Follow the North Star Metric as the Compass for Your Business

Running a business can feel like a whirlwind. Each day presents new challenges, and the pressure to perform can be overwhelming. For SMEs and startups, especially those with limited budgets and resources, it’s easy to get caught in the cycle of maintaining the status quo. But what if you could simplify your focus and drive growth by narrowing down on one key metric—the North Star Metric?

What Is the North Star Metric?

The North Star Metric (NSM) is a single, crucial metric that reflects the core value your product or service delivers to customers. It is the guiding star that aligns your team and drives your business forward. For companies like Airbnb, it’s the number of nights booked. For Facebook, it’s daily active users. This metric helps ensure everyone works towards the same goal and simplifies decision-making.

How Do You Set Your North Star Metric?

Choosing the right NSM is vital. It should be a metric that:

  • Represents the value delivered to your customers.
  • Can be influenced by your team’s actions.
  • Predicts long-term business success.

Here’s a step-by-step approach to set your North Star Metric:

  1. Identify Core Value: Understand the significant value your product or service provides. What’s the primary reason customers use your offering?
  2. Map Key Metrics: List all possible metrics that reflect this value. Consider metrics related to customer engagement, retention, and satisfaction.
  3. Select the Best Fit: Choose the one metric that best represents sustained growth and aligns with your long-term vision.

A word of caution. It might be tempting to get into endless debates on which metric to choose as the best fit. The goal is to set one that feels right. It’s okay if you don’t get it right the first time. You can always learn through the following quarter and make changes after. It’s also advised not to set revenue targets as the North Star Metric (NSM). The NSM serves as your business’s leading indicator; when it is successful, revenue follows as a lagging metric.

Isn’t North Star Metric for Tech Companies?

The North Star Metric isn’t confined to tech companies; it can be a strategic metric for any SME. Growth isn’t a marketing function alone. Every department plays a role, from the business owner to customer service. Take a physiotherapist clinic, for example. Their North Star Metric could be the number of completed treatment plans. This metric reflects the clinic’s ability to guide patients from initial consultation to recovery. To improve this, every team member must contribute. Receptionists ensure appointments run smoothly, therapists provide effective treatments, and the marketing team attracts new patients. The entire clinic thrives when everyone understands and works towards this common goal.

Establish the Accelerators That Drive Your NSM

Once your North Star Metric is set, the next step is to set the accelerators that will directly impact this metric. Think of the accelerators as objectives—specific, actionable, and measurable. Identify which accelerator is causing the bottleneck for your company’s growth. This would be the accelerator that’ll unlock rapid growth when the bottleneck is released. Here are three examples:

1. Increase Customer Acquisition

More customers using your product will naturally drive your NSM. Enhance your marketing efforts, optimise your sales funnel, and explore new channels for customer acquisition.

2. Boost Customer Retention

Retaining current customers can often be more cost-effective than chasing new ones, and loyal customers contribute more value over time. Improve customer support, create loyalty programs, and continually engage your existing user base with relevant updates and offers.

3. Optimise Product Experience (The Bottleneck)

When customers find value in your product or service, they’ll keep returning and referring others, driving organic growth. I’ve assigned this as the bottleneck as, in many cases, the product or service can be holding back growth. Gather user feedback, conduct usability tests, and refine your product based on insights to enhance the overall user experience.

The Way Forward

With your North Star Metric as the guiding star, your business has a clear direction. The next step is translating the accelerators into OKRs (Objectives and Key Results), which we’ll cover in the next blog post. OKRs will help you break down your accelerators into actionable, measurable goals and track progress effectively.

Focusing on what truly matters can help you step away from the daily grind and take leaps toward sustainable, long-term growth. The North Star Metric aligns your team, clarifies your strategy, and drives you toward your goals.

Let’s work together to help your business find its guiding North Star Metric. Check out our ROOTS methodology and Growth Marketing Programme.