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How Much is a Lead Worth? Here’s a Quick Formula to Find Out.

Let’s pretend for a moment that I have been out generating leads for your business for a month, and I have a grocery sack of leads that are perfect for your business.

(I know you are saying, “you can’t put my leads in a grocery sack.”  I realize that. Let’s just go with it.)

So, I have this grocery sack of leads that are perfect for your business – and I want to sell them to you for $30 each?  Is that a good deal for you? 

Well, how about if I wanted to sell them to you for $300 each.  Is that still worth it?

How about $3,000 each?  Should you take that deal?

(See where I’m going with this?)

Business leads are a critical element for all companies to grow, but often they aren’t coming in the way they should.  And that’s because most businesses don’t know what a lead was worth to them.

 

At the end of this article, WE PROVIDE A FREE TOOL to help you to answer this question for your business. 

 

But Why Does Knowing the Value of a Lead Even Matter?

Here’s a question.

Let’s say you tell me that your average customer is worth $1,000 in sales each year. And what if I used my super secret (super easy) Lead Cost Formula and I found out that with a certain type of marketing, I could get you leads that are your ideal customers for $1 each. 

What would you do?

If you were like most businesses , you would figure out how many $1 bills you can send to me as quick as possible, right?

But, if I told you it would be $100 instead of $1, you probably would not be so quick to jump — even though, with the right knowledge, it still may be a good investment.  You just don’t know it, because you don’t understand the value of a lead should be to your business.

There is an old marketing genius named Dan Kennedy.  One of Dan’s famous quotes is:

“The business that can spend the most to acquire a customer wins.”

How much can you afford to spend on attracting new customers?  Do you have any idea? 

How much are you spending now to acquire customers? 

It’s not surprising if you don’t know.  A majority of businesses can’t answer this question either.

You Need to Learn Your Metrics

Costs to acquire a customer is something many large businesses know well.  Here are just a few as examples:

  • $7 – priceline.com
  • $315 – Sprint PCS
  • $10 – Barnes & Noble
  • $175 – TD Waterhouse

The key to knowing this is to get into the numbers.

At first, you obviously will have to make assumptions.  That’s OK though.  You can refine your numbers as you get more data points.  But the key is to begin by tracking all of your marketing and advertising activities and their costs. 

If your business model requires a sales team, this just adds another layer into your calculations, but it certainly is important to add those metrics too.

Download Our Lead Cost Formula Spreadsheet

If you are ready to figure this out, we have made it super easy to calculate everything.

All you have to do is download our FREE Lead Cost Formula Spreadsheet and it will walk you through all of the metrics you need to consider to calculate your cost to acquire a customer.

We even put together a simple video to show you exactly how to use it.

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