A health and fitness app · B2C · host's newly bought app
Buy an app at about 3x yearly earnings with a loan its income covers
Just closed: ~$350K, ~$5K/month payments vs ~$10K/month earnings
Unknownfinancingexit-ma
What they did
Bought an app earning about $10K/month (closer to profit than revenue) for roughly 3x annual earnings (~$350K). Financed with a 10-year loan at about $5K/month, so the app's current income covers payments. Structure: some cash, an earnout on revenue (not profit) milestones, and a deferred payment / seller's note. Risks found in diligence were used to negotiate the multiple. Josh's caveats: 10-year app life is optimistic; rule of thumb is that current revenue must cover loan payments; any growth pays the loan faster.
What happened
Deal closed the week of recording; results not yet known.
- Stage
- Exit (just acquired)
“So, literally, I just took I got a loan right now and, you know, we made a pretty decent purchase, and we got it for 350.”
“The app is making $10,000, my loan is only $5,000, why wouldn't I do this all the freaking time”
“the way we did our deal was cash, bit of cash, and then we did an earnout based off of like different milestones, revenue milestones, not profit, and then the deferred payment or a seller's note”
Related topics
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More from this episode
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- BlueThrone: Pay half at closing and guarantee the other half 12 months laterLets them offer a higher price because their risk is lower; no numbers
- Redesign the subscription offer and A/B test it hard after buying an appFree-to-paid conversion rose 'massively'; no exact figures
- Redo the store listing and launch in new countries after buying an appMonthly users grew from 200K to 5M, alongside other changes
- Add streaks, daily login rewards and game elements to the core appDay-7 retention rose from 18% to 34%, and is higher today
- Buy your first app through a broker instead of cold-emailing developersDirect outreach got no replies; the broker deal closed with a motivated seller
- Grow on App Store search and Apple Ads alone, one main keyword plus long-tailBuilt an app that sold for about $350K without paid social
- Show the paywall before asking people to sign upSales up 52%; swapping the order was the only change
- Make separate Google Play listings, each aimed at one keywordReached about $6-7K MRR on Android alone
- Buy the company that owns the app, not just the app, to keep rankingsAvoids app transfers that can hurt keyword rankings; seller pays less tax