I was asked to sell the source code (along with existing users) of small utility app I created years ago. I've investigated how to put a price on the source code but so far haven't come up with a good solution. I've searched the net, but haven't found anything useful. Then I came across a few others who also sold their source code with users, but their prices seem unrealistically high. For example, one person calculated price per user at about $200. He had 80 users and ended up selling the source with users for $30k. How did he come up with this price?Can I find a good price with this formula: (number of users x app price) + (app price x num of new users in one year)?If this is a good formula, how do you price source that doesn't yet have users?
How do you put a price on your source code?
source code
Selling the source code for an app is very much like selling a business.The standard formula is price = revenue * 3 + assets.The multiplication of 3 is a factor of supply and demand. The more buyers a business has the higher the multiplier. When we hear about a business being purchased by ABC Corp in the news, it's often for a large figure. Those businesses can have a multiplier of 5 or higher.For businesses that don't have a revenue history, then they depend upon an evaluation. The evaluation is an estimate of projected revenue and the multiplier is applied to that.So we can calculate the multiplier for your example;1.875 = 30000 / 16000 = 30000 / (200 * 80)Assuming he sold all his licenses in 1 year, he (your example) would have a multiplier of 1.875 with no additional assets. That's not a very good deal for the programmer. Especially when you factor in future upgrades from those users adding to revenue.Why is it not a good deal?The buyer can recover his costs in less than 2 years. Most people take longer to pay off a car loan.When we speak to the buyer in terms of setting a price, we discuss how long the buyer would like to recover his investment and start profiting from his purchase.You are saying I'm giving up this source code, and its future revenue to you. The price is set based upon an estimate of what the future would be.If you have not received any revenue from your source code, then you will have to argue with the buyer what the evaluation of its future revenue will be.