North Star Metric
Why it matters
Without one, teams drift towards vanity numbers such as sign-ups, followers or contract value, which can rise while the product gets worse. It also stops teams pulling against each other. Sales wants big annual deals, product wants a smooth first week and support wants fewer tickets, and a shared number settles which of those serves customers. One improving number also tells outsiders, including investors, that the company knows what it is optimising.
How to apply it
- List the customer actions that happen before people stay and spend more, usually depth or frequency of use.
- Test each candidate against retention and expansion data, not against whether it sounds sensible.
- Prefer an early indicator over a late one. It should move before revenue or cancellations do.
- Choose a number that teams can influence through their daily work.
- Put it on a dashboard everyone sees, and start reviews with it.
- Revisit it once a year. A number that suits an early product may not suit a mature one.
What it is
A North Star metric is a company's guiding number. It measures the value customers receive, not the money the company takes in. A good one rises when customers succeed and predicts revenue and retention before they show up in the accounts.
A bookkeeping agency, for example, might choose monthly closes delivered by working day five. That number measures the thing clients pay for. If it improves, clients stay longer, refer others and accept price rises. Revenue is a result of that number, not the number itself.
Common mistakes
- Choosing revenue. It records what happened but tells no team what to do.
- Choosing a number that can be raised without helping customers, such as page views.
- Keeping a dozen "main" metrics, which defeats the point.
