Marketing & agency
Lead Value Calculator
Works what a lead is worth, which sets the maximum you can pay for one.
Result
The one-third target is a working rule that leaves room for overhead and profit after acquisition. It is a guide, not an accounting rule.
Get a Free Business AuditHow the calculation works
Conversion rate times the gross margin on a converted customer, plus the value of repeat business and referrals over the relationship. The share of that value you are willing to spend sets the ceiling on what a lead can cost.
What moves the number
- Conversion rate from lead to customer.
- Gross margin on the first sale.
- Repeat and referral value over the relationship.
- Whether the lead is exclusive or shared.
Where this one goes wrong
Using revenue rather than margin overstates lead value by the whole cost of delivery, which in a service business is most of the revenue, and that single error is why businesses buy leads that cannot pay for themselves. Use margin. Shared leads also convert far worse than exclusive ones, so applying an exclusive conversion rate to shared leads overstates their value substantially.
Before you quote
- Use gross margin, not revenue.
- Apply a lower conversion rate to shared leads.
- Include repeat and referral value where it is real.
Questions
About this calculator
What is a lead worth?
Conversion rate times the gross margin on a converted customer, plus repeat and referral value. Using revenue instead of margin overstates it by the whole cost of delivery, which is why businesses buy leads that cannot pay for themselves.
Are shared leads worth less?
Considerably, since the prospect is talking to several providers and is frequently comparing price. Applying an exclusive conversion rate to shared leads overstates their value, and that is the usual reason a lead programme disappoints.
Should repeat business be included?
Where it is genuinely repeat, yes, since a customer who returns is worth more than the first sale. The caution is that it has to be measured rather than assumed, because an optimistic repeat assumption justifies overpaying for leads.
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Please keep the attribution line. It is the only thing we ask in return.
How to use this calculator
- Average job value ($). Enter your own figure; the page starts at $900.
- Close rate (%). Enter your own figure; the page starts at 30%.
- Gross margin (%). Enter your own figure; the page starts at 45%.
- Additional jobs per customer over time. Enter your own figure; the page starts at 0.8.
The result updates as you type, so you can try a figure, see what it does to revenue value per lead, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Average job value | $900 |
| Close rate | 30% |
| Gross margin | 45% |
| Additional jobs per customer over time | 0.8 |
What comes out
| Result | Value |
|---|---|
| Revenue value per lead main result | $486.00 |
| Gross profit per lead | $218.70 |
| Value per customer won | $1,620.00 |
| Suggested target cost per lead | $72.90 |
Each lead is worth $486.00 in revenue and $218.70 in gross profit. Anything above that loses money; below $72.90 is comfortable.
How sensitive the answer is
Holding everything else steady and changing only average job value, this is what happens to revenue value per lead. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Average job value ($) | Revenue value per lead |
|---|---|
| $450 | $243.00 |
| $675 | $364.50 |
| $900 example above | $486.00 |
| $1,350 | $729.00 |
| $1,800 | $972.00 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Average job value ($)
- A money amount, starting at $900.
- Close rate (%)
- A percentage, between 0 and 100, starting at 30%.
- Gross margin (%)
- A percentage, between 0 and 100, starting at 45%.
- Additional jobs per customer over time
- A number, between 0 and 100, starting at 0.8.
What the results tell you
| Result | What it is |
|---|---|
| Revenue value per lead | The headline result. A money figure. |
| Gross profit per lead | A money figure. |
| Value per customer won | A money figure. |
| Suggested target cost per lead | A money figure. |
Attribution is the weak link
Return and cost-per-lead figures depend on knowing which enquiries came from which source, and most home-services businesses do not track that reliably. If the source data is guesswork, so is the return.
Keep going
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