How to Pick North-Star Metrics For Your Business
One of the key factors that separates successful businesses from those that struggle is the ability to stay focused on long-term goals. Below, we discuss north star metrics that can help you to remain on track as you build your business toward these long-term goals in mind. North star metrics are key performance indicators (KPIs) that serve as guiding lights for your business. More specifically they are high-level goals closely aligned with your business's mission and vision that keep you and your team focused on what is most important.
Five Steps to Determining Your North Star Metrics
1. Identify your business's mission and vision:
Your mission defines the fundamental purpose of your business. It should be based on the value that your business provides to customers, employees, and other stakeholders. Your vision is a long-term goal based on the value your business provides beyond immediate goods and services. For example, your vision can be based on what benefits you want your business to bring to the industry or to the community in which it operates. It should be aspirational and inspirational. Together your mission and vision will form the foundation for your business's north star metrics.
2. Define your north star metrics:
Your next step is to decide on what metrics will serve as the best indicators that your business is moving in the right direction. These indicators will be your north star metrics, high-level goals closely aligned with both your business’s mission and its vision. North star metrics are not as broad as the goals set by your mission and vision, but smaller, measurable goals that represent an aspect of those larger goals. Setting north star metrics can help you more clearly define what you want your business to achieve. Some examples of north star metrics include revenue growth, market share, customer satisfaction, employee engagement, and social impact.
3. Make your north star metrics measurable:
To be effective, your north star metrics should be measurable. This means that you should be able to quantify and track your progress toward the goals you’ve set. If your north star metric is revenue growth, the information you need to measure it is more or less built into company financial statements. However, measuring something like social impact or customer satisfaction might require you to set more creative parameters for your metrics. For example, how you measure customer satisfaction can be through any number of methods or even combinations of methods: e.g., number of repeat customers, customer satisfaction survey results, customer reviews. A metric like social impact would require you to clearly define what sort of social impact you want to make and to what degree. Are you reducing pollution? Will you measure the amount of garbage or recyclable materials you’ve collected? Will you commission water quality tests? You will need to decide what measurements make the most sense for your business.
4. Set targets for your north star metrics:
In addition to being measurable, your north star metrics should also have clear targets. These targets should be ambitious but achievable, providing a roadmap for your business's growth and success. For example, if your north star metric is revenue growth, you might set a target to double your revenue over the next three years. Or if you want to focus on customer satisfaction you may want to work to increase your percentage of repeat customers within that same time frame.
5. Monitor and review your north star metrics:
Finally, it is important to regularly monitor and review your north star metrics to ensure that you are making progress toward achieving your goals. This may involve tracking KPIs, gathering feedback from customers and employees, conducting regular business reviews, or any combination of these methods. By staying focused on your north star metrics and making adjustments as needed, you can ensure that your business stays on track and achieves its long-term goals.
Benefits of North Star Metrics
Once you have determined and implemented your north star metrics as described above, they can provide you with several advantages as you move forward with your business.
Having north star metrics can help you to communicate more effectively with your team, stakeholders, and investors. Having clear, measurable goals helps everyone involved to understand the direction in which your business is heading and the role that they play in achieving its long-term goals. This shared understanding of your vision can give your employees a sense of purpose and accountability, and it can help to build trust and confidence in your business.
Another benefit of having north star metrics is that they can help you to identify and prioritize opportunities and challenges. By tracking your progress, you can easily identify areas where you are successful and areas where you need to improve. These metrics also help you to identify opportunities for growth and innovation, as well as the challenges that may be limiting your success. By focusing on your north star metrics, you can make more informed decisions about how to allocate your resources and where to focus your efforts.
Finally, having north star metrics can help you to remain focused on the big picture. It can be easy to get caught up in the day-to-day demands of running a business, but by keeping your north star metrics in mind you can avoid getting sidetracked by less important tasks or low consequence issues. Staying focused on your north star metrics will reinforce the need to prioritize your long-term goals and will support the progress you make towards them, allowing you to build a sustainable and successful business.
The benefits provided by north star metrics make them a powerful tool for guiding your business and maintaining your long-term focus. In summary, the simple steps outlined above will:
- Keep you aligned with your business's long-term goals.
- Provide you with an effective tool for communicating with your team and stakeholders.
- Give you a framework for conceptualizing your business’s current trajectory alongside set goals, helping you to identify what’s important so that you can prioritize opportunities and challenges.
Whether you are just starting out or are already well-established, having clear north star metrics can help you to navigate the ups and downs of entrepreneurship and achieve your long-term goals. And no matter where you are in that process, Jenfi can help you to meet the marketing and growth solutions you need to meet those long-term goals you’re moving towards.