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Importance of having NorthStar metric and how to choose the correct one

What is a Northstar metric?

A Northstar metric is a kind of key performance indicator (KPI) that reflects the overall health and success of your business. It is a metric that provides insights into how well your company is performing against its goals and can be used to help guide decision-making.

There are many different ways to measure success, so it’s important to choose a Northstar metric that is aligned with your company’s goals. Some common options include revenue, profit, customer satisfaction, and engagement.

Once you’ve selected a Northstar metric, you need to track it over time to see how your business is performing. This can be done using data from financial reports, surveys, customer feedback, and other data sources.

Regularly tracking and reviewing your Northstar metric will help you identify areas of improvement for your business. If you see a decline in performance, you can take action to correct course and get back on track.

While it’s important to have a Northstar metric, it’s also important to remember that it’s just one metric. Don’t get so focused on your Northstar metric that you lose sight of the other important aspects of your business. Balance is key!

Why is the Northstar metric so important?

The Northstar metric is important because it is the metric that best captures the value that your product or service delivers to users. If you can grow this metric, you will be able to grow your business.

There are many different factors that can influence a business’s Northstar metric, but some of the most important include customer satisfaction, engagement, and retention. By tracking these factors, businesses can get a clear picture of their progress and where they need to focus their efforts.

Customer satisfaction is one of the most important factors in determining a business’s Northstar metric. If customers are happy with your product or service, they are more likely to continue using it and recommend it to others. This can have a major impact on your business’s growth and profitability.

Engagement is another important factor in determining your Northstar metric. If customers are engaged with your product or service, they are more likely to use it and recommend it to others. This can also lead to increased sales and profits.

Retention is also a key factor in determining your Northstar metric. If customers are retained, they are more likely to use your product or service and recommend it to others. This can also lead to increased sales and profits.

How to choose the right metric for you?

There’s no one-size-fits-all answer, but there are some key factors to consider. First, think about what drives value for your business. What are your goals and objectives? What do you need to measure to determine whether you’re achieving those goals?

Once you’ve identified the key drivers of value for your business, you can start to narrow down which metrics could potentially be NorthStar metrics. A few examples of metrics that could potentially fit the bill include customer satisfaction scores, retention rates, or even gross margin.

Ultimately, the decision of which metrics to include as part of your NorthStar metric will come down to what makes the most sense for your business. What will give you the clearest picture of whether you’re on track to achieve your goals? Once you’ve identified a few potential candidates, test them out and see which one provides the most insights. With the right metric in place, you’ll be well on your way to achieving your business goals.

Tips to make sure a company stays on track while developing their Northstar metric

Here are a few tips to make sure your company stays on track while developing its Northstar metric:

Keep the goal in mind

When setting out to develop a Northstar metric, it’s important to have a clear goal in mind. What is the metric supposed to achieve? What does success look like? Answering these questions will help keep everyone on the same page and focused on the task at hand.

Get input from all stakeholders

It’s important to get input from all stakeholders. This includes employees, customers, and investors. Each group will have its own perspective on what the metric should be and how it should be used. Getting input from all sides will help ensure that the final product is something that everyone can agree on.

Set up a system for tracking progress

Once the metric has been developed, it’s important to set up a system for tracking progress. This could involve setting up weekly or monthly check-ins, creating a dashboard to track KPIs or anything else that will help keep everyone on track. Having a system in place will help ensure that the metric is being used effectively and that progress is being made.

Examples of companies that are using a Northstar metric:

Facebook – The social media giant uses a Northstar metric called “active users” to track its growth and success.

Google – The tech giant uses a Northstar metric called “search volume” to track its success in the search engine market.

Amazon – The e-commerce giant uses a Northstar metric called “sales” to track its success in the online retail market.

Uber – The transportation app uses a Northstar metric called “rides completed” to track its growth and success.

Airbnb – The vacation rental app uses a Northstar metric called “nights booked” to track its growth and success.

Dropbox – The number of active users

Slack – Number of active users

Pinterest – Number of Pins saved

Lyft – Number of rides taken

These are just a few examples of companies that are using Northstar metrics to track their success.

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