Dear SaaStr: What is The Typical Conversion from Paid Pilot to Annual Contract in SaaS?

Dear SaaStr: What is The Typical Conversion from Paid Pilot to Annual Contract in SaaS?

70%+ once you are doing it right.

Having said that, I’m not sure there is a “typical” number for only one reason … as you grow and scale and become a bigger player and a more established brand … you don’t need to do as many.

• By that I mean, most vendors once they are established flip pilots around into “opt-outs”. I.e., allowing new customers to cancel the contract after 60 days for any or no reason if they aren’t happy. Once you have an established brand, a 60-day opt-out gives many big customers the confidence to sign a longer-term contract upfront, pre-deployment.
• At a practical level, the “churn” will be much lower from opt-outs that most paid pilots, which are generally “opt-in” by definition and by their terms.

But until you have an established brand and can flip this around from opt-in to opt-out … it does certainly vary. In the companies I work closely with, roughly, the conversions vary fairly widely from about 60% to over 90%. It was well over 90% at Adobe Sign / EchoSign, back in the day. Why? Because in the pilot period, we almost always got them fully into production and successful. Similarly, companies I’ve invested in strive to provide value within the first day of deployment — plug the device in, fire up the mobile app and website, and you can start tracking your small fleet on Day 1. Their conversion rate is also sky high.

The startup I’ve worked with with the lowest percent (60%) isn’t the “worst” — their challenge is simply they have the most work to get into deployment. The more business process change involved, the lower the conversion rate likely will be. Over-eager sales reps are also an issue here. They can get deals to close that realistically can’t deploy.

Even in this 60% case, with lots of business process change, as their CS team has improved, this has gone up too. So measure it and drive it up. And live with the fact that for now, they won’t all convert.

And … certainly I’ve seen 0%.  That’s when desperate VPs of Sales that are struggling to close anything … close junk pilots.  Often if not free, that are way too heavily discounted.

On a related point, unpaid pilots are a waste of time … 95% of the time.  There isn’t buy-in from either side.  Free trials can work, if the app is super easy to deploy.  But a free pilot, with real work to deploy the app?  A false milestone, a free pilot usually is.

(note: an updated SaaStr Classic answer)