As a SaaS founder, you’re probably wondering, “Are my conversion numbers right?” when you view your own numbers. Only this question is very difficult to answer. Because of the differences between industries, business models, phases of a company, and the type of SaaS. In order to get an idea of the different conversion rates, in this article I reviewed existing sources and the stats of the many SaaS companies I helped to grow in order to get some kind of benchmark.
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Difference between Low-touch and High-touch SaaS companies
Before we dive in, it’s important to consider what kind of SaaS business you have: low-touch or high-touch. Here are the differences with examples:
Low-touch SaaS companies sell to prospects with virtually no or minimal face-to-face interaction. Examples include Slack, Basecamp, and Atlassian (or Trello, Jira, and Confluence).
- The primary sales method is to offer a free trial of the product, which is promoted through email marketing and other forms of online marketing.
- The prospect is encouraged to subscribe independently by optimizing the product experience and placing CTAs in the software.
High-touch SaaS companies have a more traditional approach to SaaS marketing and sales. For example, consider Salesforce.
- The sales team cold calls prospects or receives leads from marketing to schedule demos and follow-up meetings.
- The focus lies on demos at large (corporate) companies and direct sales. The salespeople customize packages for large (corporate) customers who may be looking to license hundreds of users.
B2B SaaS benchmark: sales funnel conversions
One of the most important metrics is to track the success rate of the sales funnel. In many cases, you will have more than one sales funnel at a time, and each funnel needs to be monitored closely to function better.
Although B2B SaaS companies typically use sales processes that are tailored to each prospect with a high contract value, it is still worth keeping an eye on this success rate for best results.
Below are two SaaS benchmarks for B2B SaaS sales funnel conversions (source):
- 2.1% of website visitors via SEO for your SaaS go to the next stage of the sales funnel.
- But 0.7% of website visitors who come to your site via pay-per-click ads go to the next stage of the sales funnel.
Website visitor to free trial conversion rate
About 2% of website visitors convert into free trial users (source). Here, the trial user does not have to enter any credit card information for the free trial period. The trial user chooses at the end of the trial period whether or not to take a paid package.
Free trial or test period conversion
The conversion rate for a free trial or trial period is the percentage of users who switched to a paid subscription from a trial period.
B2B SaaS companies with a free trial have a conversion rate from free trial to paid customer of 14-25% (source).
Below is a simple representation of the funnel of a low-touch SaaS company:
- 10.000 visitors
- 200 trials (2% conversion of visitors)
- 50 paying clients (25% conversion of trials)
The funnel and conversion rates of high-touch SaaS companies
The funnel of SaaS companies consists of the following terms:
- Lead – A website visitor who has left his or her contact information.
- MQL – A prospect from a company who meets the ideal customer profile and has taken action such as signing up for a free trial, downloading a white paper, or viewing a few key pages on the website. Ideally, 1/3 of MQLs convert to SQLs.
- SQL – Someone from inside sales speaks and qualifies the prospect to find out the level of interest and budget. The prospect books a (demo) meeting to go deeper into the requirements.
- Opportunity – The SQL is converted to an opportunity (or sales chance) if the demo goes well and the prospect agrees to a proposal (source).
Below are the different conversion rates:
- Nurturing new contacts and email subscribers to MQLs: 5%.
- Booking a meeting with an MQL: 20%.
- Converting MQLs to leads accepted by sales: 43.75%
- Converting sales accepted leads to sales qualified leads (SQLs): 63.33%
- Converting SQLs to an opportunity: 43.33%
- Converting an opportunity to a closed deal: 31.25%
The average conversion rate from top to bottom in the funnel (from new contact to a closed deal) is 0.05% (source).
Furthermore, the average conversion rate from website visitor to demo is similar to the free trial conversion, between 1% and 2%.
Average conversion rate from a demo to a customer
It remains difficult to give absolute numbers due to the wide variety of pricing structures, and qualification processes. Nevertheless, I found a guideline below via this question on Quora:
- Small business SaaS with inside sales doing pre-demo qualification (contract value per year of about $5,000): 44% conversion to customer after demo
- Small business SaaS without inside sales, demos booked directly through website (contract value per year of $2,400): 20%
- Mid-market SaaS with inside sales doing pre-demo qualification (contract value per year of $24,000): 29%
- Large company with inside sales doing pre-demo qualification (contract value per year $120,000): 58%
Conclusion
It remains difficult to get exact numbers to surface because every SaaS is different. Therefore, don’t be demotivated if your numbers are lower than the benchmarks mentioned. Instead, this is a great opportunity to start working to improve parts of your marketing and sales process.
