To find out what a lead is worth, you have to start by establishing an Average Value per Sale for your pest control company. Let’s assume most your sales are recurring clients that sign on for a 1 year contract. Some clients are one-time only services but others will stay with your company much longer than 1 year. I like to look at it through the lens of a one year contract because we don’t want to overestimate this number. Let’s assume you charge $125 per quarter. In a year, you gross $500 per customer. Let’s also assume that you run your business at a 40% profit margin. This means that each customer profits your company $200 per year. (Adjust these numbers for your actual business of course). So if a new customer walks through your door and signs up for service, on average this is going to profit you $200. (I know there are ancillary benefits of having a new sale such as the new customer’s propensity to refer their friends and neighbors as well as the fact that they hopefully will stay with your company for 5+ years but its important to ignore these to keep it simple.)
So if you profit $200 from a new customer, how much are you willing to pay for this new customer? Hopefully not more than $200! Ideally you want to pay next to nothing but in reality you would most likely jump at the prospect of paying around $100 to $120 for this new customer. That way you make money your first year and the rest of the benefits are gravy in future years.
Here is where things get a little tricky. New sales come from leads, and leads ultimately have a cost. This cost could be incurred by actually buying the leads, a salesperson’s commissions or by paying for a billboard ad or for Search Marketing services.
So how much is a lead worth (remember that leads ultimately turn into new sales)? The answer depends on your lead to sale conversion rate. If your office staff is awesome at selling a lead into a new customer, they may convert as many as 50% of your leads into sales. Our stats show that if your office staff is converting 25% of the leads into sales they are doing a pretty good job. A 33% lead to conversion is a great goal to attain. If you are lower than 20%, you are below average at closing sales.
So let’s say you convert leads into sales at 25%. This means you turn 1 out of 4 leads into new sales. If you are willing to pay $120 per new sale, than you should be willing to pay $30 for a decent pest control lead. This is because you end up shelling out $30 x 4 or $120 and out of this spend you get 1 new sale on average!
Here is the arithmetic-
$500 average gross revenue from a new sale
40% profit margin
$200 profit per new sale
The percent of the average profit you are willing to spend to acquire the new sale (60%)
Your lead to sale conversion rate (25%)
The price you are willing to pay for a new lead ($30)!
FYI Info: Lowest cost per lead methods-
Search Engine Marketing
Local Directories with Great Customer Reviews
Current Customer Referrals
Pay Per Click Marketing
Buying Leads from a Reputable Source
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