Goal Setting & North Star Metrics, Part 1

Today is all about goal setting. I want to share a way to approach goal setting that will work for you regardless of stage or your personality type. This article will focus on critical actions versus generalities around goal setting. 

I’ll start by saying goal setting has always been a challenge for me personally. I mostly live my personal life not focused on goals but growth through repeatedly practicing certain good habits and improving on them. In essence, I focus on being personally prepared for life mentally, physically, and spiritually to the best of my ability every day, letting serendipity take its course while looking out for opportunities as they present themselves. While I have specific big life motivators and hopes, I don’t put much effort into specific, highly-defined life goals.

However, I have noticed that this approach doesn’t translate well when working with teams, especially within a fast-moving startup environment. Maybe I haven’t figured out how to translate growth through positive actions and habits to a company/team setting.

Given the chaos and easy distractions when building a startup, a clear vision and a clear set of goals are essential to achieving sustainable growth. As we discussed in Decision Making and Problem Solving, you never want to be doing things ad hoc without clear goals in mind – no matter how chaotic the day-to-day feels. 

Clear goals create clear paths of action for you and your team. They clarify what work you should be doing and help discern what isn’t worth your time. Clear goals also rally your team. No matter how excited you are about your product, startups are not always fun, and some events in the early stages can feel disheartening. Being able to look at where you are versus where you want to be by a specific point in time can be an anchor in those periods.

So how do I approach goal setting in our companies?

The first step is to create or adopt a framework within which goals are captured, nurtured, and tracked.  Common frameworks for goal setting are things like OKRs, 3HAG, EOS, MBOs, Scorecards, The Rockefeller Habits, or Scaling Up, and on and on. Rather than just random vision and goal setting, these systems help you capture your essence and develop the habits and rituals that lead to consistent improvement in performance.

Before my introduction to business operating systems like EOS and OKRs, the early days of entrepreneurship were somewhat directionless and felt like guesswork. I wasn’t sure how each day’s actions contributed to moving me to the needed destination or how individual contributors' actions moved us to a positive goal. I didn’t start each day, quarter, or month with a clear focus on which needle needed to move in what direction, except in generalities. Zertis, my business prior to TheraNest, was a struggle in this sense. I knew what I wanted to accomplish with Zertis, but I was doing a poor job moving myself and the small team on a clear path to our final destination. 

About a year into doing Zertis full-time, I read the book The E-Myth Revisited by Michael Gerber. That began my journey into building a clear business operating framework and what it meant to work on a business rather than just working in it. E-Myth helped me sharpen my focus around why Zertis existed and the actions and activities I’d need to take to help me hit my goals for it as a business. I created Zertis as a bridge to building a SaaS company, but it had become about one consulting project after the other. It had become just a race for survival and not the vehicle for idea incubation and acceleration I originally had in mind. E-Myth forced me to go back to being methodical in accomplishing one of the core reasons Zertis existed: as a learning and idea incubator for launching a SaaS product, something I had lost focus of. That focus led to building a system for validating ideas, testing them, and moving quickly towards launching a product, which eventually led to TheraNest.

A business operating system helps provide a cadence for the business rituals that form growth habits within the organization. The stage and type of company matter when picking the business operating system. In the early days, go for simple, easy-to-explain, easy-to-implement systems. As you grow, adapt and make changes that make them work better for your organization’s size and needs.

The second step is to develop and capture your North Star Metrics in your business operating system.

Your North Star metric communicates what is essential to your business success. It’s not that other metrics don’t matter, but your North Star metrics are the ones that will ultimately guide your growth journey. North Star metrics are driven by vision – your chosen measure should further your overall vision for the product.

At TheraNest, my early North Star metrics were providing exceptional value to the customer, growing MRR by a certain percentage consistently, and achieving profitability quickly. The customer should always be at the center of how you are defining your success. You can build a product that you think is amazing, innovative, and exciting, but if you’re not delivering value to customers at the end of the day, you’re likely to fail. Part of our success was because our customer needs primarily drove us. Customer value was at the heart of what we did from the get-go, and North Star metrics helped us maintain that focus in a balanced way. I then captured those metrics using a modified version of the One Page Strategic Plan by Verne Harnish and reviewed and updated it quarterly.

In part two of this newsletter, we’ll discuss upcoming steps on the goal-setting journey, what rituals are helpful, getting the most out of the execution process, and what happens when you need to change or don’t hit your goals. 

I hope you enjoyed this week’s Let’s Build post! As always, please let me know your thoughts by tweeting me (@sotulana), commenting on Substack, or responding directly to this email.