Lead value calculator
Ad budgets are often set without anyone knowing what an enquiry is really worth, which makes it impossible to say whether a campaign paid off. Fill in your typical sale, how many times a customer buys, your margin and the share of enquiries that turn into customers, and you get the profit a single lead is worth. From there you can see your break-even price per lead, a sensible target price and whether today's leads are earning or burning money.
This month's funnel
How many enquiries are left at each stage, from first contact to paying customer.
The payoff from closing more deals
Lead volume and lead price stay the same while the close rate moves up and down. A few extra sales per hundred leads lifts the price you can afford for every one of them.
| Close rate | Customers a month | Value per lead | Cost per customer | Monthly profit after lead cost |
|---|
How the value of a lead is worked out
On its own a lead earns nothing. It is worth a slice of a customer, and the size of that slice depends on how often leads go on to buy.
The sums use gross profit, not sales, because profit is the only money that can pay for marketing. That figure is then set against the price you pay per lead now.
Put a figure on a customer
Add up everything a customer buys from you over time, then keep only your margin.
customer profit = average sale × purchases × margin
Find your conversion rate
A lead must first be a real prospect, and then that prospect must buy.
conversion = fit share × close rate
Work out one lead
This is the most a lead can cost before each new customer loses you money.
lead value = customer profit × conversion
Choose a target price
Keep the share of profit you picked and treat the rest as your budget for buying leads.
target cost per lead = lead value × (1 − profit kept)
Hold it up against today
Compare the lead value with what you pay now, and divide that price by your conversion rate to get the cost of winning one customer.
cost per customer = cost per lead ÷ conversion
Lead value FAQ
What is the formula for lead value?
Lead value is customer value times the chance a lead buys. Customer value is your typical sale, times how many times a customer buys from you, times your gross margin. So a customer worth $1,000 in profit, with one lead in ten converting, makes each lead worth $100.
Should I measure lead value in revenue or in profit?
Profit. A $500 sale at a 30 percent margin leaves $150 to cover marketing, overheads and your own wage, not $500. The calculator still shows revenue per lead because ad platforms report that figure, but spending decisions should rest on the profit number.
How high can my cost per lead go?
Up to the profit each lead brings in, and not a cent more. Past that point every new customer costs more to win than they earn you. In practice you want to pay well under that line so some profit is left, which is what the target figure is for.
What conversion rate should I expect from leads?
It varies with the source. Referrals commonly close at 30 to 50 percent, people who contact you on their own at 10 to 25 percent, and cold or social ad leads at 2 to 10 percent. A few months of your own numbers, split by source, beats any benchmark.
Why separate good-fit leads from customers?
Some enquiries never stood a chance: wrong budget, wrong area, or just curious. Splitting that filter from your sales close rate shows whether you are losing people in targeting or in follow-up, and you can test an improvement in each.
How much do repeat customers raise lead value?
In direct proportion. A customer who comes back three times is worth three first orders, so the lead that brought them in is worth three times as much. That is why businesses with loyal customers can outbid rivals who only count the first sale.
Is cost per lead the same as cost per customer?
No. Cost per lead is what one enquiry costs. Cost per customer divides that by your conversion rate, so $40 leads that convert one time in ten cost $400 for every customer you win.