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How to define North Star Metric for SaaS?

North star metric

After the existence of SaaS, technology evolved tremendously. Also, In this tech-savvy world with day-to-day emerging SaaS solutions, it is really hard to stand out from the crowd. Until we hold an effective way to measure business growth and set a unique strategy to face future consequences and competition. It will be difficult to build a castle of long-term success.

In this blog, we are going to discuss one such business savior metric for SaaS. 

North Star Metric (NSM) is that effective metric for the SaaS industry and an essential checklist to reach your maximum growth potential. And to succeed in the long run, you as a company need to develop a solution for a long-term growth strategy.

Let’s dig deeper!

What is North Star Metric?

The North Star Metric defines the relationship between the customer problems that the organization trying to solve and the revenue that the business aims to generate by doing so. 

To make it even simple, The North Star Metric (also shortly known as NSM) is a metric that a company uses as a focal point for its growth. This ratio best reflects the amount of value your company brings to your customers. In addition, the North Star metric gives direction to your company’s long-term growth versus short-term growth by defining the product vision.

Some examples of North Star metrics 

Common well-known companies NSM for a better understanding,

North star metric for SaaS

Few examples of NSM for B2B SaaS

North star metric

Benefits of North-star metric for SaaS

“If you can’t measure it, you can not improve it. – Unknown”

Yes, it is true. When we discuss SaaS, it is important to measure the growth rate to make a consistent success. North Star metric holds immense benefits for business goals, success, and everything in between.

The core benefits of the North Star metric involve,

  • It lets you see the exact outcomes of the work you have done.
  • This will create a clear focus and transparency for your entire company toward your business goal.
  • It represents the core value of your current product and your business in the market.
  • Provide an objective view of the overall performance of the company.

On the whole, the North Star metric brings in a focus and organizational clarity on the vision of what each member of the team is running towards.

I think now you are ready to find your NSM. Let’s see how to find it.

Define your North star metric for SaaS

A right North-star metric is directly proportional to the company’s growth and revenue. The North star metric isn’t found or incorrectly defined if you’re not capturing the company’s revenue (ROI). 

In simple, North Star Metric is a data-driven and customer-driven metric. And for a SaaS company, the North Star metric is one that should “Add value to you and your customer”.

To identify the right NSM, start with your active users and trace out,

  • The value customer acquires from the product.
  • The Aha Moments of the customer.
  • and How did they get that?

Another way to find your North star metric is to first define your company’s core value. A company may have different core values, identify which is ultimate for your product growth. Review and analyze the onboarding process and the time taken to onboard the customer. Considering the above all, we can trace and figure out the point where business growth happens and your ideas North Star metric for SaaS.

The Ideal North Star Metric Checklist

Here are a few checklists to cross-verify if you have identified the correct North star metric,

  • Your North Star metric should equal customer satisfaction level.
  • It should express the core value and where we can see why it matters to your customers.
  • The metric should be applicable to all customers.
  • It should reflect both company’s vision and strategy together.
  • It should be measurable and time-bound.
  • NSM should be directly proportional to business growth.

A metric that simply, makes money without satisfying customer needs and satisfies customer needs without profitability. Both will not lead the company in the long run. NSM is the one which is a perfect balance of both an organization should grow and gain by adding value to the customer.

Wrapping up

A well-defined good North Star metric will lead to future success. The SaaS companies are making it the heart of their business growth, and now you are too!!

NSM will align your customer and team towards a standard single path of growth. It may also take a prolonged time than you expect to set the perfect metric and see the visual growth. But, After once you identify your ideal North Star metric the product growth will become unstoppable. Understanding your customer journey will be that easy, and you will be able to set a better, more valuable North Star metric.

Nothing is too late, Identify your right North star metric now to make your business a long-term success. 

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