Why smart SaaS leaders are adopting the bowtie model

Closing the deal is the end of a traditional sales funnel. A sales rep nudges leads through the funnel, closes the contract, and calls it a day. But reality is different for modern SaaS companies.

In SaaS, closing a deal is a job half done. Recurring revenue doesn’t come from one-and-done deals. It comes from keeping your customers happy and coming back for more. Everyone in SaaS knows this, yet many SaaS businesses still look at the customer journey as ending when the customer signs the contract or enters a credit card number.     

When you think about revenue generation, it’s clear that the customer journey doesn’t end with the sale. So how exactly do you factor in your recurring revenue growth—all the ARR generated after the sale—into your forecasts? After all, there’s expansion ARR and renewal ARR to consider. While this revenue is offset to some degree by churn, it can still significantly impact growth. To get a comprehensive picture of your ARR, you need a more comprehensive view than what the traditional sales funnel can provide. 

You need the bowtie model. 

The bowtie model maps both sides of the customer journey, from when the lead enters your sales funnel all the way to conversion of the lead into a customer and beyond. It tracks what happens after the sale, including renewal and/or expansion and ultimately churn. 

In this guide, we dive into the basics of the bowtie model, explain how it works, and discuss the different ways you can use it to improve your business.

Understanding the bowtie model

Picture a traditional funnel with activities like awareness, education, selection, and commitment—all the things your marketing and sales teams do to bring new customers into the business. 

Now, if you look at the bowtie model below, you’ll see that the traditional sales funnel is actually the left half of the bowtie model—everything you do to generate new revenue. The “knot” in the middle of the bowtie represents the conversion of leads into customers. And everything to the right of that represents the process of building customer loyalty to generate long-term recurring revenue through renewals and expansion revenue through upselling and cross-selling.

Why is the bowtie model so important in SaaS?

There’s actually a couple of reasons for this, and they both have to do with the subscription-based business model upon which SaaS businesses are built.  

SaaS thrives on recurring revenue

With recurring revenue models, especially seat-based or usage-based pricing, every happy customer is a future upsell, cross-sell, or champion in disguise. Every customer who sees value in your product will likely buy more licenses, use your product more frequently, and sometimes even encourage colleagues and friends to try your product.

SaaS companies don’t close sales. They start relationships.

This is why customer success, which the bowtie model introduces as an extension to the traditional funnel, can’t be an afterthought for SaaS companies. You must treat customer success like a growth engine. That’s why you often find SaaS teams obsess over engagement metrics—they’re leading indicators of expansion revenue and long-term loyalty.

Churn is expensive

Conversely, churn for SaaS companies isn’t just a lost customer. It’s a leak in your revenue bucket. Since revenue is recurring, every churned customer means lost future revenue. To compensate, you don’t just have to replace the customer; you have to acquire multiple new ones, thanks to acquisition costs and time-to-value.

The compounding effect of churn is often a major motivator for SaaS companies that invest heavily in customer success, retention campaigns, product education, and proactive support. The bowtie model reflects this importance and quantifies it. Unlike the traditional funnel, it pays due attention to churn, helping you dramatically improve customer lifetime value (LTV).

How does the bowtie model work?

Unlike the traditional sales funnel, which only considers the acquisition phase, the bowtie model maps the entire customer lifecycle. It represents two key stages—acquisition and retention—with a “knot” in the middle marking the moment of conversion.

Let’s take a more detailed look at each side of the model and the activities that move potential customers and after the sale, new customers through each stage. 

The acquisition stage (the left side of the bowtie model)

• Awareness: This is where your marketing team works to ensure people in your target market know you exist. They’re working to build awareness about your product usually through different types of free content provided online.   
• Education: Depending on the specifics of your sales process, it may be your marketing team or perhaps your business development reps that are engaging with leads at this stage. The goal here is to build their trust and help them learn more about your product so that ultimately, they’ll request a demo. 
• Selection: This is the stage in which the lead is ready to make a purchase decision. At this point, the sales team will enter the picture to begin discussing pricing with the lead and working to close the sale. 

Commitment

This is the stage where the contract gets signed—you’ve made it through the knot on the bowtie. You’ve got a customer, and now it’s time to guide that customer successfully through the other side of the customer journey.

Retention and expansion (the right side of the bowtie model)

• Onboarding: At this stage, your focus is on helping your customers up and running with your product and removing any barriers to running fast. Accelerating time-to-value is the primary goal here. This helps to avoid early churn and paves the way for the adoption stage. 
• Adoption: This is where the user starts actively and regularly engaging with the product. The goal at this stage is to boost adoption. The more your customers use the product, the more value they gain from it. This stage is also where retention comes into play. If you’re doing a good job of engaging with your customers and supporting them, your renewals will go up and churn will go down, both of which helps to grow ARR over time.
• Expansion: Happy customers may choose to buy more. This is where upsells and cross-sells drive your ARR higher without adding to your customer acquisition cost (CAC).

How to build a bowtie model in your business

There are three basic steps to building a bowtie model for your business. Keep in mind that the steps presented here are deceivingly simple. Attempting to build and use a bowtie model effectively with spreadsheets will be an extremely time consuming undertaking fraught with error and frustration. 

You will need a robust financial planning and analysis (FP&A) tool like Drivetrain in order to manage the complexity associated with tracking multiple cohorts and individual conversions through each stage of the model and performing the conversion rate calculations necessary to leverage the benefits the bowtie model can have for your business.  

1. Define the stages and conversion subsystems in your model

In this step, you’ll map out the stages of your pre- and post-sale processes and define your subsystems for each. Note that these will differ depending on the type of go-to-market motion you’re modeling. In this example, we’ll keep it simple. 

On the left side of our bowtie model diagram above, there are three stages: awareness, education, and selection. Subsystems refer to the qualification frameworks you use at each of these stages to define the potential customer in that stage. 

The subsystems for the awareness stage might be leads, qualified as such based on some kind of conversion event (e.g., downloading an eBook). The education stage might include MQLs and SQLs, two different subsystems each with its own qualifying framework.     

2. Define your conversion events

Between each of the stages in your bowtie model, there is a conversion that has to happen. How you define each conversion—the specific event that moves a lead from one stage to the next—will be unique to your business and GTM process. Generally though, it will be based on your sales process on the left side of the funnel and on your post-sale processes on the right side. 

Understanding the conversation rates at each stage is key to using the bowtie model effectively. You probably already have a benchmark—a target for each conversion rate in your sales pipeline. Ideally, this would be based on historical data. However, many companies use industry benchmarks instead of or in addition to historical data. 

For example, early-stage startups often don’t have much historical data simply because they haven’t been around very long and haven’t made enough sales to provide reliable averages. Many late-stage companies will also use industry benchmarks, viewing them as a sort of “Gold Standard” against which to measure their performance.     

The point is, you need something to compare to, and as with all benchmarks, the more accurate they are, the more reliable they will be for this process. 

When you know what your conversion rate should be at each stage, the bowtie funnel gives you a quantitative representation of your entire customer journey that you can apply to specific cohorts to identify which stage(s) can have the biggest impact on your revenue growth.

A word of caution here…

Looking at your conversion rates independently, without considering how the metrics are defined can lead to incorrect conclusions. 

For example, if your marketing team defines an SQL as any company with more than 10 employees, and your sales team defines an SQL as any company with more than 10 employees and more than $5M in annual revenue, you can expect to see a massive dropoff in the number of leads the sales team can successfully move through the funnel. 

And when that happens, the sales team is going to blame marketing, “They’re not giving us good leads!” And the marketing team is going to blame the sales team, “They’re not moving forward with the leads we’re giving them!” Then you’ll spend a lot of time trying to “fix” one or the other when in fact, the real problem is that your teams aren’t aligned on their definitions.  

So, before you build your first bowtie model, spend some time aligning your teams on how conversion events are defined.

3. Determine your cohort period and maturity

Once you have your benchmarks, you’ll need to start tracking your conversions at each stage in your pre- and post-sale processes and calculating the associated conversion rates. 

Using cohorts in a manner similar to those you might use for a customer cohort analysis for tracking conversion rates across your bowtie model is particularly useful because it more closely aligns with the customer journey and allows you to more accurately attribute recurring revenue after the sale. In addition, when you use a cohort analysis, you more easily determine what’s working well and then double down on that for greater gains. 

For the purposes of a bowtie model, you would use a time-based cohort to track the prospects, for example, that entered your sales pipeline in January 2025, tracking them through each stage of the bowtie model all the way to the end. By tracking conversions for a single cohort at each stage of the customer journey, you can more easily identify where you may be losing leads/customers vs. where you’re able to more easily move them to the next stage.  

Something to keep in mind when using cohorts with your bowtie model is that they need time to mature, meaning they don’t all move through the stages at the same time. So, it’s important to make sure that for each stage, everyone in the cohort has either converted or dropped out. This is the only way to ensure your conversion rates are accurate. 

Understanding end-to-end conversion in your bowtie model requires very good tracking, which can be highly complex when tracking multiple, successive time-based cohorts. As suggested earlier, leveraging technology for bowtie modeling will make it much easier and far more effective.  

Bowtie model vs. traditional sales funnels

Now that we understand the “bowtie basics,” let’s run through some of the key differences between the bowtie model and traditional sales funnels. 

The traditional sales funnel is designed to attract, convert, and close. Once a deal is won, the customer exits the picture. But for SaaS companies, that’s just the beginning of a possibly long-term relationship. This is why the bowtie model is a better alternative.

The bowtie model is continuous. It starts in much the same way as the traditional SaaS sales funnel (taking prospects from awareness to conversion) but extends past the sale to cover the entire customer lifecycle, including adoption, retention, and expansion.

The bowtie model eliminates several constraints of the traditional sales funnel, such as:

• No consideration of the post-sale process: The traditional funnel ends once the deal is closed. It doesn’t factor in any kind of a post-sale process. Most SaaS companies have a customer success (CS) team. However, their work is often not considered part of the company’s growth strategy. This is an opportunity lost. The bowtie model recognizes the post-sale potential for expansion revenue and the additional recurring revenue that happens when you reduce churn, giving it an “equal place at the table” when evaluating different strategies for growth.    
• Low-efficiency growth: A traditional sales funnel requires you to continuously feed the top of the funnel, pouring money into generating new leads to grow revenue. This is expensive and often unsustainable. The bowtie model optimizes growth efforts by focusing on expansion and retention, where revenue can grow even without acquiring new customers—that sweet spot where net revenue retention (NRR) can exceed 100%.
• Limited view of revenue drivers: The traditional sales funnel doesn’t account for expansion revenue. The extended view that the bowtie model provides helps you identify room for increasing revenue through upsells and cross-sells, which increases the compounding impact of recurring revenue. In addition, by recognizing your post-sale drivers of revenue growth, you can allocate spending in a way that more effectively leverages the potential on both sides of the model.  

So, given these limitations, you might ask why SaaS businesses continue to use the traditional sales funnel? Well, for one thing, it’s been around for a very long time, well over a century, in fact. 

But there are other reasons, too… 

The challenges in using the bowtie model for SaaS

Despite the fact that the bowtie model is tailor-made for recurring revenue businesses, implementing it successfully is not without its challenges. So, we should probably take a look at those here: 

• Data integration and validation: Your systems need real-time data to track key metrics and generate actionable insights. If your systems aren’t integrated, your tracking tool can’t track metrics like CAC and churn rate. Integration challenges typically arise with legacy tools. Most modern systems offer out-of-the-box integrations and APIs.
• Cross-functional alignment: The bowtie model requires all teams to row in the same direction. Disjointed teams are likely to create a disjointed experience for your customers. All teams need to be aligned on the definition of each stage and the associated subsystem(s). Further, to ensure everyone knows their role in the bowtie processes, use a single customer journey map that shows who owns which stage.  
• Measuring post-sale success: Quantifying post-sale success isn’t always easy or intuitive. Your onboarding process may be top-notch, but there’s no way to measure how much you’ve improved over the past year.
• Resource allocation: Acquisition is expensive, but top-notch onboarding, customer success, and upselling also require resources. While the bowtie model will always be more resource-intensive than the traditional sales funnel, you can optimize your resources by funding post-sale roles, tools, and automation based on revenue impact.
• Scalability: Your bowtie model processes may need some tweaks as business grows. You might need to automate onboarding, ensure customer success doesn’t become a bottleneck, and deliver a consistent customer experience no matter how many of them you acquire each month. Use automation tools and create playbooks to ensure scalability with the bowtie model.

Benefits of implementing the bowtie funnel

Despite the challenges described above, we think the benefits of the bowtie model for SaaS businesses far outweigh them:

• Maximizes revenue across customer lifecycle: The bowtie model goes beyond closing leads, maximizing revenue across the customer lifecycle through renewals, upsells, cross-sells, and usage-based expansion. By providing a full view of the customer lifecycle, the model allows for effective channel comparisons, identifying which conversion levels need improvement to boost overall output and which ones to double-down on.
• Ensures scalability: The bowtie model structures your business around repeatable, lifecycle-based processes. As a result, your growth is more predictable. When your customer base grows, you’re better prepared to handle that growth at every stage within your existing system. No more going into panic mode to beef up your  post-sales processes after a spike in closed deals.
• Increasing LTV: With an equal focus on post-sale processes and the value they can have for driving revenue growth, the bowtie model naturally encourages activities that contribute to better customer satisfaction, which in turn, helps to reduce churn, promote expansion, and increase renewals. 

A model that’s adaptable to any go-to-market (GTM) strategy

One of the biggest advantages of bowtie modeling is that it is adaptable to all three of the most common go-to-market strategies that SaaS businesses typically employ:

• Inbound sales
• Outbound sales
• Sales through account-based marketing (ABM) 

While the core stages in the customer journey, such as awareness, education, and selection remain constant, the subsystems associated with each stage will differ depending on the details of your GTM process. 

To fully leverage the bowtie model in your business, we recommend building out a bowtie for every GTM motion you’re using, channel by channel, so you can compare them to see which ones are really giving you the most long term value. 

You’ll probably need to invest in a solid FP&A software to do this well. If you choose one like Drivetrain, you can also explore other GTM strategies and channels you’re not using yet, with powerful multi-scenario planning features. 

Spend some time with Drivetrain today to learn more about the platform and how it can support all your financial modeling, forecasting and planning needs.