on August 19, 2021 (last modified on January 31, 2023) • 13 minute read
When you’re dehydrated, you won’t stop until you find water to quench your thirst. You’ll have that unwavering commitment to finding something to drink, even if you’re in the middle of a dessert.
And when you feel as strongly about a goal or a mission in life, you’ll have the same unshakable belief that you’ll find a way to accomplish it. Some call it your “why”, others say it’s your North Star.
In business, the North Star is usually the ultimate reason why people do what they do. What keeps them motivated even when it’s hard and what provides them with satisfaction when they’re performing well.
When talking about business, people try to express their North Star in metrics so they can measure their progress towards it more easily. That’s why we asked over 20 professionals about their North Star metric: do they have more than one? Which ones do they align their company priorities around?
You’ll find the answers quite inspirational, so let’s dive in.
Simply put, your North Star metric is the one that best reflects the value your customers are able to gain from your product or service. It also reflects your “why”, bringing together the company’s mission, vision, values, and guiding beliefs.
When you identify your North Star metric, you can create a strategy focused on helping it grow – that way, your whole business will grow, too. North Star metrics are typically connected to a company’s long-term goals, and all other goals set by individual teams have to be aligned with it.
One of the best-known North Star metrics is Facebook’s – the number of Daily Active Users. This way, Facebook can monitor how many people are being active on the platform and gain valuable feedback on how they perceive the platform.
However, it’s critical to remember that your North Star metric isn’t the goal itself – it’s a relevant, measurable indicator of your success and growth that helps the whole company align its efforts to achieve one common goal.
Why do companies even focus on identifying their North Star metric?
Here are the main benefits of defining it:
Since the purpose of your North Star metric is to capture the value your product or service provides to your customer, as well as your brand’s mission and core values, it’s important to choose it carefully. Sometimes it may be challenging to identify the right business metrics to track.
A good North Star metric has several aspects to focus on.
First of all, it’s the clear indicator of your growth. It’s not the number of likes on your Instagram page as it doesn’t say anything about how many purchases your followers make and how happy they are with the service. If your North Star metric grows, your business should be growing as well.
A good North Star should be somewhere close to the result you want your customers to experience after using your product or service. For example, the number of registered users on a platform doesn’t really say anything about the value of the platform since it’s only the beginning of the journey. However, the number of active users over a specific time range says much more about how valuable people find this platform.
Your North Star metric should also be based on customer satisfaction. That way, it can really capture the value you’re providing. At the same time, this metric needs to stay measurable and limited by a specific time range – in this way, it’s pretty similar to setting SMART goals. It’s critical to find a balance between these two aspects of your North Star metric.
In the end, as your North Star metric should be a reflection of your efforts and only include your product/service and your customers, make sure it doesn’t depend on external factors, but only on what you do for your users. That means your North Star metric is actionable and allows you to strategize and make adjustments when something’s not going well.
Still not sure what your North Star metric could be?
Although it’s a common case, you don’t need to have only one. There are many companies that successfully juggle several North Star metrics that help them track their growth.
If you’re curious to learn what they are, let’s move on to examples of North Star metrics 20+ experts agreed to share with us. They may inspire you and help you define your own.
If you want to discover how visitors engage with your website, and which content drives the most engagement and conversions, there are several on-page events and metrics you can track from Google Analytics that will get you started:
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Almost half of the participants in our survey (47.6% of them) say that there’s only one North Star metric in their company. All other metrics are aligned with this one and each team works hard to make a contribution to this overall company goal.
And what are some examples of these North Star metrics? Let’s find out.
For some companies, user satisfaction is the ultimate goal. It makes sense since it’s completely aligned with the definition of the North Star metric, and it can easily be measured in various ways – for example, by sending out customer surveys or monitoring social media.
That’s the case with Powder Insider, says Tim Anderson. “It’s not sales, it’s not leads or anything else, first and foremost, we are in the business of serving the user and making them as happy as possible. If we can get that right, everything else takes care of itself.”
Closed sales equal success for some businesses.
“Our north star metric is the ‘number of closed sales a month’,” says Randy VanderVaate of Funeral Funds.
“If the number of our closed sales a month increases, it will accelerate the growth of our business. It will ensure that our expenses are covered, and there we have a substantial return on our investment.”
Customer growth can indicate the growth of several other metrics. For PEO Companies, according to Nelson Sherwin, “the most essential ones fall in line with customer growth although there are tons of other metrics we should be tracking.”
“Customer growth is absolutely vital for my business’s success and we wouldn’t be where we are today if we hadn’t prioritized it from the get-go. Increased customer growth means higher revenue, more engagement with our services, and improved word-of-mouth advertising,” concludes Sherwin.
Customer lifetime value can be an excellent North Star metric, as it can drive a good deal of other metrics related to cash flow and your marketing efforts.
“As an agency founder, I’m obviously dealing with the same cash flow problems as any business, but it’s especially important to have predictable cash flow and margins for a services business,” explains Alex Birkett of Alexbirkett.com, who considers this metric critical for a services business.
“However, beyond the simple P&Ls, customer lifetime value is actually a very good predictor of another acquisition metric: referrals. The longer a client stays with us and the more they pay us, the more clients they, in turn, refer to us. This is the best North Star for a services business because you’re not focusing on maximizing leads or acquisition, but rather the value you’re both giving to, and therefore getting from, your clients.”
“I operate a niche website and for me, my true North Star metric is ‘Number of Email Subscribers’,” explains Rohan Kadam of Biking Know How. Kadam underlines email marketing is where the largest portion of their revenue comes from.
”Since I am in the blogging and content marketing business, it is very important to track my email subscribers. I use the email channel to promote new content on my website and also to promote affiliate offers. 85% of my total revenue comes from my email channels. My constant focus hence is to constantly ensure that my subscriber numbers keep increasing and my audience size is always in an uptrend.”
Our research showed that 52.4% of professionals have more than one North Star metric. We also asked them what metrics they typically align their company priorities around, and most answers were revenue (around 30%), customer growth (around 30%), and user experience (around 25%). These answers may reflect a logical string of events: the better the user experience you provide, the more customers you will acquire. The more customers you get, the more your revenue grows!
And here are the most commonly used sets of North Star metrics that the participants in our study use.
Your engagement rate across different channels can be a good indicator of how valuable your product or service is to your customers.
Brittney Ihrig of tl;dv says they track “any metric that measures engagement percentage, and this goes for any channel.”
“As we’re an early-stage startup, engagement is critical as we iron out the kinks and develop our product. To do this, we need a loyal and engaged community. Thus, social engagement is one of the best metrics to measure this. We find that Twitter especially is an underutilized medium, as many SaaS companies distribute their content regularly, without actively engaging the community,” says Ihrig.
For Andre Oentoro of Milkwhale, customer satisfaction rating is one of the most important metrics to monitor as it really matters to his company how their customers perceive them.
“How our customers rate our service is highly important to us. It helps us figure out what needs to be improved and what we can keep doing. Our main focus is on our customers, and when they’re not happy with our work, it can be a big problem.
Combined with client retention (which is more cost-effective and important for many businesses than acquiring new customers), revenue growth can be a good indicator of your cash flow.
“Revenue growth and client retention drive our business. These two primarily determine our cash flow, which is the oxygen that fuels our business and determines whether we’d need to expand our resources or not,” explains Jordan Brannon of Coalition Tech, and adds:
“Retention also serves as a scorecard for our operations and is ultimately the measure of how effectively we are generating revenue for our clients.”
Editor’s note: Schedule automated reports on revenue growth whenever fits you best with automated reporting software. This way you will never miss the opportunity to adjust your business strategy for better outcomes.
“The customer growth rate highly determines the success of our business,” says Alina Clark of CocoDoc.
“Just like a restaurant depends on feeding more mouths, a Saas company depends, sometimes almost entirely on the number of paid users on its platform. The customer growth metric determines how we do everything else. It shows us how to approach the customer experience, the marketing, and whether the sales funnel is as efficient as we want it to be,” explains Clark and adds that having a North Star metric can also give you a sense of purpose and help you focus on what you want to achieve in the future.
“We are looking to grow beyond being a startup. The key metrics show us what works, and what doesn’t. Besides, measuring the customer growth rates also takes into consideration the churn rates on our products. A high churn rate signifies the need to change something in our customer experience. As such, every attempt at tinkering with our business processes is inspired by insights collected through the customer growth KPIs.”
Whether there’s only one or you define a number of metrics crucial to your business and strategic priorities, your North Star is what leads the way in every sense.
Aligning your strategy around your North Star will help you accelerate your growth, sharpen your focus by tracking the metrics that really matter, and work hard to provide an outstanding customer experience.
Think about your purpose, motivation, and goals – what kind of results do you want your customers to achieve by using your product or service? This will point you in the right direction when defining your North Star metrics, so you can align your company priorities around them and keep growing.
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