Metrics That Sell a Digital Tech Company

By Ryan Kuhn. Since Ryan founded M&A advisor Kuhn Capital, the firm’s principals have initiated over 80 tech-industry M&A transactions together totaling more than $3 billion.

Introduction

The metrics used to value technology companies differ significantly from those used for traditional manufacturers, distributors, or trade services firms. Tech buyers care about a target’s unique software, data, revenue reliability, and margins under growth as much as they do about its historical income statements.

In fact, tech buyers are more focused on predicting a target’s future performance than on valuing it based on past performance. That’s because tech companies without growth and scaling potential don’t interest them much, whereas many buyers of traditional companies are fine with steady, albeit relatively flat, cash flow. (For what scaling means and how to achieve it, see our How to Scale.)

As a result, tech sellers must deliver tech industry metrics or risk leaving buyers to create them (or not bother). Further, some such metrics vary by tech industry segment, and even when used across segments, they may have different effects on value calculations.

Another advantage of knowing which metrics buyers will want to see is that sellers can embed them in their KPI dashboards well before going to market. That gives them time to build reliable track records for their metrics.

What’s a “Digital Technology Company” Anyway?

We define digital tech companies as mid‑market businesses (those with sales between $10 million and $100 million) whose products and delivery are built on software and the internet. We divide them into five segments with their associated metrics:

SaaS Software-as-a-Service) Platforms

Ex: Salesforce, Zoho. They deliver software functionality and associated data over the internet for a subscription fee that grants access to the platform. Because the SaaS model applies horizontally across multiple vertical sectors, many of its metrics do as well. Common ones are —

• Annual Recurring Revenue (ARR): trailing twelve months’ subscription revenue. Also expressed as a percentage of total revenue during the same period.
• Customer Churn: the percentage of customers who don’t renew their annual subscription, also expressed as a percentage of revenue.
• Net Revenue Retention (NRR): the percentage of sales growth for a category of customers over the last twelve months.
• Customer Lifetime Value (CLV or LTV): the profit derived from customers throughout their lifetime of platform use, obviously difficult to calculate for a young company.
• Customer Acquisition Cost (CAC): how much money the company spends to attract, recruit and retain a customer.

Ad/Media Supported Platforms

Ex: Facebook, Medium, Substack. They provide media and social interaction funded by advertising or platform access fees. They’re judged mostly by text and video quality, audience quality (potential to purchase advertisers’ products), and depth of engagement/loyalty. Key metrics include —

• MAU/DAU, the number of unique monthly and daily platform users.
• Session Length, or how long customers interact with the platform per visit. It’s one way to measure attention. Users of this metric often track length by content type or creator.
• Return Frequency: how often they revisit in a given period, another attention metric.
  ARPU: average revenue per user.

Digital Marketplaces

Examples: Amazon, Airbnb, eBay, Etsy. They charge buyers and sellers a transaction fee, or “take rate,” as a percentage of the gross merchandise value (GMV) of the transaction. Their investors look at —

• Liquidity (how frequently a buyer searching for a product buys one, and conversely, how frequently a seller seeking to sell its products does so). More such activity means more liquidity.
• Concentration risk: the percentage of revenue derived from a certain buyer, product or seller group.
• Network effects are captured through metrics that track whether and how margins increase with scale.
• Transaction volume stability as measured by variance from the mean.

Data and Analytics Vendors

Examples: Bloomberg, Cognism, S&P. They sell data sets, APIs, analytics platforms, and insights derived from their data. Analysts use some of the metrics listed above to assess the uniqueness and usefulness of the data, how customers are billed, and how deeply embedded the data is in the customer’s workflow.

Tech‑enabled Services

Examples: Uber, Bitfarm, a cryptocurrency mining platform. They develop and deliver to clients outsourced operating efficiencies through automation. Investors consider customer utilization, gross margin, process repeatability, client loyalty and networking effects.

For some of the metrics above, see this Forbes piece.

Lest Auld Acquaintance Be Forgot

M&A advisors who understand these distinctions in tech buyers’ interests are better positioned to identify which ones to approach and how to create marketing materials (teasers and confidential information memoranda) that attract their interest.

Meanwhile, when considering the terms above, no seller can afford to ignore the continued importance of traditional financial metrics such as historical revenue growth, current ratio, debt-to-equity ratio, and working capital. They remain relevant for assessing value across all industries. See this brief Harvard Business School list describing the top 13 such metrics.

To Review

Tech buyers don’t primarily value digital technology companies on past performance, as buyers of traditional companies do. Rather, they invest in a digital tech company’s future cash flows by seeking answers to three basic questions:

• How durable is its revenue?
• How do its customers behave over time?
• What happens to margins as the business scales?

The commonly used metrics to answer these questions by the tech segment are:

• For SaaS platforms: ARR, NRR, LTV and CAC.
• For ad-supported/media platforms: MAU/DAU and ARPU.
• For marketplaces: GMV and trading liquidity.
• For data vendors: Decision value of data set, ARR, integration into client’s operations.
• For tech-enabled services: Utilization, gross margin, and project automation (e.g., AI)

Connect metrics used to value technology companies with simple, memorable stories about growth, margin upside, and downside risk management. When buyers see that a large share of revenue is recurring, customers stay and expand use, and growth strengthens rather than erodes margins, they pay higher multiples and are more likely to make negotiation concessions.

Why Early Preparation Matters More in Tech

Because most of the above metrics predict future performance, the most profitable sellers start using them well before going to market. They:

• Clean up data so core industry metrics (ARR, churn, NRR, LTV/CAC) are calculated consistently and trends are visible over a meaningful period.
• Address retention issues that would concern buyers if discovered during diligence.
• Clarify contracts, IP ownership, and third‑party dependencies.
• Establish a simple, repeatable reporting cadence that they can hand to buyers with minimal explanation. That would be a KPI platform that tracks, in real time, the relevant metrics for the seller’s tech sector.
• (For other profitable preparations in any industry, see our Quick Ways to Increase Value Before Sale and Bigger Projects to Increase Value More.)

Last, Lead with Clarity

For tech company owners, the key is to avoid vague labels like “we’re an internet business.” Instead, say, for example:

• “We’re a digital tech company, specifically a B2B SaaS platform with strong net revenue retention and a clear, profitable path to further expansion.”
• Or “We’re a digital tech marketplace that connects two specific sides of a vertical, with growing liquidity and a defensible position.”

(For other suggestions on how to write compelling sell-side marketing material, see our The Perfect Confidential Information Memorandum.)

High levels of clarity not only help buyers quickly evaluate the opportunity but also help them understand its value. Use an M&A advisor who brings the right metrics and narrative to the most relevant buyers, setting up competition that maximizes value.

Got questions or suggestions about tech company M&A? Email us.
Revised 2/3/26 © 2026 Kuhn Capital, Inc. All Rights Reserved