The real value of a lead, how to calculate it?

Hi Allegandro,

There is no possible way to "know" the value of a lead in advance for a new business with a brand new product/service. At the pre-launch stage all you can do is make some assumptions based on an educated guess.

I suggest you look at similar types of offers, and try to discover their selling points and estimate their costs to deliver. Subtract the cost to deliver from the selling price and that's the estimated value of a transaction.

Since you are planning to generate "leads", you cannot expect to close every lead, so again research similar businesses and try to discover the typical closing ratio of the average sales rep. Multiply your estimated closing ratio by your estimated transaction value to determine estimated lead value.

To get more accurate you are going to need real data from you own test marketing campaigns. Don't be afraid to just start generating leads, you going to need the data generated from your own test marketing to confirm and adjust your valuations to match real honest data. Look at the initial phase of your marketing campaign as a research and development phase with the express intent of gathering real observable data.

Once you have that real data you can move your new business from the development stage, utilizing theoretical assumptions, to a true operational stage adapting your business model to that real data.

HTH,

Don Burk

Total net income divided by the total number of leads is what each lead is worth. So you want to pay less than what the average value per lead is worth if you want to realize a profit.

In your case, it's a little more involved since you plan to charge monthly VS a flat fee. So you also have to figure out what the average stick time is...how many months does someone continue to pay before canceling.

You also don't know what you can truly charge per month. You estimate $25, but is that realistic and will it get you the best stick time / max income?

To estimate what "might" be a fair/realistic cost per lead before having your own actual stats is to know similar businesses stats. Which may or may not be possible.

I would just start generating leads and use your stats to figure it out.

Prices for lead generations depend on lead generation time and lead availability. If each lead includes a contact name, email and company, then one needs approximately 3 minutes to collect it. Then he/she can create 20 or more leads each hour. In this case, you can pay 40 to 50 cents for every lead creation. If it's possible to collect leads from consumers' websites, then there is the best possibility to convert leads into actual sales.