Should You Sell Your Software Company and How Much?

If your passion for the software company has waned, it's essential to explore options and identify the best course of action. In this article, we delve into strategic advice on whether to sell your software company and, if so, at what price. We will also provide guidance on how to evaluate and price your software company accurately.

Transferring the Role

If you're considering stepping away from your role, hiring a project manager to take over can be a viable solution. This approach allows you to maintain your business ventures while still managing the day-to-day operations of your software company. With the right training, a new project manager can manage approximately 90% of the tasks automatically, freeing up your time for other projects.

Valuation and Pricing

While your software company appears to be thriving, it's crucial to have a precise valuation. Whether you're planning to sell or need accurate valuation for other business purposes, we can help you gain a more accurate understanding of your company's worth. Simply fill out our free valuation form, and a member of our team will get in touch to provide you with a personalized assessment.

Setting the Price

When setting the price for your software company, it's important to consider the market value and the industry standards. Initially, you may want to set the price considerably higher than what you believe to be fair, for instance, doubling or tripling it. This approach can help identify your company's true market value and puts you in a better position to negotiate.

Often, your initial valuation proves to be less than what you can actually sell for, as the need for your software can drive demand at a higher price point. However, always consider why the price might be questioned and address any concerns before finalizing the sale.

To ensure continued growth and success, you might want to employ strategic pricing methods. For instance, selling your software at a price that is a portion of its future net profit, while providing training and consulting, is a valuable approach. This method aligns the buyer's success with your company's success, creating a mutual benefit.

For consumer software products, consider using the freemium model, where users can access a "lite" version for free, with premium features available for subscription. This model can be highly effective in driving revenue and user satisfaction.

For developers, calculating the exact price can be challenging, but essential for managers and bookkeepers. First, determine the costs incurred in creating the software, such as man-hours multiplied by the hourly rate. Then, consider the number of expected users and set the price accordingly. For instance, if it took 100 hours to develop at a rate of $25 per hour, the cost would be $2,500. If you expect 50 customers, each should pay $50 to break even; however, if you have 5,000 customers, each user would only need to pay $0.50 for you to break even.

Conclusion

Deciding to sell your software company and determining the right price involves careful consideration and strategic planning. Utilize the advice provided here, along with professional valuation tools, to make an informed decision that maximizes the value of your software company.

For those seeking further assistance, feel free to reach out. We are here to help you navigate the complexities of selling and pricing your software company effectively.