The dream of any B2B SaaS company founder: an efficient, effective, and I dare I say- beautiful- sales funnel. A steady stream of qualified leads turning into happy, paying customers. One that is in perfect proportion from initial contact through renewal. While possible, the reality is that most startups have a sales funnel that is misshapen in one way or another. You may have figured out a great top of funnel strategy, but are struggling to convert free users to paid subscribers. Or, you have a fantastic retention rate but a limited customer base.
So what happens when that carefully constructed path from prospect to customer has gaps? And how can you even identify the gaps in the first place? Even with limited resources, you can find and fix the leaks in your funnel. Here's how to tell if your B2B SaaS funnel needs some TLC and what you can do about it:
Conversions Across The Board
- Tracking conversion rates at each stage of the funnel is the best and simplest way to identify and improve your sales performance. Pay particular attention to these metrics:
- Website Traffic & Free Trial Sign-Ups: Are you attracting enough qualified visitors to your website? Are those visitors converting into free trial sign-ups? Consider content marketing targeted towards B2B decision-makers' pain points and leverage SEO best practices to improve organic reach.
- Free Trial to Paid Conversion: This is a critical conversion point for B2B SaaS. A low conversion rate here suggests potential issues with product-market fit, the value proposition being unclear, or a confusing user experience within the free trial itself.
- Customer Acquisition Cost (CAC): While not a direct conversion rate, a high CAC can indicate inefficiencies in your lead generation efforts. Analyze your marketing spend across different channels to see where you're getting the most bang for your buck.
- Churn Rate: Also not a conversion, churn rates are important to diagnose if the issue is more on the product side. Analyze churn data to understand at what stage customers are dropping off and why. A 2023 SaaS benchmarks report by Chargebee revealed the median churn rate for B2B SaaS companies to be around 5%.
What are “Good” Conversion Rates?
No surprise, there is no easy answer here. Unless there is something obviously wrong, the best approach is to adapt a culture of continuous experimentation and benchmark against yourself. True A/B can be challenging with market dynamics, but try experimenting with one phase at a time and seeing how that approach impacts your bottom line revenue. For example, one quarter, you could try doubling your marketing investment and the next you could test out a new mid funnel sales strategy.
Need some industry benchmarks to get started? Check out this comprehensive list from Userpilot.
Beyond the Numbers: Talking to Your Customers
- Numbers matter, but don't neglect the power of direct feedback from your B2B customers. With limited resources, it’s common for startups to deprioritize holding customer meetings and documenting them consistently. If you do make time for this, overtime you’ll have a treasure trove of insights. Some key touchpoints:
- Schedule calls with new paying customers during or right after onboarding. This helps identify any pain points they encountered during the free trial or early paid usage.
- Hold regular customer success check-ins to understand their needs, identify potential churn risk, and gather feedback on the overall value proposition.
- Monitor industry forums and social media for brand mentions, specifically focusing on discussions relevant to your B2B SaaS offering.
- Look for recurring themes that might suggest confusion or frustration with specific features or functionalities. Utilize social listening tools like Hootsuite to streamline this process.
Common Issues
The number of priorities on a founder or first sales and marketing hire’s plate is overwhelming. I’ve been there. With things moving fast, these are the most common mistakes I see that are worth fixing to ensure you’re funnel is operating at an optimal level:
- Unclear Ideal Customer Profile (ICP): I’ve had years of experience selling emerging technologies at early companies. Some had products that innately targeted specific teams, workflows or companies. These solutions have a built-in ICP, but there’s other cases where the solution is broad or horizontal. In these cases it’s challenging for the sales team to create messaging, value propositions and target the right personas.
- Generic Sales Pitch: Personalize your outreach to address the specific needs and challenges of different B2B segments within your ICP. Highlight case studies and success stories showcasing how your product has helped similar businesses achieve their goals.
- Lack of Content Marketing: Content marketing is a powerful tool for attracting qualified leads in the B2B SaaS space. Create informative blog posts, white papers, and webinars that address the pain points of your target audience and showcase your thought leadership.
If you’ve found this helpful, but are looking for specific recommendations for your business, reach out to Morris Milton, our Seed Through Series co-founder and B2B SaaS lead, or fill out this form.
