Dear SaaStr: What is the average percentage of annual vs. monthly plan sold for a BtoB SaaS startup targeting the SMB market?
Here are some rough-and-tough numbers:
- If the customers are so small they are basically paying out of their own pockets … then 80%+- will pay monthly. 20%+- will pay annually to save money. Most would rather skip the discount and pay less now.
- Once the customers get large enough, and you have a brand … in the enterprise, for six figure deals … almost all will want to pay annually via invoice. Anything else is way too much trouble to get through procurement, accounting, etc. And while it’s your budget — it’s not your money.
- The earlier stage you are, the more flexible you probably should be. Folks at scale can force their customers down an annual path even if they don’t want to. That’s fairly common, and most SaaS companies that offer both seem to toggle Annual on as the default choice now.
The more you are between these two ends of the spectrum, your ratio will likely be in-between.
A few data points:
- 50% of Zoom’s customers paid monthly until recently. Zoom’s brought that down under recently growth pressures, but throughout its big run, 50% or more paid monthly.
- Datadog has gotten more flexible and allows more customers to pay quarterly and monthly. Even as its gone pretty enterprise.
- 95% of Expensify customers pay monthly. They are very freemium and PLG-focused, and likely do this to minimize all friction from going paid.
- 38% of Freshworks customers pay monthly. Make sense, given their mix of Small, Medium and Larger customers.
- 90% of Smartsheet’s SMB customers pay annually. Why? Smartsheet wants them to, and pushes / forces them to, due to the work required in onboarding. The more onboarding there is, the higher the churn you’ll see in monthly deals.
- 91% of SurveyMonkey’s customers pay annually. A surprise, and I think a big change over time. I strongly suspect this is because otherwise, churn for a survey done just once a year would be huge.
- 70% of Squarespace’s customers pay annually, 30% monthly. The surprised me a bit, but presumably they push annual hard given how competitive the space is.
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