Establishing a well-set North Star Metric is key to making substantive investments in growth. But it's often not treated properly, and businesses find themselves changing their North Star to accommodate their outcomes, not the other way around.
In this article, I'm going to share with you some North Star Metric examples that effectively communicate the business mission along with how to achieve success.
First, what is a "North Star" metric concept?
Mixpanel does a great job explaining this in their blog post, "What is a North Star Metric?"
They say it must do three things (and I wholeheartedly agree):
- Lead to revenue
- Reflect customer value
- Measure progress
I'll add a couple of other notes as well. A valuable North Star metric:
- Is unwavering and does not change over time
- Dictates investments in sales, marketing, and production
- Is specific to YOUR business, not the needs of your clients
MORE LIKE THIS: How to Find and Use Your North Star Metric
Here are some examples of good AND bad north star metrics and how they influence growth
Orange Pegs - Consulting Agency
The North Star: Signed engagements
Why it works: Signed deals are a precursor to revenue. It reflects customer value because first engagements come from demonstrating value during the sales process and renewals come from achieving targeted objectives. They're easily measurable, and this metric hasn't changed since we established it several years ago. When investing in ANYTHING, whether it's talent or production processes and templates, we are able to test whether it impacts our ability to close more deals by signing more engagements.
Confidential - SaaS
The -original- North Star: Account signups
Why it didn't work: We found that this North Star changed often. Account signups indirectly led to revenue but didn't guarantee it. It only reflected value in the sales pitch and only up TO the paywall. Additionally, focusing on account signups also left out the B2B side of the business, which is about licensing their platform on white-labeled apps.
The NEW North Star: Trades on their platform
Why the NEW one worked: Trades are how they make their money regardless of where the account comes from. They show value in sales as well as in the UX and value proposition promised by the product with every trade. And, regardless of where the company goes in the future, they don't see it changing.
Air BnB - Technology Company
The North Star: Booked rooms
Why it works: Booked rooms directly result in revenue. Success is proof that they demonstrated value to the customers (those listing their rooms AND those booking them). No matter what they're investing in, whether marketing or UX improvements, they can draw a line from them to the North Star. And, of course, it's easily measurable.
What's right for your business?
Here are a few more broad examples of North Stars based on some of the industries we work with often:
- Staffing & Recruitment Agencies: Filled Jobs or hours worked
- SaaS: Active users (ad-based) or paid subscriptions
- Professional Services: Main service delivered or retainer secured
- Management Consulting: Signed engagements or hours worked
- E-Commerce: Sold core products