What a north star actually is, and what it is not
The single metric that captures core delivered value
The cleanest definition comes from Sean Ellis, who coined the term growth hacking: a north star metric is the single metric that best captures the core value your product delivers to customers. Read that twice, because every word is load-bearing. Single, so the organisation has one point to aim at rather than a scoreboard nobody can hold in their head. Captures, so it measures the value rather than the money. Delivers to customers, so it sits at the moment the customer receives something, not the moment you receive something.
That last distinction is the whole game. A true north star measures the act where value is provably received. A night booked. A contact added. A message sent. Revenue is the shadow that act casts. When you count delivered value, the money follows as a consequence; when you count the money, you are counting a consequence and calling it a cause.
Revenue is the lagging shadow, not the star
This is exactly why MRR and ARR make poor north stars, however much they feel like the only numbers that matter. Revenue metrics tell you what happened in the past rather than predicting future results. By the time ARR dips, the value leak that caused the dip has been compounding quietly for months. A north star sits one level upstream of revenue, on the leading cause, so that when it moves you have advance warning of where the money is headed. If the dollars are what you ultimately care about, the relationship between the leading star and the lagging money is the subject of compound your customer lifetime value; the north star is the early-warning instrument that LTV only confirms in arrears.
There is a sharp test for whether you have chosen well. The rule of thumb, attributed to John Cutler, is that if you can move your north star directly, it is probably not a good north star. A good star is an outcome. You cannot reach in and crank it. You can only move it through the inputs beneath it, which is precisely why it is worth steering by.
The vanity graveyard
The opposite of a north star is a vanity metric, and the giveaway is that it rises forever and warns you of nothing. The usual suspects are named directly: ARR and MRR, daily active users, and registered users sit on the list of poor choices, alongside the page views and impressions every dashboard accumulates. The common flaw is that these numbers climb monotonically. Total registered users only ever goes up; it can never tell you that value is leaking, because nothing about a leak makes the cumulative count fall.
A real north star can move against you. That is its job. If the number you have chosen can only ever rise, you have not chosen a star, you have chosen a trophy.