Pick a North Star Metric (Not Revenue)

Last week I had a great conversation with a group of entrepreneurs, and our first topic was identifying each startup’s North Star metric. A North Star metric is the single most important metric in a business—the one that best captures customer value, reflects what is going well, and creates a singular focus for continually improving the company.

The most common answer when you ask an entrepreneur about their most important metric is revenue or annual recurring revenue. While these are critically important, they are outcomes of customer value, not the value itself. The better question is: what is the specific thing customers do where value is most clearly created? What action best represents real benefit from using the product?

When I posed this question to the group, one underlying theme emerged: many founders started with a vanity metric because it felt like a quick and easy way to measure progress. A classic example of a vanity metric is page views inside a web application. Usage can be a proxy for value, but merely clicking around is not the same as achieving a meaningful result with the product.

Once you decide on your North Star metric, the next step is to embed it everywhere. Put it on a big screen in your lobby. Include it in your weekly email updates. Make it the headline metric in your quarterly board deck. Align company goals and initiatives around it. Make sure every employee understands how their work contributes to it.

A simple test of alignment is to ask any employee, “What is our North Star metric, and how are we doing?” If they can’t answer clearly, your communication around it has been insufficient.

Entrepreneurs, my recommendation is this: choose a North Star metric that truly represents the value you deliver, track it rigorously, and ensure your entire team rallies around it. A startup is more than a single metric, but there is nothing more powerful than clarity about what you are working toward and why.