Rose Report: Issue 46
Have You Found Your North Star Metric?
By Ted Rose, CEO, Rose Financial Solutions
Long before GPS or even a compass, ancient sailors used the star Polaris (also known as the North Star) to navigate their ships when out of sight of land. Why? Because it serves as a constant focal point that stays in nearly the same place in the night sky while other stars circle around it. Fast forward today, and there is a business concept called the North Star Metric that helps business teams ensure that everyone in a company is focused and working on the same goal.
Often, businesses believe that revenue growth is the key metric to growth. However, when growth outperforms the value you deliver to customers, revenue may decline. The premise of the North Star Metric is that if you can grow the value you deliver to customers over time, you will be able to achieve sustainable growth. Simply put, a North Star Metric is used to predict the long-term success of an organization by producing revenue, showing customer value, and tracking progress. According to Sean Ellis, growth hacking expert, “The North Star Metric is the single metric that best captures the core value that your product delivers to customers. Optimizing your efforts to grow this metric is key to driving sustainable growth across your full customer base.”
When choosing your North Star Metric, make sure your goal is something your entire company can focus on. Ask yourself, what are the essential components of your company’s success. Then, identify the KPIs and other metrics that allow you to measure outcomes. A North Star Metric should be the key metric that demonstrates customer value that predicatively leads to revenue. The metric is then broken down by department so it is clear how each department and employee can assist with growth. A good North Star Metric will cover three main factors— breadth (i.e., number of clients), depth (i.e., depth of engagement), and frequency (i.e., how often it occurs). Theoretically, the organization will create sustainable growth if the metric meets the goals set for all three factors, and if every department contributes to its advancement. When relevant, an additional factor is efficiency (i.e., how fast to complete).
At Rose Financial Solutions, we provide our clients with strategies that lead to long-term success. Our cost-effective and scalable Finance as a Service (FaaS) solutions combine the best people, technology, and processes to deliver the insight needed to make informed business decisions. With 25+ years of finance and accounting outsourcing experience, we have earned the reputation as the leader in helping clients obtain sustainable growth through financial clarity.
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This content is for information purposes only and should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business.