Author Topic: Apps Business + Net Worth Calculation  (Read 127 times)

tedbendixson

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Apps Business + Net Worth Calculation
« on: August 10, 2018, 03:28:09 PM »
Hey fellow mustachians! I'm in a somewhat weird position given that I currently own an iOS apps business that generates an average of $133 per month. I also own some stocks.

I want to calculate my net worth, but I don't know how to value my iOS app business. I started it in 2011 and have consistently managed to keep sales churning along. Technically, revenue is up but I'm just being really conservative with my numbers. Things change and it would be kinda silly to assume they'll just keep cranking out cash until I'm dead.

Obviously this is getting into fairly subjective territory since we're talking the basic principles of free market capitalism and the notion that anything is worth what its purchaser is willing to pay for it. I currently don't have anyone who wants to buy my business, and I am not looking to sell it either.

Having said that, the revenue the apps generate would be roughly equivalent to having $22,663 in the stock market invested in something like VTI at a historical average of a 7% return. But I might value them a little higher than that since they're less susceptible to market volatility and pay me in the form of a pure dividend.

Any fellow entrepreneurs out there facing a similar valuation conundrum? What does your accountant tell you?

Missy B

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Re: Apps Business + Net Worth Calculation
« Reply #1 on: August 10, 2018, 04:23:43 PM »
I would include this in my cash flow, but not my net worth. (Not sure what you need your net worth for... something serious like a loan guarantee, or just bragging rights?)
IP is hellish to value at the best of times, and Apps can be put out of date or lose their cash flow overnight.  If you must value this,  the selling price of it would be the fairest comparison. No matter what people claim their net worth is, it's meaningless if they can't get that worth on the open market.

tedbendixson

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Re: Apps Business + Net Worth Calculation
« Reply #2 on: August 10, 2018, 05:30:19 PM »
That is fair to say. I suppose I'll enjoy the cash flow while I've got it and not make any other assumptions

Michael in ABQ

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Re: Apps Business + Net Worth Calculation
« Reply #3 on: August 10, 2018, 05:56:39 PM »
Most businesses sell on a multiplier of the net income. So at $1,600 a year you might only be looking at a 2-3x multiplier. Internet businesses are relatively risky and an investor would probably not be willing to pay much more than that as the income could drop to zero next month or in a few years.