Lead value calculator

Revenue per deal is what a typical won deal brings in. Use the first deal rather than the lifetime relationship unless there is a retention curve behind the longer number and cash to bridge the gap between paying for media now and collecting the revenue later.

Gross margin is the share of that revenue the business keeps after delivering the work: materials, subcontractors, the delivery team's time, payment fees — whatever varies with the job. Fixed costs stay out; they are paid out of what this calculation leaves behind.

Lead to deal rate is the share of leads that become a won deal, measured from the same lead definition the ad account reports. This is where the arithmetic most often goes wrong, and it is worth being careful about.

A sales team's close rate is usually quoted on qualified leads — the ones that answered the phone, met the criteria and entered the pipeline. An ad account counts every form submission.

If thirty per cent of form fills qualify and the sales team closes twenty per cent of those, then the rate from a form fill to a deal is six per cent, not twenty. A lead value computed on the twenty is more than three times too high, and a campaign bid against it will spend confidently into a loss for as long as it takes the accounts to catch up.

The fix is mechanical: either measure the close rate from raw leads, or multiply the qualified close rate by the qualification rate before typing it here. The cost-per-lead calculator produces that qualification rate from the same two counts.

Gross profit per deal is the money a won deal actually leaves. At 2,400 of revenue and a 45 per cent margin, 1,080.

What one lead is worth spreads that across the leads it took to get it. At a 20 per cent close rate, 216. That is the break-even ceiling: pay less than it and the campaign makes money, pay more and it does not.

Leads per deal is the same fact stated as a count — five leads per deal here — and it is the version that makes a planning conversation concrete. A target of ten new customers a month is fifty leads a month, and fifty leads at whatever the account is currently paying is a budget.

Paying exactly what a lead is worth means the campaign covers the cost of delivering the work and the media and contributes nothing to the office, the salaries, the software, the tax or the owner's return.

The number to bid against is lower, and how much lower is a finance question rather than a media one: subtract whatever each deal has to contribute to the rest of the business before setting the target. A business that needs 400 of contribution from each deal has 680 of gross profit left to spend on winning it, and at a 20 per cent close rate that is 136 a lead rather than 216.

Stating both figures is what stops an account being run at break-even by accident, which is the usual outcome when a single number is quoted as "what we can pay".

The distance between the two is also the honest measure of how much risk the plan carries. A ceiling of 216 against a target of 136 leaves eighty units of room for the close rate to disappoint, the margin to slip or the deal to come in smaller than planned. A target set at the ceiling leaves none, and every one of those three inputs is an estimate.

The two halves of the fraction are independently movable, and one of them is almost always ignored.

The close rate. Doubling it doubles what a lead is worth, immediately, with no change in the auction. Speed of follow-up, a qualifying question on the form, better routing, and a sales process that reaches people while they remember filling in the form are all worth more to the media budget than any bidding change — and none of them is usually presented as a marketing decision.

The deal. Price, packaging and margin each move the ceiling proportionally. A ten per cent improvement in margin is a ten per cent increase in what every lead may cost, across every campaign at once.

The mix. A single lead value across several services averages a high-margin job that closes rarely with a low-margin one that closes often. Compute it per service line wherever the two differ materially, because one blended ceiling will overpay for one and underfund the other.

Set the ceiling from the first deal, set the target below it by whatever the business needs, and compare both against the cost per qualified lead rather than the headline cost per lead. Recompute when price, margin or the close rate moves, and treat a close rate quoted from memory with suspicion — it is the input with the widest range of plausible values and the largest effect on the answer.