In the startup world, the North Star describes the one metric that is indicative of all your future business growth. It is the central metric to track and improve that everyone in the company focuses on.
Now, it seems pretty easy to go ahead and just use revenue or profit as your North Star metric. However, these are not a particularly inspiring missions. Secondly, they don’t consider the value you are creating for your customers nor how you can improve it.
Revenue and profits are lagging indicators.
They happen when you did all the right things and everything worked out as projected.
A good North Star metric, however, is a leading indicator highlighting your path to scale. It is also specific to your business and highlights that your business model actually works.
Here are a few examples of North Start metrics:
– Amazon: New Prime customers per month.
– Netflix: Watch time per month.
– Airbnb: Beds booked per month.
– Facebook: Daily active users.
When improving these metrics, the companies can be sure that growth, revenue and profits will follow.
A strong North Star metric is focused on sustainable growth & value.
So, for our digital marketing agency, we focus on client retention rate as the North Star metric.
Firstly, this means that we have to be providing great services and results.
Secondly, it means that our clients appreciate our partnership.
Thirdly, this allows for up-sells and cross-sells which are easier than acquiring new clients.
And lastly, it builds a snowball effect of referrals and recommendations that feed our pipeline.
