What should a lead cost? How to calculate your maximum lead price

Many business owners buy leads on gut feeling: pay too much and your margin evaporates, pay too little and you miss out on volume or quality. The question of what a lead should cost has no single answer, but it does have a clear calculation. In this article you will work out, step by step, your maximum lead price.

Why a fixed lead price does not exist

What counts as a good lead price varies hugely between industries and businesses. A lead for a full kitchen renovation is simply worth more than a lead for a small repair, because the job is bigger. Your own conversion matters too: one company turns one in three leads into a customer, another one in ten.

That is why “my competitor pays 30 euros per lead” tells you almost nothing. What matters is how much a customer is worth to you and how often you turn a lead into a job. Once you know those two figures, your maximum lead price falls out almost by itself.

What should a lead cost? Start with your customer value

The foundation of the calculation is the value of a single customer. Be careful: this is not your revenue, but what you keep at the bottom line after materials, hours and other costs. That is your margin per customer.

Factor in repeat business as well. A customer you help with a leak this year might call next year for maintenance and recommend you to the neighbours. Count that follow-on value in carefully, because a customer is often worth far more than that first job alone.

Work backwards through your conversion rate

Not every lead becomes a customer, and that is normal. The question is: on average, how many leads do you need for one job? That rate determines how much each individual lead is worth.

The rule is simple:

• Work out your margin per customer.
• Work out what share of your leads become customers, your conversion.
• Multiply the margin by your conversion. That is the average value of one lead.

That result is your ceiling: the amount at which you break even exactly. Anything you pay below it is profit; anything above it costs you money.

A worked example

Say you are a plumber and you keep an average margin of 500 euros per customer. For every five leads, one turns into a paying job, so your conversion is 20 percent.

The average value of a lead is then 20 percent of 500 euros, which is 100 euros. At 100 euros per lead you break even exactly. To earn a healthy return, you deliberately stay below that, somewhere around 40 to 60 euros per lead for example. That leaves enough margin per customer to actually grow your business.

Do plug in your own numbers. If your conversion improves to one in three, your ceiling rises sharply and you can afford more per lead. That is exactly why it pays to know your conversion before you negotiate on price.

Cheap leads are not always cheap

A low price per lead means little if the quality is poor. Ten cheap leads that go nowhere cost you more time and frustration than a few pricier leads that genuinely match your work. So look beyond the amount on the invoice:

• How exclusive is the lead? Is it also sold to three competitors?
• Does the request match what you do and your service area?
• How fresh is the lead? A request from today is worth more than one from last week.
• Can you reach the person easily, with a correct phone number and the right details?

So always calculate your maximum lead price from conversion, not from the lowest price. A slightly pricier lead that converts more often pays for itself many times over.

Your action plan in short

• Calculate your margin per customer, including repeat business.
• Measure how many leads you need for one customer.
• Multiply margin by conversion to find your ceiling.
• Deliberately stay below that ceiling so profit remains.
• Judge leads on exclusivity, freshness and fit, not on price alone.

Once you know your customer value and your conversion, what a lead should cost is no longer a guess but a sum you can do yourself. That way you never overpay and you never leave profit on the table. Looking for leads that match your trade and service area? Explore OXIAE leads and use your own numbers to work out what pays off for you.

Frequently asked questions

What is a normal lead price? There is no universal normal amount. A lead for a large job can justify a higher price than a lead for a small repair. Always work backwards from your own margin and conversion instead of sticking to a fixed figure.

Should I pay per lead or per customer? It depends on your situation. Paying per lead gives you more volume and control, while paying per customer or per appointment shifts the risk. As long as you know your conversion, you can work out whether either model adds up.

Are exclusive leads worth the extra money? Often yes. An exclusive lead that only reaches you usually converts better than one sold to several companies. Work out how much your higher conversion is worth and weigh that against the extra cost.