Marvin Russell
When it comes to driving growth for your business, focusing solely on revenue can leave you feeling stuck. Revenue is important, of course, but it’s a lagging indicator—it’s the result of other actions you take. That’s why the concept of a North Star metric is so powerful. It’s a measurable, actionable target that you and your team can directly influence. And when your North Star metric grows, so does your revenue. But how do you pick the right North Star metric for your business? Let’s dive in.
Table of Contents
What Is a North Star Metric?
A North Star metric is a single, measurable KPI (Key Performance Indicator) that has the most significant impact on your business’s growth. It’s called the North Star because, like the actual star, it guides the direction of your business. Your North Star metric should be something your entire team can focus on and influence through their efforts. This metric directly correlates to long-term success and, when done right, leads to an increase in revenue.
For example, Dropbox uses the number of files uploaded as their North Star metric. The more files users upload, the more they rely on the platform, leading to higher retention and upgrades to paid plans. Netflix, on the other hand, focuses on the number of hours of content watched. The more content people watch, the more likely they are to stick around and keep paying for the service. Both of these companies chose metrics that directly influence revenue over time, without focusing on the revenue itself.
Why Not Focus Directly on Revenue?
At first glance, it might seem like focusing on revenue should be your top priority. However, revenue is a lagging indicator, meaning it reflects actions that have already taken place. Staring at your bank account isn’t going to make it grow. You need to focus on the activities that will lead to more revenue. These are called leading indicators. Your North Star metric is the most important of these leading indicators because it’s the one thing that most influences your overall business growth.
How to Identify Your North Star Metric
Choosing the right North Star metric requires looking at the actions or behaviors that lead to your business’s success. Ask yourself the following questions:
- What action do customers take that most aligns with their success and satisfaction?
- Which behaviors or activities predict long-term customer retention?
- What data points are most consistently tied to revenue growth?
Your North Star metric should represent the key activity that drives your product or service’s value to your customers. Let’s say you run an online course business. Your North Star might be the number of lessons completed or the percentage of users who finish a course. The idea is to track the activity that directly increases the value your product provides.
Make Sure Your Team Can Influence It
One key characteristic of a strong North Star metric is that it needs to be something you can actively influence. Revenue itself is a result, not something you can directly control. But actions like increasing product usage or improving customer engagement are things your team can work on daily. For example, Netflix’s metric—hours watched—can be influenced by improving content recommendations or optimizing the user interface to make content easier to find.
At MemberSpace, our North Star metric is helping our customers earn their first dollar online. This metric is tied to customer success because when someone earns their first dollar, they’re more likely to continue using our platform. By focusing on this metric, we ensure that our efforts lead to happy, long-term customers.
Communicating Your North Star Metric to Your Team
Once you’ve identified your North Star metric, it’s crucial to communicate it clearly to your entire team. Growth is a team effort, and everyone needs to understand what the company is striving toward. When everyone is aligned around the same goal, it’s easier to make decisions and measure progress.
Break down how each department or team member contributes to the North Star metric. For example, if you’re Dropbox and your metric is files uploaded, one team might focus on making it easier to upload files, while another team works on integrating with third-party platforms. Each small action contributes to the larger goal.
Final Thoughts
Choosing the right North Star metric can feel daunting, but it’s one of the most important decisions you can make for your business. It’s the one metric that will keep your team focused, your business growing, and your customers happy. By identifying and tracking this key metric, you’ll naturally see your revenue grow over time, without having to obsess over it directly.
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