:04   because if it's going down over time,

00:21:06   if you think about it from the acquirer's point of view,

00:21:08   they are not only more likely to need to invest

00:21:11   significant resources into turning it around,

00:21:14   but also the investment is clearly more risky

00:21:17   'cause this is a product that's already in decline.

00:21:19   So from an acquirer's point of view,

00:21:21   that is more likely that their investment

00:21:23   ends up being worth zero or close enough to zero

00:21:26   than if it's going up.

00:21:27   If it's going up, they just kind of hop on the train

00:21:29   and just keep it going and hope for the best.

00:21:31   If it's going down, they gotta turn it around.

00:21:34   And from an acquirer's point of view,

00:21:36   something that's going down,

00:21:38   no matter how much time you spent building it,

00:21:41   if they want to be in that business,

00:21:43   they could just build one themselves in a lot of cases,

00:21:46   and just from scratch and not buy yours,

00:21:49   and that actually might be easier and cheaper

00:21:51   than buying yours and trying to turn yours around.

00:21:54   Beyond that, once you actually get to the payment

00:21:58   negotiation of like how do you get paid this money,

00:22:02   first of all, quick aside on taxes.

00:22:05   Please ask an accountant, consult an accountant.

00:22:07   This is very important.

00:22:09   The way that your income is taxed could be different

00:22:11   depending on the structure of the deal.

00:22:13   Be prepared in your head, like when estimating things,

00:22:16   be prepared for it to be taxed as regular income,

00:22:19   which is a high tax rate, but oh well.

00:22:21   Be prepared for that because in many cases,

00:22:24   it will be, depending on how it's structured,

00:22:25   but please consult an accountant.

00:22:28   You may also not realize that in a lot of these deals,

00:22:32   and this is how mine have all been as well,

00:22:34   you may not get much or any cash up front.

00:22:38   I've never gotten cash up front for selling an iOS app.

00:22:42   Most acquirers of small apps like the kind that we make

00:22:46   don't have a massive pile of cash just sitting around.

00:22:49   Like cash is hard to come by.

00:22:51   It's more about cash flow usually,

00:22:53   especially because a lot of times an acquirer

00:22:56   is another indie developer or another small company.

00:23:00   So usually these deals are structured

00:23:02   with some kind of payment over time.

00:23:04   This could be like a fixed payment plan.

00:23:06   If you say like, okay, I'll sell you this app

00:23:08   for $500 a month for the next five years or whatever.

00:23:11   It could be fixed like that.

00:23:13   Or more commonly, I think it's a revenue share deal.

00:23:16   So it could be, you could say like, all right,

00:23:17   well you give me 25% of the revenue

00:23:20   over the next three years or whatever it is.

00:23:23   If you do the latter, if you do percentage of your revenue,

00:23:26   I highly suggest that you negotiate for an annual minimum.

00:23:30   This ensures that if they shut down the app

00:23:33   or if it fails or if they make it free,

00:23:36   if they eliminate the revenue stream basically,

00:23:38   that you still get something for it over those years.

00:23:42   And it also just kind of encourages

00:23:44   healthy business practices I think on the other side.

00:23:48   The only downside to this though,

00:23:52   to doing payments over time like this,

00:23:54   is that they're also not guaranteed to actually happen.

00:23:57   (laughs)

00:23:58   This is an eventuality that a lot of people

00:24:01   don't like to think about or don't consider

00:24:02   when they're looking at their contract

00:24:03   or they think the contract will protect them.

00:24:05   But in fact, the acquirer,

00:24:09   let's say you're gonna get paid over the next five years.

00:24:11   If the acquirer goes out of business in two years,

00:24:14   you don't really get anything.

00:24:15   You're kind of just screwed.

00:24:17   You might be able to try to extract something

00:24:19   out of the way they crashed,

00:24:20   but you're probably not going to succeed

00:24:23   or you're not gonna get enough to matter.

00:24:25   A contract is really not worth much

00:24:28   unless you are prepared and equipped to sue over it.

00:24:32   And most people aren't.

00:24:34   It's usually not worth it.

00:24:35   So any kind of future payment,

00:24:38   be prepared for the possibility that the company

00:24:40   either might go out of business

00:24:41   or they might do some kind of financial

00:24:44   or legal entity trickery,

00:24:46   like transferring assets between different subsidiaries

00:24:48   or things like that to get out of paying you.

00:24:51   So you really have to be careful who you sell to.

00:24:54   And anybody can be super friendly

00:24:57   during the deal-making phase,

00:24:58   but you have to kind of look at

00:25:00   how do these companies or people

00:25:01   actually do business over time?

00:25:03   If there's anything you can look at in the past

00:25:04   of what they've bought or sold over in the past,

00:25:07   how they've treated people in the past,

00:25:08   that will all help.

00:25:10   But ultimately, any kind of payment in the future

00:25:13   is merely a suggestion, not a guarantee.

00:25:16   And if I can summarize, I guess,

00:25:19   my feeling on selling apps now that I've done it

00:25:20   a few times is that in my experience,

00:25:23   the way I sell apps is not a great way to make money.

00:25:27   It's a great way to make a little bit of money,

00:25:30   but I've made more running my apps

00:25:33   than I've made selling them.

00:25:34   Selling for me is a way to make space in my schedule.

00:25:40   It's a way to get rid of an app

00:25:41   that I no longer want to work on

00:25:43   or I'm no longer able to work on

00:25:46   and then to free up that time

00:25:47   that that app was taking in my schedule

00:25:49   and then hopefully in the process of selling it,

00:25:52   give its users some kind of nice exit

00:25:55   so that I don't have to worry about

00:25:57   abandoning all these users

00:25:58   and maybe give me a little bit of cash

00:26:00   to help fund the development

00:26:02   of the next thing I want to work on.

00:26:05   - Yeah, and one other interesting thing, I think, too,

00:26:07   with selling an app, so I would prefer to say

00:26:10   I've never sold an app.

00:26:11   I've gone very far down the process

00:26:14   of selling an app, but we didn't end up closing the deal.

00:26:19   Part of what I would also sort of,

00:26:25   I don't know, warn people about is,

00:26:28   especially as an independent developer,

00:26:29   selling an app can be a very emotional thing,

00:26:32   which makes it very complicated

00:26:36   because the person who is acquiring the app,

00:26:39   like you're saying, is typically more interested in it

00:26:43   just as a business, like it's just an asset

00:26:48   that generates money over time

00:26:50   and they can run some financial equations on it

00:26:52   and kind of get a sense of what it's worth

00:26:54   and their goal is to profit from it

00:26:57   beyond what they're giving you money for,

00:26:59   either now or over time.

00:27:01   But you may have very different feelings about it

00:27:05   that are much more intertwined.

00:27:08   Like this may be, this thing that you've been toiling over

00:27:11   for years and years and put hours into work,

00:27:13   or it's the thing that allowed you to go out independent

00:27:17   if that's always been your goal

00:27:18   and you have this kind of emotional tie to it.

00:27:21   And those kinds of things are going to make this process

00:27:24   very complicated for you.

00:27:26   And in many ways, ultimately,

00:27:29   like the deal that I kind of walked down

00:27:32   but then didn't end up doing,

00:27:34   I mean, it broke down for a variety of reasons,

00:27:35   but one of them was this type of awkward,

00:27:38   this awkward tension in my own mind of,

00:27:42   it's like separating myself from this thing

00:27:44   that I care for a lot is hard.

00:27:48   Like the acquiring company doesn't care about that.

00:27:51   Like that's not valuable to them.

00:27:52   They're not gonna pay a premium because you love your app.

00:27:55   - Right, it's not their baby.

00:27:57   - Yeah, like they don't care.

00:27:58   And that's entirely reasonable and appropriate.

00:28:00   And if they did care, like that would be kind of weird,

00:28:03   but it's something to keep in mind

00:28:05   that it's easy to kind of think about it in the rosy terms

00:28:08   in theory and just focus on that.

00:28:11   But when it actually comes down to it,

00:28:13   when it actually comes down to like,

00:28:14   is this something that you wanna part with for money?

00:28:19   Like that is often going to be a somewhat emotional thing.

00:28:22   And maybe it's a good emotion.

00:28:23   Maybe you're fed up with the app

00:28:24   and you're just happy to be done with it.

00:28:26   But like, it's something that I just want

00:28:28   as a cautionary tale for my own experience

00:28:30   that it can become surprisingly emotional even for,

00:28:34   I wouldn't characterize myself as a particularly

00:28:36   emotional person, but I got fairly emotional

00:28:38   about the thoughts of selling off some of these apps

00:28:42   that I've been working on for years

00:28:44   and had been such an important part of my life.

00:28:48   It was not just a financial calculation.

00:28:51   And because of that, it made me realize

00:28:53   that I'm probably not a good candidate

00:28:55   for selling apps in general.

00:28:57   Like maybe that day will come,

00:28:59   but it's something that I would go into with very much

00:29:02   sort of my eyes open to this is a potential pitfall.

00:29:07   - I love that we've come around at the end of this episode

00:29:09   about selling apps to me saying

00:29:11   it's not really worth the money

00:29:12   and you saying it's not really worth the emotion.

00:29:15   - And that's, I think, speaks to who we are

00:29:18   and where we're coming from.

00:29:19   And that's probably okay.

00:29:21   If you're listening to this show,

00:29:22   selling apps for money and profit

00:29:25   is unlikely to be the approach you take.

00:29:27   And so, like maybe that's where we end up.

00:29:29   It's something you wanna think about.

00:29:30   It's something you wanna be conscious of.

00:29:32   But ultimately, maybe that's not for us.

00:29:35   - Thanks for listening, everybody.

00:29:36   I'm gonna talk to you next week.

00:29:38   - Bye.

00:29:39   [BLANK_AUDIO]