logoSaaSy Trends

Is B2B or B2C Better for SaaS? (Analysis)

One of the main reasons that we wanted to add a B2B/B2C label to our SaaS database of about 20,000 companies was to see if the type of business model influences the success of a business.

There are a few specific questions that I’ve answered in this short post:

  1. Among “successful” companies, what is the ratio between B2B to B2C models?

  2. What percent of B2B SaaS companies achieve a good level of brand volume or have a good growth rate?

  3. What percent of B2C SaaS companies achieve a good level of brand volume or have a good growth rate?

Note that while we do have a hybrid “B2B/B2C” label in our database for companies that use a mix of both models, I’ve excluded them from all the following analysis.

Ratio of B2B to B2C in Successful SaaS Companies

What's a “successful” SaaS company?

That's going to be highly subjective, but I chose the following criteria to look at:

Either of those conditions represent an at least somewhat successful company in my opinion.

And when I run those conditions against our database, I found that there were:

For an overall ratio of about 8:1 in favor of the B2B model.

Successful SaaS by Business Model

Does That Mean Only B2B Businesses Are Worth Starting?

In order to see if B2C is just a terrible model, we need to take a quick look at which percent of companies overall are deemed “successful.”

It turns out that from the companies in our database at least, that B2B and B2C SaaS businesses have a similar likelihood of success:

One big note is that I suspect that B2C companies are typically more likely to shut down altogether (i.e. they’re smaller in general, and it’s easy for a solopreneur to shut down a site), so our database might be overestimating the success of B2C companies (selection bias).

Still, going back to the section before and connecting the two, we see that this means that B2C isn’t less likely to succeed, but there are fewer B2C opportunities.

It makes sense to me, the average person doesn't really need a SaaS for anything other than entertainment (e.g. media, hobbies, etc.).

If you really want to launch a B2C business, I think it generally makes more sense to do a non-software approach:

So Which Business Model is Best for You?

I want to wrap this short analysis up by sharing some final thoughts on the positives and drawbacks of each model for SaaS.

Pros and Cons of B2B SaaS

While I may not love it on a personal level in terms of fun, I do think that most SaaS entrepreneurs should focus on B2B unless they have a really good idea for a B2C product.

But there are still obstacles that you should think about ahead of time.

Pros:

Cons:

Pros and Cons of B2C SaaS

As an entrepreneur, I’ve always found B2C more enjoyable to build, but they do require a drastically different go-to-market strategy than B2B.

Pros:

Cons: