How To Calculate Mobile App Valuation
The current digital era is predominantly accessed by mobile app technology, which has brought our world to an axis point, where businesses can offer their services to the customers from any corner of the world, with a click on a mobile phone.
To enhance this mobile-first experience the inclusion of app technology in our life cannot be taken for granted.
The significance of apps cannot be described in few words, as they drive the digitalization ecosystem for businesses across the geographies. Hence, they need to invest heavily in the apps to grow their business out of bounds.
In today’s digital landscape every business is canvased in and around an app function, which functions in a way that businesses are enabled to stay competitive.
But here one should not forget that a simple mobile does not suffice the need and it must be measured with results that offer a substantial return on investment.
To be precise app ROI is easy to be assessed, and enables businesses a clear understanding of how their apps are performing on the success parameter.
Are you puzzled- How to Calculate Mobile App?
Don’t Be!
In this piece we have covered every bit of the information that is required to comprehend the app valuation concept in detail.
To unleash the magic, just scroll ahead and get enticed
App Valuation – What is it?
As the name suggests, the app valuation is all about gaining insights into different app specifics such as- market demands, user engagement to assess the revenue generation.
Utilizing this data, they can improve app functionalities so it does not wear off easily and keep gaining an edge over the existing and potential competition in the longer run.
You should know that this valuation is not limited to quantifying the app’s monetary value; rather it builds an ecosystem for the app owners to sketch down the overall success and effectiveness of the app to grow and reach its targeted audience base.
Now that you have understood the concept behind app valuation, the bigger question comes: what factors should be considered while calculating the app valuation…
How to Calculate the Cost of a Mobile App?
Well, the app valuation process involves various steps, before reaching out to the bottom line. Let’s take a look at some of those factors:
Financial – A MUST
Well, the financial data is where the crux of every business lies.
In a mobile app this specific part has enough information such as historical data including revenue, expenses, profits, and monthly or yearly revenue, are included.
This data allows business owners to know the nitty-gritty in app’s performance meter and add value to exceed revenue goal.
And it does not end here!
This data boosts the ways trends are identified and decisions are made, such structured app monetization models can be placed to redefine app’s performance and engagement rate.
Note- This data is nothing but a goldmine for the businesses which can be a foundation for correct evaluation leading to make smart decisions for future growth of the app from 360 degree angle.
Pay heed to user metrics
Users are the real stakeholder in any business, and it is no exception in a mobile app as well.
The importance of understanding users, and what they prefer or dislike hold high weightage, and this set of information comes packed as user metrics.
These metrics are essential to make informed decisions and fuel growth; hence paying attention to them brings only good.
These reports can include information such as:
- the number of active users
- the rate at which new users are being acquired
- the cost associated with acquiring new users
- Rate of user engagement & user retention
- targeted user base age group
- Demographics & user behavior
- bounce rate
When businesses anlayze these metrics diligently, they can comprehend what and how their users are engaged.
In accordance they can customize their approach towards mobile app development strategies and match a pace with users’ demands.
Listen to your competitors
Do you find it insane???
Honestly speaking, competitors are your best source to understand what is high and what is low in the market.
WHOA!
That’s incredible!
You would be further surprised to know that competitors offer a one-stop shop for you to understand the market and conduct analysis at the same time.
Such assessment of recent transactions and funding rounds of competitors, bring precise data to evaluate their position in the market, this can be compared and evaluated further to remove the noise.
It goes without saying but such an information set is a source of unleashing competitors’ strength and weakness and accordingly identify potential opportunity canvas for app’s sustainable growth.
This data gives a platform to the businesses to set a benchmark for competitors, using the right tools and methodologies.
Assess revenue ecosystem
Not many of us know that revenue streams are highly crucial in the app’s success rate and improves its bottomline for the betterment.
There is not just one but multiple methods to conduct monetization strategy such as freemium, in-app purchase, and subscription.
The freemium model enables app owners to offer basic features to the users at the cost of nothing, but once they are enticed to use the app, then for further features there is a charge for it.
With in-app purchases, app owners let their users purchase features, upgrades, or virtual goods to enhance their user experience to another level.
In this mode, users are encouraged to buy subscriptions with discount or offer to avail premium content or services from the app.
Evaluate patents & trademarks
Apps are available for every possible service around us. However there are few apps which come up with patents or trademarks- and it is an ideal choice to consider such intellectual property rights while calculating the app valuation.
These aspects impact app value to a larger extent as they restrict competitors from copying technology, features, functionality or app ideas.
With these, app owners can protect app’s features or functionalities and even get a trademark for their app’s design, logo, name or brand.
App Maturity Stage
Do you know the maturity stage of the app does affect the valuation?
Every app progresses through the different stages of development, leading to its value getting increased or decreased.
In the early stages, when the app is still in the development phase, its value is obviously lower compared to other stages as the app is yet to prove its worth in the market.
You should not forget that as an app grows with a larger user base, its worth also increases with an impact on app value at large.
traction and acquires a user base, its value can grow significantly.
App valuation methods
To carry out valuation there is not just one but multiple ways. Below we have outlined some of the methods that can solve the mystery of – How to Calculate Mobile App?
Let’s take a look.
Income-Based
Within this method the total revenue generated by the app is taken into consideration. This can be done considering a specific period of time, wherein additional cost incurred or expense is associated with the app.
It estimates the future cash flows and applying a discount rate, enables business owners to determine the present value of the app.
No point for guessing, but the approach is one of the most utilized models by the investors to assess the monetary value and potential of the app, and what more can be done to help the app grow.
Cost-Based
Every app has a big show going on in the background, and this model clearly reflects it.
With this approach, it becomes easy to identify different monetary engagements in the app, that can be from resource, technology to infrastructure, impacting the overall cost bracket of the app.
Worth mentioning here- this model also captures some of the most overlooked factors, such as salaries for the resources involved- technical or non-technical along with the equipment and other infra required.
With this model, it becomes easier to get a comprehensive assessment of app’s value without being baffled about hidden costs triggering app’s cost unexpectedly.
User-Based
What do your users want?
You can’t deny, but this set of information is highly valuable which fuels the success and expansion plan for an app.
It might sound irrelevant to some of you out there, but if derived correctly, this information can be a key driver to grow an app on the ROI chart with a touch of market trends.
Market-Based
Market data and trends give businesses an outlook of current value and how it can be enhanced further with the implementation of right strategies and technical synergies.
For businesses looking forward to growing unconditionally with an app platform, this platform boosts the chances highly.
Simultaneously, market dynamics give business owners right measures to identify opportunity canvas that can be implemented in the app respectively.
The Bottomline
With the increasing reliance on technology in today’s business landscape, having an app tailored to specific needs can bring a competitive edge.
At the same time, with an app, businesses can enhance their offerings and expand their user base while driving impeccable revenue generation systems.
App valuation is an ideal process that works on improving app’s performance while empowering businesses to generate improved ROI with data-driven intelligence.
However, this process becomes more relevant with a leading app development company.
Such companies have years of experience and skills that enable businesses to make informed decisions and improve their ROI that matches with their business objectives.
It is no surprise that apps are an integral part of every business ensuring high value given to users. For an improved value ecosystem, app valuation is a handy process that improves the bottomline and align these values to your business goals.
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