The Math That Matters
Before you buy a single lead, you need to understand the economics. This formula will tell you exactly what you can afford to pay per lead and still be profitable.
The Formula
Max Cost Per Lead = (Average Ticket × Close Rate) ÷ Desired Profit Margin
Example: Roofing
- Average Ticket: $25,000
- Close Rate: 12%
- Revenue Per Lead: $25,000 × 0.12 = $3,000
- Target Profit Margin: 50%
- Max Cost Per Lead: $3,000 × 0.50 = $1,500
Wait—that seems high. That's because roofers can afford to pay A LOT for a qualified lead. Most charge $150-250, which means they're leaving money on the table or closing at much lower rates.
Reverse Engineering
If a lead costs $200 and you close at 12%, your break-even ticket is:
Break-Even Ticket = Cost Per Lead ÷ Close Rate
$200 ÷ 0.12 = $1,667
So any job over $1,667 is profitable. With an average ticket of $25,000, you're printing money.
What This Means for You
As a lead buyer, you should:
- Know your numbers before purchasing
- Track close rates religiously
- Calculate actual ROI per lead source
- Negotiate pricing based on performance
As a lead seller, you should:
- Price based on buyer economics, not your costs
- Provide transparent performance data
- Help buyers improve close rates (training, scripts, follow-up systems)