As the year draws to a close, it’s the ideal opportunity to take time and reflect on your lead generation strategy so that you only take the best practices forward into the new year. As a business owner, you need to have an understanding of which channel is bringing in the most leads and which is giving you the greatest return on investment. Whilst investigating this, there’s the added incentive that you’ll be able to identify what strategies aren’t worth your time or money. 

Once you begin calculating your costs per lead, you can plan how you will maximise the most successful channels to achieve an even better return on investment. What’s more, when we work with our clients to figure out their most effective lead generation process, they also often discover new ways to generate leads. 

If you haven’t already, block out some time in your diary to follow this guide and calculate your costs per lead. Doing this will ensure you make better use of your time in 2022 and will help you gather more valuable, cost-efficient leads in the future. 

How to figure out your cost per lead  

Step 1) Identify where you get leads from 

The first step, unsurprisingly, is to identify where your leads come from. Initially, the obvious ones will spring to mind – but take it one step further and have a look through your existing client database and note down where you acquired each lead from. You might have some of the following lead generation strategies on your list: 

  • LinkedIn (Posting engaging content, messaging campaigns, sending relevant connection requests) 
  • Networking groups (e.g., BNI) 
  • Creating website content to appear in search results 
  • Creating free guides/ useful resources that people download in exchange for their email address 
  • Current client referrals  
  • Previous purchaser referrals 
  • Website queries 

Step 2) Figure the cost of leads for each source. 

Now you have a list of all your lead generation channels, it’s time to figure out the cost per lead for each so you can later compare and investigate which strategy is most worthy of further investment. 

The data you will need to do the calculation is the cost invested in a channel (remember to factor in the cost of your time to get an accurate representation of what is involved) and the total number of leads acquired through that channel. 

Once you have gathered your data, the formula is as follows: 

Cost per lead for each channel = Marketing spend on channel ÷ Marketing leads by channel. 

One by one, use your data and this formula to discover the cost per lead of each channel. 

Step 3) Look at your data objectively. 

It’s now time to analyse your data impartially. Firstly, start by ranking each source according to which method is giving you the best return on investment.  

For example, if you’re a member of a networking group, this will likely have high total marketing spend as it incurs a joining fee and is time-consuming to get the most out of it. Therefore, if you have found this method has a high cost per lead – consider how long you’ve been a member of the group and what you have got from it financially. If you have only just joined, it will take some time before you see tangible results – so keep this in mind when comparing data. 

Additionally, it’s likely that client referrals will be a relatively low-cost channel but ask yourself – are you utilising this to its full potential? How often do you ask your clients for referrals and/or introductions? 

Step 4) Compare the results. 

After taking the time to consider external factors which influence the data, now discuss your results with an employee, business coach or even a friend or family member. Which is generating the lowest cost per lead? What is giving your business the greatest return on investment? But before you rush to make any decisions, don’t miss our final stage… 

Step 5) Consider the conversion rate. 

Once you have this data and you have analysed it objectively, it’s important not to act hastily. Knowing your cost per lead for each channel is just the beginning. You must go one step further and consider what channels are converting leads into sales. 

In my next blog post, we’ll use your cost per lead data to calculate conversion rate – so you can identify the cost of your clients by source (and discover which channel is bringing the most prosperous leads!) 

How Bill Squires Business Coaching can help you 

Identifying the cost of your leads is common sense, but it’s not common practice. And this isn’t the only practice you can do to help your business run as efficiently as possible. To find what more you can do to make lasting change to your business, book a call with Bill.