If you’re in the business of software development, it’s important to know which metrics will give you the best insights into the health and growth of your company.
In this article, we’ll go over the five most important metrics for software companies to track. For more in-depth guidance, more resources for software company kpis are available online.
1. Customer Churn Rate
This metric measures the percentage of customers who cancel or stop using your service within a given time period. For software companies, the customer churn rate is especially important because it directly impacts your recurring revenue stream. A low customer churn rate indicates that you’re doing a good job of retaining customers and keeping them happy. Thus, it’s crucial to keep tabs on this metric and strive to continuously keep it lower over time.
2. Net Promoter Score
Your net promoter score (NPS) measures how likely it is that your customers will advocate for your product. It’s calculated by taking the percentage of promoters and subtracting the percentage of detractors. Anything above 0 is considered good; anything above 50 is considered excellent.
3. Customer Lifetime Value
Customer lifetime value (LTV) is the estimated total revenue that a customer will generate for your company during their lifetime. This metric allows you to measure and predict the profitability of acquiring new customers.
4. Average Revenue Per User
The average revenue per user (ARPU) measures how much revenue each paying customer generates for your company on average. This metric allows you to track changes in customer behavior and adjust your pricing accordingly.
5 . Monthly Recurring Revenue
Monthly recurring revenue (MRR) is perhaps the most important metric for software companies. This measures all the recurring revenue you generate in a given month from subscriptions and other recurring sources. MRR is important because it allows you to predict future growth and measure the success of past growth initiatives.
Tracking the right metrics is essential for any software company that is driven toward success. By focusing on metrics such as customer churn rate, net promoter score, customer lifetime value, average revenue per user, and monthly recurring revenue, you can get unparalleled insights into how your business is performing and where you need to make improvements.