How Convert grew to $4m ARR by increasing its’ pricing all the time and making an impact on the world

Dennis, the founder of Convert, shares with us a proven recipe to grow a company to over $4m ARR. You can't miss that mark if you play by his rules.

How Convert grew to $4m ARR by increasing its’ pricing all the time and making an impact on the world

In the first post of this series of different SaaS Growth case studies, we will see how Convert grew to $4m in ARR in 11 years.

The content of this case study is taken from the podcast episode I recorded with Dennis some time ago.

The interesting fact about Convert is that they didn’t take a traditional startup path.

They’re not all about growth.

They’re not growing 300% YoY.

They grew Convert from $0 to $4m ARR in 11 years. That’s a long period of time.

But they have a stable company that constantly grows 20-30% YoY.

And what’s even more important, they’re making a huge impact in the world by making it a better place.

In this article, we’re not going to see how to grow quickly.

Instead, we will be sharing a proven recipe for building a stable, growing company, while also building happy people and the environment.

Here’s the story of how Convert grew to $4m ARR by:

  • 💲 Increasing their prices each year
  • 😻 Having a strong referral system in place without even working on it
  • ✍️ Writing content they’re experts in, not the content they should write by popular opinions
  • ❤️Having a strong and influential company culture that has an influence in their customers and potential users as well.

Let’s dive deep.

The First 100 customers

  • The first 10 customers came through comment spamming. Dennis was going through relevant blog posts and providing value to them through comments.
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Note #1 - This is definitely not something you would like to do these days. If done wrong, it feels spammy and builds a bad image of you and your brand. On the other hand, it’s also not scalable and doesn’t bring a lot of results.

The next 50-60 customers came from a conference in San Diego, Convert had a booth there and they were able to pitch their product to the conference visitors.

The rest of the first 100 customers came through the word of mouth. Having a pretty good first version of the product helped them generate a lot of brand advocates early on.

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Learning #1 - Although it’s always good to have a great first version of the product, remember that in business, time and money are equally important resources.

Getting early feedback and iterating your product based on your customers’ real needs is always better than investing a lot of money and time into trying to build the perfect first version of the product.

How Convert grows each year by increasing their prices

The price increase is the #1 revenue growth factor for Convert.

Eleven years ago, when they started, you could by Convert at $29/mo for the basic and $69/mo for the premium plan.

Today, the situation is completely different:

That’s over a 2000% price increase over the last 11 years (if my math is right 😅).

Even today, they’re raising their prices by 10-15% each year.

Here’s how to replicate this growth lever.

Early founders should be very smart about their pricing. Don’t give unlimited packages - at least if you want to go with the LTDs, then be very smart about what kind of deal you give.

- Dennis Van der Heijden
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Note #2 - Unlimited packages and LTDs have both advantages and shortcomings. You’ll get users for life who’ll pay just once, so long-term, they will be the real pain in the a*s.

On the other hand, early on, you’ll be able to “fundraise” a lot of money (if the deal goes well), and more importantly, you’ll get a lot of valuable feedback from your early users.

So play this game wisely.

Anyway, as a SaaS company, your obligation is to maximize the value for your customers.

The best way to do that is to go with value-based pricing.

It’s important how much do you charge, but it’s also essential to know what do you do for your customers, and what value (either in time savings or money), they’re getting from your product.

Take it like this:

If someone buys Convert at $699/mo, but doesn’t make that amount of money from it, then buying Convert is ridiculous.

In Convert’s case, their product is replacing in-house teams. If someone would like to do the same things they can achieve with Convert, but with an in-house team, they would need to pay between $10-$15k in monthly salaries and benefits.

Look at it like that, and Convert is very cost-effective.

If they go with the in-house team, they must earn more than $120k a year.

But to go even further, to make a cost-justified, the ideal returns should be at least 2-3x.

If they go with Convert (and pay it $7k a year) and get the same results as they would get with the in-house team, then Convert is ridiculously low-priced.

In SaaS, you can either make money for somebody or save them time.

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Learning #2 - When thinking about your pricing, keep in mind the actual value your customers are getting from your product.

Value can be measured in two ways:
- Amount of money your product makes for them
- Amount of time your product saves for them

In the beginning, when you're still no one, it's a good option to go with value-based pricing for maximum conversions.

But, how does Convert approach the price increase game without driving their users mad?

How to properly increase your pricing?

Here's Convert's process of increasing pricing:

  • Every 12 months, they increase their prices by 10-15% for all new users (old users pay the same rates as they used to).
  • In parallel with the price increase, they usually also launch a whole new bunch of features (they add these new features only in the new packages)
  • This allows them to reach out to their existing users and offer them new plans with new features at an exclusive offer.

And this is how Convert added at least $1-2m in their ARR over the last 11 years.

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Learning #3 - Price increase must be justified. The best way to do that is to release a new set of features at the same time.
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Learning #4 - Think about your existing customers as well. You don't want to drive them mad.

That's why it's always a good thing to offer them an option. Don't force them to go with your new pricing. If they like the new set of features you have to offer, they'll gladly pay you more.

Building a great product for agencies is the secret sauce for getting more referrals

One of Convert’s biggest user acquisition channels is “referral marketing”.

But not in the traditional way as we know it.

Convert’s dream customers are CRO and marketing agencies that offer conversion rate optimization as their service.

Why so?

Because they usually work with a big chunk of clients. So they need Convert for every project.

Most agencies come to Convert by switching from some of the competitive tools.

Once they see the Convert’s power and great customer support, they switch all of their 20,30,40+ clients to Convert.

It comes naturally.

But in order to achieve this, you need to:

  • Have a great product that solves a real issue.
  • Offer great support and show that you care about your customers (Convert offers 24/7 live chat support to keep a high customer success score).
  • To make your product actually suitable for agencies.

This is not rocket science.

Listen to your users and build the product they want, while offering great customer service.

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Note #3 - Listening to your customers and their feedback is the foundation of everything that we do in business.

We exist because of our customers.

I can’t emphasize enough how regular ICP research and communication with our customers is important for everything we do - building a product, working on a new marketing strategy, or even writing a new piece of content.
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Learning #5 - To easily convert customers into brand advocates, build the product they want. Offer great customer service. Make their life easier.
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Learning #6 - If you’re just starting out, then consider focusing on the product that can be used by one person who can bring more revenue over time (i.e. agencies).

How Convert builds trust with potential customers?

Sales are easy when potential customers have trust in you.

Especially if we’re talking about high-ticket sales.

Paying $699/mo for software (even more, $1899/mo), is a lot of money.

Many SaaS companies that price their products like this have long sales cycles.

For Convert, that isn’t often the case.

The reason?

They already built the trust factor between them and potential customers.

But how?

Dennis’ first insight is - Stand for something.

Convert is a privacy-first company. Privacy is the part of their DNA.

Whenever and wherever they can - they talk about it.

They’re always the first to write about the newest changes and trends in the privacy industry.

That’s one of the reasons why people trust them.

It’s important to build trust cells - a connection between two people - us and the customers.

- Dennis Van der Heijden

The second reason is a family-friendly relationship inside the company that shares its core values with the world.

Dennis built the company the way he would wish the world to be.

He treats his team members and customers the way he would wish to be treated.

Why is he doing this?

Because as a business owner, Dennis has an opportunity to change things.

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Note #4 - Another example of this is my saas content marketing agency. We have core values we unselfishly share with everyone. It’s our contribution to making the world a better place.

For example, each month, we’re donating 5-10% of our monthly profits to charitable causes.

An example of how Convert treats its customers:

Once they had one customer who paid 11 months’ worth of subscription. After the 11th month, they reached out to Converts’ team and said:

We didn’t use a tool at all. Can we get a refund?

And although Dennis had an absolute right not to issue a refund, he did it.

Having a great company culture and building relationships with its’ customers can’t bring an exact ROI.

You can’t do revenue attribution on it.

But you know the impact is there.

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Learning #7 - Treat your customers and teammates the way you want to be treated. People will appreciate that and return you 10x.
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Learning #8 - Stand for something. Find the enemies. Fight for something. It makes you stand out and better communicate your values and message to prospective buyers and hence, build trust with your potential customers.

How Convert stands out with content marketing?

Another Convert’s channel that brings a lot of new users is content marketing.

Particularly - organic traffic that comes from their blog posts.

It’s one of the “newest” channels Convert managed to develop since it started bringing new customers around 2 years ago.

Convert realized they’re playing the long game - they won’t sell the company tomorrow. They enjoy working there.

However, ironically, Convert’s team are not the best experts in CRO and A/B testing.

They tried writing about those topics, but at the end of the day, there are brands such as CXL that publish way better and more actionable content than them.

So what did they do?

They created a new content category where they can dominate.

How?

By writing about the things they’re best at and combining them with their niche.

Whenever you write content - you need to be the best at it in your niche. - — - Dennis Van der Heijden

Convert’s team is really good at privacy and GDPR.

So they started writing about the correlation between privacy and CRO.

They created a completely new category by combining two topics.

What happens after that?

Paranoia.

Whenever someone says: Can we be GDPR compliant and run A/B tests? - Convert is the first resource that comes to their mind.

Convert is the first to write about the newest trends and changes in the privacy world.

Even more - they go in-depth on how that impacts the CRO industry and A/B testing.

Final result?

At least 50k organic traffic each month.

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Learning #9 - If your category is over-saturated with high-quality content, find your own subcategory.

Write about the things you're best at. It will position you as the thought leader in that field.

You will eventually become the first choice whenever someone has problems your content solves.

What would Dennis do differently if starting Convert again?

Dennis sacrificed 7 years because of one mistake he made. He could go to $4m ARR way faster than he did.

Here’s what he would do differently.

It’s important to remember that things that work for other SaaS companies must probably work for you as well.

The main thing Dennis would do differently if given a second chance is to go early and split off from the main branches.

If there’re many free tools, then there’s probably room for more niche products.

Be X for Y.

You’ll learn the market better and connect your brand to your potential customers very quickly in that specific area.

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Note #5 - Going niche-down is always a better option than being X for everyone. Especially if you’re in a crowded market or just starting out.

Once you become a “niche leader” you will easily go bottom-up and conquer other niches as well.

For example, when we at Contenthrose fixed our positioning from a Content Marketing agency for B2B SaaS to an ROI-led Content Marketing agency for B2B SaaS doing between $500k - $5m ARR, we started seeing way more positive responses and closing more deals.

Typical founders don’t pick a niche because they think everyone is their customer.

Niching down and dominating a single vertical is significantly more important than selling to everybody.

When you dominate one vertical, you can go on and dominate other verticals as well.

It’s easier to go from 0 to $1m in a niche than if you sell to everyone.

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Learning #10 - If you’re in a very competitive market (and you probably are), go niche-down from day one.

You will better connect with your potential customers, and be able to build a better solution for them, rather than selling to everyone and being the same in the sea of sameness.

The Bottom Line

You don’t need to build a business that grows 200-300% YoY.

As we saw in Dennis’ and Convert’s example, you can build a great, sustainable business only by focusing on:

  • 💲 Price increase
  • ⚒️ Building a great product and offering amazing customer service
  • 🌎 Standing for something you really care about - and sharing this message with the world
  • 🤩 Going very niche from the day one and dominating one specific vertical.
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