Lead value calculator
A lead is only worth what it eventually turns into, and most businesses guess that number when they set an ad budget. Enter your average sale, how often customers come back, your margin and how many leads end up buying, and this calculator turns them into the profit one lead brings in. It then shows the most you can pay per lead, what you should aim to pay, and whether the leads you are buying today make or lose money.
From leads to customers each month
How many of this month's leads survive each step of your funnel.
What a better close rate is worth
The same leads at the same price, with your close rate moved up or down. Small sales improvements raise what you can afford to pay for every lead.
| Close rate | Customers a month | Value per lead | Cost per customer | Monthly profit after lead cost |
|---|
How lead value is calculated
A lead has no value of its own. Its worth is a share of a customer's worth, in proportion to how often leads become customers.
Everything is measured in gross profit rather than sales, because profit is what pays for marketing. The calculator then compares that value with what you pay per lead today.
Value a customer
Total sales over the relationship, then keep only the margin.
customer profit = average sale × purchases × margin
Work out the conversion rate
Leads first have to be a fit, then fit leads have to buy.
conversion = fit share × close rate
Value one lead
This is also your break-even cost per lead: pay more and you lose money on each customer.
lead value = customer profit × conversion
Set a target cost per lead
Keep the share of profit you chose and spend the rest on buying leads.
target cost per lead = lead value × (1 − profit kept)
Check today's numbers
Compare the lead value with your current cost per lead, and divide that cost by the conversion rate to get what each customer costs you.
cost per customer = cost per lead ÷ conversion
Lead value questions
How do you calculate the value of a lead?
Multiply what a customer is worth by the chance that a lead becomes a customer. Customer worth is the average sale times the number of purchases over the relationship, times your gross margin. If a customer is worth $1,000 in profit and one lead in ten buys, each lead is worth $100.
Should lead value use revenue or profit?
Use profit. A lead that brings in $500 of sales on a 30 percent margin only gives you $150 to spend on marketing, overheads and your own pay. Revenue per lead is shown too, because it is the number most ad platforms report, but decisions about how much to pay should rest on profit.
What is the most I should pay for a lead?
The break-even cost per lead equals the profit a lead brings in. Pay more and every new customer loses money. Most businesses aim well below break-even so there is profit left over, which is what the target cost per lead in the calculator shows.
What is a good lead-to-customer conversion rate?
It depends heavily on the source and the sale. Referrals often close at 30 to 50 percent, inbound enquiries at 10 to 25 percent and cold or paid-social leads at 2 to 10 percent. Track your own rate by source for a few months; it is far more useful than an industry average.
Why split leads into fit leads and customers?
Some leads were never going to buy: wrong budget, wrong location or just browsing. Separating that filter from your sales close rate shows where the loss happens. Better targeting raises the fit share, while better follow-up raises the close rate, and the calculator lets you test both.
How do repeat purchases change lead value?
A lot. A customer who buys three times is worth three times the first sale, so the same lead is worth three times as much. Businesses with strong repeat buying can afford to pay much more per lead than competitors who only count the first sale.
What is the difference between cost per lead and cost per customer?
Cost per lead is what you pay for one enquiry. Cost per customer, or acquisition cost, is the lead cost divided by your conversion rate. At $40 per lead and a 10 percent conversion rate, each customer costs $400 to win.