Key metrics every tech business should track

In the tech industry, where everything moves at lighting speed, relying on intuition isn’t enough. Every business owner must be well-versed in tracking the right KPIs (Key Performance Indicators) for their organisation. However, the metrics of traditional business models, such as retail, do not quite cut it for companies that focus on software or application development. So, here are some other useful metrics:

Customer acquisition cost

Customer acquisition cost, commonly referred to as CAC, measures how much it truly costs to gain one new paying customer. This is something that usually the sales or marketing teams will be looking at, accounting for various different expenses, like salaries, ads, tools, etc. used to get new users on board. For instance, you may be running Google Ads as a way to get brand awareness for your new app or, perhaps, doing an influencer campaign to promote it. But, even if the users come through organic social media activity, your marketing team is still costing in wages. If you find out how much you spend a month against the number of new users gained in that months, that is your customer acquisition cost.

Customer retention rate

Now, acquiring new customers is no good if they don’t stick with your product. The customer retention rate, or CRR, helps you to measure how loyal your users are (the percentage of which customers remain with you over a specific period). If you have 100 ongoing users and your CRR is 97%, this means only 3 users have cancelled their subscriptions over the period of time. The higher the CRR, of course, the better for your business, as it shows high customer satisfaction. It also means that your investment on customer acquisition has been long returned, and now you’re gaining good profit.

User engagement

If your customer retention rates are low, user engagement is a good metric to look at. It’s all about understanding how involved users are with your software or app. For example, MAU (Monthly Active Users), DAU (Daily Active Users) or customer stickiness rate (how often they return to your services) provide this data, counting interactions within those periods. Don’t forget to follow relevant data protection regulations when collecting this data, as users must consent to it. Generally, high engagement indicates product value and relevance, while low numbers signal problems. So, if your user engagement is high, but you are still losing customers, the problem might be in the pricing or in customer support.

Monthly recurring revenue

For subscription-based tech businesses, monthly recurring revenue (MRR) is a paramount metric. It’s essentially the predictable revenue that is generated every single month from active subscriptions. This will also include new sign-ups and subscription upgrades, minus revenue lost from cancellations. MRR is a core indicator of your company’s financial health and stability, allowing you to forecast your earnings more accurately. It can also show growth, if your MRR is increasing every month.

Customer lifetime value

How much net profit can you expect from the average customer over their entire relationship with your business / product? This is what customer lifetime value (CLV) calculation is about. It involved the average revenue per user, purchase frequency, and customer lifespan (influenced heavily by the previously discussed retention). CLV is important because it determines how much you can sustainably spend on acquisition (CAC). It also helps inform effective retention strategies and showcases the most valuable segments in your business, allowing you to maximise your long-term profit.

Measuring for your success

These metrics aren’t just numbers – they are indispensable insights into your business performance and financial health. With consistent monitoring and analysing, you can act upon these insights to make informed and data-driven decisions towards success.