In the competitive world of SaaS, closing deals is everything. It’s that critical moment when all the hard work you’ve poured into your product, marketing, and lead generation finally pays off. But what happens when your close rate is underwhelming? How do you make sure you’re keeping potential revenue on the table? I was a guest on The Practical Founders Podcast hosted by my friend Greg Head, we dug into the details of software demo close rates and the key factors that can make or break a deal.
No Magic Number, But a Benchmark to Aim For
Greg asked me a great question during our conversation: “Is there a magic number for demo close rates that works for everyone?” The short answer is no—there’s no one-size-fits-all answer. However, I believe specific benchmarks can guide your efforts. If your close rate is below 20%, that’s a major red flag. I’ve seen it repeatedly—scaling becomes incredibly tough, and achieving exponential growth feels like an uphill battle. If you’re not closing at least 20% of your demos, it’s time to rethink your approach.
But let’s talk about what happens when you surpass that baseline. I worked with a client named Paul from the UK, who was initially closing at 26%. We made some key adjustments to his discovery process, and his close rate skyrocketed to an incredible 87%. I know that sounds extreme, but it’s a testament to what can happen when you fine-tune your software sales process.
The Importance of Qualification and Process Improvement
Achieving a high close rate isn’t just about having a great software product or service. It’s about ensuring your sales process is airtight. One of the things Greg and I talked about was the importance of qualifying leads early on. By identifying and weeding out unqualified leads before they reach the sales stage, you can focus your efforts on prospects more likely to convert.
Qualification is just the beginning, though. The sales process—everything from the demo to the final contract—plays a crucial role. It’s not just about what you say during the demo; it’s also about how you engage with prospects and understand their buying process. Even the mechanics of contracts and pricing can significantly impact your close rate.
Diagnosing the Problem: The First Step to Improvement
Many software founders come to me with the same issue: they generate good leads, but those leads aren’t converting. When I start working with them, my first step is always to diagnose the problem. I like to have a detailed conversation about their buyer journey. What are the steps? What’s happening at each stage? Just from that discussion, I can usually pinpoint 2-3-4 red flags holding them back.
One of the most common issues I hear about is the frustrating experience of getting a prospect excited during a demo only to have them go cold afterward. It’s one of the most significant pain points for SaaS founders. They’ve done everything right—built a fantastic product, crafted compelling marketing, generated quality leads—and yet, they’re still not closing deals.
The Relief of a Well-Oiled Sales Machine
Fixing a broken software sales process is more than just a financial relief; it’s also emotional. I can feel the frustration when SaaS founders tell me about all the hard work they’ve put into their product and marketing, only to see those efforts wasted due to a low, close rate. It’s incredibly disheartening. But when we fix the process, the relief is almost palpable. Founders who were struggling with low, close rates suddenly start seeing quick closes, and they realize, “We can do this now. We can make it happen.”
That moment of clarity is often more about relief than celebration. It’s the realization that they won’t be another forgotten startup—they’ll succeed.
Conclusion
Increasing your close rate isn’t about making a change; it’s about taking a comprehensive approach. That includes better lead qualification, refining your demo and sales presentation, and optimizing every step of the buyer journey. As Greg and I discussed, getting your close rate above 20% is the minimum requirement for scaling your business. Beyond that, the sky’s the limit—if you’re willing to diagnose the problems and work to fix them.
If you’re struggling with low, close rates, don’t just focus on generating more leads. Start by converting the ones you already have. Your future growth depends on it.
