A Simple Formula to Stay Disciplined While Building a New Income Source
People fail as a result of an ineffective system, not a lack of willpower. The North Star & 4DX framework will supercharge your journey to financial flexibility.
This is the era of side hustles. People everywhere are building multiple income sources. Youtuber Ali Abdaal has made more than US$4 million in 2021 from sources other than his traditional full-time job as a doctor.
Inspired by such success stories, many people have embarked on the journey of starting new businesses and doing freelance jobs, with the goal of diversifying their earnings.
Unfortunately, there is no formula on how to do this right. No one was there to tell me that my idea of starting a business to bring local literature works to the rest of the world is farfetched.
Everyone knows it is going to take time before you see results with an idea. But really, how much time is long enough? How much perseverance is actually required? And how do we maintain our discipline?
It takes me a while to realize that what we need is not the sheer strength of willpower. We need an effective system that will guide our decision-making process. And I am happy to share with you a unique approach which is a combination of the North Star Framework and the 4 Disciplines of Execution.
The North Star Metric
Widely used in the product world, the North Star Framework has empowered the likes of Netflix to their current worldwide success. Designed for building successful products, it is the perfect framework for any individuals out there who want to start selling physical products or services to others.
TL;DR: In the North Star Framework, we look at one single crucial leading metric, i.e. the North Star metric which defines the core value of our products/services to our customers.
The emphasis is on a single crucial leading metric. The amount of income earned a month from this new product/service is lagging. It is the outcome of certain actions we take in the course of managing our product/service.
A leading metric is something that will be indicative of the final outcome. For instance, the number of customers adding your books to their carts can be a leading metric that is indicative of revenue performance.
In my case, I recently started my product management preparation service to help aspiring product managers ace their interviews. Since the value proposition is to get job seekers ready to tackle interview questions, I have chosen my North Star metric to be the number of users clicking “Continue” (to checkout), which is indicative of the actual sales.
The Input Metrics
How do I increase the number of users clicking “Continue”?
Mathematically, it is equal to the number of users landing on the service page, multiplied by the likelihood that they will convert to checkout. Increasing either factor will increase the value of the North Star metric.
In order to increase the number of visitors landing on the service page, I can bring as much traffic there as possible via multiple channels such as this product management blog or advertisements.
If blog readership is a driver of the number of users landing on the service page, the number of readers per blog post can be considered an input metric.
If I can come up with initiatives that increase the number of readers on my blog post, it is likely that the number of readers directed to the service page will increase.
Similarly, the likelihood that a site visitor will convert to checkout is influenced by a multitude of factors such as how reliable this interview coach (aka me) is. One way to increase my reliability is to accumulate testimonials and positive ratings from past clients. In this case, the input metric can be the number of 4-star and above reviews I have for my service.
As you can see, there can be many different input metrics to measure. The key is trials and errors. To the best of your knowledge, define your North Star metric and input metrics. Align all of your tactics to improve them, and try out a different metric when one does not work.
Leading behaviors
This is where we deviate from the North Star framework and embrace the last two disciplines in the 4 Disciplines of Execution.
In the previous section, I talk about the input metrics which are metrics we should focus our energy on improving. They, however, are NOT specific actions we can take.
For my PM interview preparation service, I define 2 input metrics: number of readers per blog post and number of 4-star and above reviews I have for my service.
For the first input metric, a specific action I can take is to write blogs once a week in order to build an audience. The more regular I put out qualified content, the higher the likelihood of increased readership.
The leading behavior, in this case, is the act of writing blog posts once a week, which I can have absolute control over.
Keeping a scoreboard
Now that I have had my leading behavior defined, I use a scoreboard to keep myself motivated in developing this habit. It is a simple system where I set a target of writing at least 500 words per week. Every week, I log the actual number of words written to the scoreboard. Over time, I will have a view of how well I am keeping up with the weekly target.
This scoreboard is powerful because humans tend to become more competitive when we keep track of our scores.
When I see the actual line deviating away from the expected line, I am more inclined to work harder to minimize the deviation.
Accountability
It has been shown that when we tell other people our goals for the week, as well as share with them our progress at the end of it, we are more likely to follow through. This is the power of external accountability. Even though no one is going to chase us, we still feel compelled to deliver.
If you have a support group to which you can share your weekly scoreboards, leverage them.
If like me, you are looking for like-minded individuals to create a circle of support where we keep one another accountable, come join me here.
Before you go, check out another post on how I validate my business idea with less than 50 bucks.
