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View Full Version : Evaluating how much your App source is worth?




jsnuff1
Oct 31, 2008, 04:12 PM
I have been approached by a company interested in licensing one of my Apps so they can created their own branded version of it. They have asked me to make them an offer, but have no idea where to start in coming up with a number.

I obviously cant give them some nice number I came up with the top of my head, so how do software companies go about putting a price on their source code of a certain application?

Thanks!



liptonlover
Oct 31, 2008, 04:31 PM
I suppose it would depend on how much work you put into the app, and how much you think you'd get if you just sold it yourself. Then up that number a bit and see what happens. Depending on the app and the company, you could potentially get tons out of this.

firewood
Oct 31, 2008, 04:33 PM
For a non-exclusive license, there's one easier number, and another one that's harder.

First the easy one: How many days/hours/months would it require a good programming team to rewrite the equivalent of your app? That number times a tempting hourly rate, times a development risk factor, would be their up front development cost without you. A lot of small companies without patents found out that their acquisition deal fell through when their stated cost of purchase was larger the the cost of big-corp ripping off the idea and doing it themselves.

Next: How much is value of time-to-market that they would lose by taking the extra time to develop what you already have available? I some markets, being first is worth 10X, 100X more than being late. Will a competitor beat them to market if they don't buy your code? You might be able to negotiate a really high price in that situation. If they would lose 3 months sales by not going with your technology, you could at least charge them a good fraction of those sales.

If you think there's a really strong upside to their branding, you may want to try and negotiate a percentage deal (with a nice advance royalty up front, of course).

Yet another number to consider is whether their branded version will eat into the market for your version. You've got to add a good estimate of that to your price just to try and break even. If you don't want/need the money, you could offer it at just that price, and end up with some extra resume fodder.


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