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4 KPIs for Tech Businesses to Monitor
Posted on 8th May 2017 in KPIs
Written by Freya Hughes
Since the early 1990s, the technology industry has become completely unrecognisable. With developers leading the way to innovation, thousands of businesses have opened their doors since. In this decade alone we’ve witnessed some unbelievable advancements, from AR to self-driving cars, forecasting apps to internet-connected fridges. But before you release the next drone that can pick up your shopping (or something equally useful), have a look at our core KPIs for running your tech company so you can rest assured your business is on the right path.
We can’t stress how important measuring metrics is. They’ll guide you through your day-to-day and give you a great idea of which areas in your business are doing well, and those areas that need a bit more care. From start-ups to industry leaders, we all need to be keeping a close eye on what’s occurring in our businesses. If you’re unsure, read on and have a look through our KPI Library for more metrics and how to calculate them.
1. Customer Acquisition Cost (CAC)
This metric measures how much money your business needs to spend on your outgoings. This includes sales, expenses, and marketing. If most of your incoming finances are making their way into your account and turning straight back around again, there’s something amiss. Your cash going out needs to be lower than your cash coming in – otherwise, you won’t be seeing profit anytime soon. This metric links really well with Lifetime Value below as you can really get into the value of your clients and cashflow. By measuring the average cost to acquire new customers or clients, you can see the overall efficiency of your sales and/or marketing processes. You can then use this information to make actionable decisions to optimise this figure further. Find out more about CAC here.
2. Lifetime Value (LTV)
This measures the value of each customer to your business over a given time period. If you can implement this KPI alongside CAC above, you’ll be confident as to how you should be dealing with your customers. If you’re experiencing small values, think about how you could bulk up your services or products by upselling and cross-selling. Of course having plenty of customers knocking on your door every day is great, but if each customer is taking up a lot of your time and not bringing in much cash to your business then you need to work out why. Balance is key for this metric. Find out more here.
3. Burn Rate
This is the negative cashflow of your business. Most applicable for start-ups, this KPI will indicate how quickly you’re burning through your cash. Once you know this, you’ll be able to calculate how much cash your business needs to keep going and to grow. If you have investors, it’ll allow them to see how quickly fundraising needs to happen and if they want to inject more cash into your operation, how much you’d need.
Needless to say, there’s so much emphasis on forecasting here. If you have a strong idea of where your cash is going and how to minimise its impact. Join the forecasting revolution.
4. Data Gravity
This KPI is a relatively new one. As you’re on the cutting edge of new technology, I’m sure you’ve come across it before. The term ‘data gravity’ was coined by Dave McCrory. It’s basically the idea that as businesses migrate to the cloud, data that remains outside of the cloud starts to gravitate to applications running in the cloud. It’s described as such:
“Having all the data in one place would mean the least amount of moving it around, and as a result, the least cost. This is the fundamental principle of data gravity. Just as two planets might compete, gravitationally, for a third planet between them, so two data centres or cloud providers ‘compete’ to pull data towards themselves. If all else were equal, we’d wind up with one big data centre.”
So essentially, if you have all of your data in one place, you’ll save on time and cash.