The Free-to-Paid Conversion Guide for SaaS Founders
You have a leaky bucket. Pouring more water in will only cost you money and pain.
You're getting signups, but they're not converting. Users sign up, poke around for a day or two, then disappear. Meanwhile, you're spending more on ads to fill the bucket faster instead of fixing the leak.
Here's the truth: even a small improvement in your free-to-paid conversion (like going from 5% to 8%) cuts your customer acquisition cost and gives you more budget to grow. Fix the leak first, then scale.
This guide shows you how. Let's start with the basics.
What Is Free to Paid Conversion rate?
Free to paid conversion rate measures the percentage of free users who become paying customers.
The formula:
(Paid Conversions ÷ Total Free Signups) × 100
Example: 100 signups, 20 convert to paid = 20% conversion rate.
Why It Matters
Your free-to-paid conversion rate directly impacts:
Lower customer acquisition cost Double your conversion rate = cut your CAC in half. If it costs $100 to acquire 100 free users at 10% conversion, your CAC is $10. Improve to 20% conversion and your CAC drops to $5.
Product validation Low conversion = something's broken (product or onboarding). High conversion = you're doing something right.
Easier growth It's easier to improve conversion than double your traffic. Most founders obsess over getting more signups when they should focus on converting the ones they already have. Better conversion means more revenue with the same traffic—see how churn impacts your max MRR.
What's a Good Conversion Rate?
It depends on your business model and pricing:
Free trial products
- Target: 5-20% conversion
- Why: Urgency drives decisions (trial ends, users must choose)
Freemium products
- Target: 2-5% conversion
- Why: No urgency, users can stay free forever
High ACV ($10K+ annually)
- Target: Lower conversion rates (5% can be excellent)
- Why: More stakeholders, longer sales cycles
Low ACV (under $1K annually)
- Target: Higher conversion rates
- Why: Faster decisions, fewer approvals
Bottom line: These are benchmarks, not goals. If you're at 2% and your competitor is at 10%, something's off. That's what this guide fixes.
The Framework
Most founders treat conversion like a black box: user signs up → ??? → paid customer.
In the next part we’ll cover why your users aren't converting and how we can fix it!
