Is This Educational Kids App Worth Buying?

In this series, CapForge’s owner and founder gives us a little behind-the-scenes on what a good or bad business would be. CapForge helps tons of clients either buy or sell business and Matt was a business broker before starting CapForge. Let’s look at some of these businesses up for sale and see if Matt would be interested in buying them.

Video Transcript: 

Alright next up in our series of businesses for sale that I take a look at and figure out whether or not I’d be interested in buying it or not. We have an established kid’s educational mobile app. It says profitable and remote based out of San Francisco California. So what’s interesting here is the asking price is $18 million, the gross revenue is 3.1, and the EBITDA it which is earnings before Interest in taxes and depreciation and so on is 2.8 million. So essentially it’s a business that does a little over $3 million and has less than 10% cost involved in actually operating the business. So that is a great profit margin which I guess justifies the 18 million dollar asking price and it does say sale pending so they must have somebody interested. That doesn’t mean that they’re paying 18 million but with profit margins like that, that’s not a crazy price. Now the question is how many users does it have, how does it monetize itself, and how does it hold up against competition. It says it’s been around or established in 2010. Let’s see if there’s any more details in there. 50 million downloads for kids between three and thirteen. Over 250,000 five-star reviews. It says the key strength of this business is recurring revenue boast the staggering 95% of total revenue. Let’s see, 85,000 active subscribers, so I’m sure like typical app it has a free version and then you pay to get more out of it and apparently 85,000 people have done so. So cool I mean without more information and looking into it and understanding what the opportunity to convert more of those users into paying users is and what the competition looks like and whether they’ve been growing or flat or declining it’s hard to say specifically. But there’s a lot to like about a 90% profit margin. That gives you a lot of room to try new things, expand, acquire other apps, advertising various channels to grab more users, and experiment with continuously updating the program to keep more and more people engaged. So on the face of it with no more information that what’s in this listing I think the business is pretty interesting. It would certainly have to have a lot of positives to justify an 18 million dollar price but I wouldn’t say no to it. Based on what I’ve seen so far I would certainly say I would be interested in seeing more information. So interesting business for sale.