Let’s say someone was wanting to sell their software to another company. This software is a low cost, yet popular shareware program that was originally developed in this user’s spare time as a hobby, but it turned into a profitable shareware program that has great potential. If ABC Company wanted to buy this product and turn it into a more commerial product, how would one accurately give a price for it? And let’s also say that ABC Company wanted to take this product and release a similar product for The Dark Side (Windows). What factors would help determine the value of the software?
Thanks!
I personally wouldn’t sell my program, why give up the control unless you really have to?
But let’s say I was really fed up with my program and never wanted to develop it anymore, then I’d base the price either on a decent salary for my development time (i.e. what they’d have to spend to get it developed from scratch) or on what potential value I think my program would have for them.
What’s the program bringing in in a year? How much are you making an hour? Do you want to sell or would you be happy continuing development? Does it matter to you if they port it? Do they have deep pockets or are they a start-up?…
The previous paragraph poses a number of good questions.
You need to consider the worth of the product to you. You also need to be aware of the costs of maintaining your product and user base in the next few years.
You should not consider who you are selling to; the value of your product is not determined by the buyer’s ability to pay. If the product is capable of generating a significant return, a business will find the funds for the initial investment.
The final value is likely to be much higher than you imagine. Could you earn further income by entering into a support role for the product for a year after hand over?
Will you be selling your customer data? What value do you assign to the upgrade fees? What proportion of users pay for upgrades?
Will you have to sell any associated domain names or e-mail accounts to provide seamless support to your users?
Think of selling your software product as effectively selling a business: http://sbinformation.about.com/od/buyingorselling/
– GCM
I’d like to know why the OP is considering to sell his software. Does he not want to develop it further himself? Does he think that selling it will do more for the software than he ever could? And if so, what does he base that assertion on?
Remember, the company would have to make a profit on the software to be interested, so if they can’t make the salary of at least one programmer per month, they’re unlikely to spend one programmers time on development.
Also keep in mind that many companies buy assets (like software) and never do anything about it. Would you be okay with the company having bought your software and then decides to kill the project shortly thereafter? There are countless of such examples, and even many where the original programmer is then not allowed to continue his software himself, because he sold his rights.
So all in all, before considering the price, consider your motivation to sell!
I’m not the original poster, but, um, money?? That’s pretty much the main motivation for selling anything..
It’s easy to come up with situations where selling is mutually beneficial. A single person has limited resources. By selling off good ideas and moving on he can keep moving, and keep making good stuff. You know that “last 20% is 80% of the work” adage? Sometimes that last 20% is fun, and sometimes it isn’t. Can be a good idea to let someone else slog through it.
Furthermore, if the company wants to release a Windows version, and if the OP doesn’t have the skills to do a Windows port, then there’s a mutally beneficial situation right there. There’s a market the OP can’t tap, but by selling it he can indirectly tap it because he can charge the company taking into account that they will have a big new market open to them.
If money is the only reason for selling the software then, 1) be sure you really want to sell it, possibly give up your right to develop it yourself even if the company kills the project (or make a beneficial contract that gives back the right), a company that may think much more rational like, the last 5% polish will not give us 5% more customers, so it’s not worth it etc. and, 2) ask for as many money for it to be really worth it. I’m talking about at least a years pay.
If you did this as a hobby and you’re making money of it now, me bet is that you’re probably not the person who has a hard time finding a job, and mon ey is really a secondary concern. So while a big check might sound attractive, sometimes the better choice is to walk away from it.
But to really give you advice we/I would need much more about you, your software, and the company who wants to buy it.
I’m the OP. Thanks for all the suggestions/comments. The main reason I’m wanting to sell it is because I’m a college student, I don’t want to spend all my college years stressing out about keeping my app up-to-date, fixing bugs, adding features customer’s want, beating the competition (barely exists). If I were not in college, I would definitely find a way to hire someone to help maintain the app and work on a Windows program because that has HUGE potetional and profitability. But I want to learn other languages and stuff, not be centered on Objective-C/Cocoa (which I love). I want to have fun! I’ll be working for the rest of my life, mine as well try to get a nice amount of money from this while I can, let others work on it (at this point if they own it I don’t care if they discontinue it, or do whatever). It’s becoming too stressful and I don’t want to have to make it into a huge deal and hire others into the “company”. I’m the one who loves to learn new languages and concepts (gaming, 3D graphics, etc) but can’t do when I have to spend 40-50 hours a week + school to maintain a program and keep customers happy. I’m 98% sure this company wants to do a Windows version (which I have started) so I think I will try to base the price of the app around what they could be making with a Mac AND Windows version.
Are you going to tell us how it works out? :) I just heard that when a company goes public, it’s generally traded for what is assumed to be the profit over the next ten years. So e.g. if your application makes a profit of $50.000 a year, and the sales + expenses are expected to be stable over the next 10 years (okay, that’s quite hard to say in the IT business) then your company would have a marked value of $500.000.
Though I am really not familiar with these things, this is just what I heard, and in your case the situation is a lot different since a) the key employee that created the product isn’t sold with your company, b) this is a private take-over so it’ll be below the marked-value (where a lot of venture capital and high-risk investors exist), and c) the company that buys your product are unlikely to make an investment with this long a time-frame.
But at least now you have an upper limit of what you should ask for, i.e. 10 times your yearly profit!