Since the end of 2022, the SaaS market has been in a downward trend, and founders, investors, and customers alike are seeing the effects. Everyone is tightening their purse strings, and many SaaS companies are noticing that it’s become increasingly difficult to close sales and generate revenue.
To get deeper and more quantifiable insights into the current performance of the B2B SaaS industry, we conducted a pulse-check survey on revenue leaders in the US - asking questions about the state of their sales in 2023.
Pairing the results with our own data seen by underwriting thousands of SaaS companies, we’ve compiled the results in a new report, B2B SaaS sales cycles: New insights and data, which you can download here. Here’s a summary of what we found.
Methodology
We collaborated with market research company OnePoll to survey 500 U.S.-based SaaS revenue leaders about the state of their businesses. The objective was to capture a comprehensive snapshot of the current landscape of the B2B SaaS industry, with special attention placed on sales and procurement.
We paired these self-reported results with independent financial data from over 1,200 SaaS companies analyzed by our underwriting team to see how closely the OnePoll survey results match the actual performance of SaaS companies.
This research tracked performance before and after the downturn (defined as January 2021 to June 2022 and June 2022 to June 2023, respectively) to see how it has changed.
Key findings
Here is a quick summary of some of the biggest trends we’ve found.
Sales Cycles have gotten longer
On average, sales cycles have become 3.8 weeks longer across all companies. Our internal metrics support this conclusion, with the overall CAC (customer acquisition cost) and CAC payback (the time it takes to recoup the losses from acquisition) across all companies increasing between pre- and post-downturn times.
Average contract value growth has slowed
Our research also unveiled a decrease in average contract values. While the self-reported results from revenue leaders indicated only a small percentage of companies (8.2%) experienced a decrease in ACV while a slightly larger portion (23.2%) reported stagnation, our internal data showed a more drastic decline in overall contract value and revenue. According to this data, 42% of companies experienced a decline in ARPU (average revenue per unit).
Rigid payments are creating a bottleneck
While several factors are causing a decline in sales performance, we’ve found that rigid payment options have created a significant bottleneck. 81.2% of survey respondents believed a lack of flexible payment options prevented deals from closing and was responsible for 24.7% of churn. Our internal data also supports this: companies with rigid payment options had, on average, a lower LTV/CAC (customer lifetime value / customer acquisition cost), a higher CAC, and a much lower MRR per $1M in CAC spent.
How teams can counteract these trends
In the current sales environment, negotiations are taking longer, everyone has less money to spend, and deals have become harder than ever to close. Fortunately, we’ve found that there are 5 things sales teams could do to increase sales velocity and close more deals.
- Streamline their sales process. Leveraging automation and following up on leads reliably can save your team time and increase conversions.
- Offer flexible terms and pricing. Flexible payment solutions like B2B BNPL can help you shorten sales cycles and offer payment flexibility without sacrificing ACV.
- Make renewals easier. Ensuring customers are motivated to renew and know how to do so can reduce churn and boost LTV.
- Be careful with heavy discounts. On average, discounts make you lose 18% of your potential revenue. Keeping discounts to a minimum and offering other incentives can drastically boost your ARR.
- Optimize your billing processes. We’ve found that billing takes up 28.2% of the average finance team’s time—so optimizing, or even better, automating it can help immensely.
Learn to navigate the 2023 sales environment: Read the full report
To learn more about how the B2B SaaS sales environment has changed since the downturn, why these trends are happening, and how you can optimize your sales processes within your SaaS to ensure you perform well despite the challenging environment, download the full report.
