BSSA #70 - Insights about selling your app 🚀

Hey!

The Wide Event is in 4 days. This is the last email before the event so make sure you have your tickets already! Click here to get tickets

This event is taking a lot of work and energy. I love doing it, but I have to say this is exhausting 🥵

Do you want to sell your Shopify App?

I’ve been talking to many Shopify App buyers recently. And I have a lot of insights I want to share with you.

And I thought this email would be dedicated to selling your Shopify App.

So here we go 👇

a) The buyers

I noticed different types of buyers:

• Roll-ups. They buy multiple Shopify Apps and become experts in that field

• Solo-founders. They usually built a successful company and want to start something new. They don’t have a lot of knowledge in this field.

• Companies who want to diversify. They usually build multiple different businesses and want to acquire Shopify Apps

But there is one thing in common they’re looking for: Cashflow.

For them, Shopify Apps aren’t supposed to grow forever. They prefer an app with a lot of profits and not a huge growth rate, rather than an app growing like crazy with a small profit.

This is because they see Shopify Apps as a security. Keep that in mind if you want to sell.

Profits > Growth

It means that if you’re willing to sell soon, you rather structure your company to run daily operational tasks rather than hiring more people or investing in your growth.

Roll-ups know what they do. They’re looking for something very specific and their process is structured. You send some data, they analyze and they tell you how much they can give you.

You’ll usually get the best deals there.

Solo-founders will try to spend as little as possible. They’ll use banks, loans, and equity and create deals over a long period of time. I’m talking about bigger deals there.

If you have a small Shopify App, they won’t have any problem paying you the full price.

Companies who want to diversify will either pay you directly for a small app or will try to give you equity in order to reduce what they have to pay upfront.

Anyway, the best deals for you is to get as much money upfront as possible, even if you’re willing to stay 1 or 2 years in the business. This is your security (while the buyers will usually try to spend as little as possible upfront, they’ll even increase the valuation)

b) The dead zone

I’ve seen 2 types of apps selling: small apps and big apps.

if you’re making less than $20K per month, you can find a buyer. You have many options because solo founders will also look into these deals.

And apps over $83K per month will attract bigger buyers. You proved your app was solid by reaching $1M ARR and you can find buyers.

But between $20K and $83K from what I noticed, this is like a dead zone. You have opportunities but you’re in a transition. You’re too big to be considered a small app. And you’re too small to be considered a big app.

So if you want to grow your app past $20K, make sure you’re willing to stay there for the big numbers.

Otherwise, sell and repeat.

Now I’m not saying you can’t sell an app that is in the dead zone, but it will be more complicated. And you probably won’t sell at the valuation you expect.

Also, that transition, between $20K and 83K, is usually when you start hiring, processes become complicated, you need to find your organization and your profits are impacted.

c) The valuation

This is the most exciting part. How much can you expect?

First of all, I’m sorry, but you won’t see the numbers we had post covid.

You could easily see x7 ARR post covid. But since 1-2 years, buyers don’t spend money. So valuation is smaller.

Going after x3-4 ARR seems better. If you can get more, then you should accept it.

But most importantly, they’ll be looking at some important numbers in that order:

1. MRR and Profits (And % profits)

2. Churn

3. Annual Growth Rate

And your valuation will mostly depend on these 3 numbers. The first one is the most important.

If your profits are low but your churn and growth rate are incredible, don’t expect to get a big valuation. Profit is king.

Buyers will even calculate the valuation based on profits and not ARR.

If your goal is to sell at the highest valuation, be crazy with your profits. If you have one number to look at it would be your margins.

d) What do buyers ask for?

If you have an app at the moment you should have these documents:

• P&L for the last 12 months (non-negotiable)

• Metrics month by month (total users, churn users, new paying users, MRR, etc.)

• CIM (With all the details about your business)

This will attract better and more serious buyers. And you’ll also save so much time.

They’ll usually ask you these questions:

• Why do you want to sell?

• What is the roadmap for the next 12 months?

• Do you want to stay in the business?

So prepare your responses.

Don’t forget The Wide Event!

On Saturday 16th of September, we have The Wide Event, it’s a Shopify partners event for both partners and merchants.

And we prepared some great talks for you!

I’ll be there to answer all your questions and share some incredible tips 🔥

It’s also the best way to find new sponsors and network!

(I actually started Shopify Apps in 2017 after meeting my 2 previous co-founders in Paris)

You can get your tickets by clicking on the button below 👇

That’s it for today’s email!

I hope you enjoyed it! Feel free to share my newsletter with someone else: https://news.matdesousa.com/

And let me know what you want me to discuss in the next email!

See you next week,

Mat 😁