A lead is worth the gross profit you expect from a customer over their lifetime, multiplied by the share of leads that become customers. The Lead Value Calculator works this out from your average sale, margin, conversion rate and repeat purchases, and suggests a sensible maximum to spend to win each lead.
Lead Value Calculator
Work out what one enquiry is really worth to your business.
Your result
Estimates based on the figures you entered. Nothing is stored or sent. This is general information, not financial advice.
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How the calculation works
- Lifetime revenue = average sale value x purchases per year x years a customer stays.
- Lifetime gross profit = lifetime revenue x gross margin.
- Value of one lead = lifetime gross profit x the percentage of leads that become customers.
- Suggested maximum cost per lead = value of one lead x the share of profit you are willing to spend on acquisition.
Why lead value matters
Knowing what a lead is worth changes how you treat every enquiry. If each lead is worth R1,000 in gross profit, a missed call or a quote that is never followed up has a real cost. It also tells you how much you can sensibly spend on advertising. Read why more leads won’t fix a leaking business and our lead generation guide.
Worked example (illustrative figures)
A service business sells jobs worth R5,000 on average at a 40% gross margin, so each sale leaves R2,000 of gross profit. A typical customer buys twice a year and stays for three years, which is R12,000 of lifetime gross profit. One in four leads becomes a customer (25%), so each lead is worth R12,000 × 25% = R3,000. If you are willing to spend 20% of that to win a lead, your ceiling is R600 per lead.
Two things follow. Any channel that brings leads in below R600 is worth scaling, and every point of conversion you add through faster replies and follow-up raises the value of every lead you already get, without spending more on advertising.
Mistakes to avoid
- Using revenue instead of gross profit, which makes leads look more valuable than they are.
- Guessing the conversion rate. Count the last 20-50 enquiries and how many became customers.
- Ignoring repeat purchases, which undervalues businesses with loyal customers.
- Comparing lead costs across channels without tracking where each customer came from.
The calculator shows amounts in rand, but the maths works in any currency: enter your figures in pounds, dollars or euros and read the results in the same currency.
Questions about lead value
What is a good conversion rate to use?
Use your own records: count enquiries and new customers over the last few months. If you do not track them yet, start now with a simple weekly tally.
Should I use revenue or profit?
Profit. Revenue overstates what you can afford to spend, because it ignores the cost of delivering the product or service.
How can I increase the value of a lead?
Improve conversion with faster replies and consistent follow-up, raise average sale value with packages and add-ons, and keep customers longer with reminders and good service.
Your next step
Use the Business Growth Toolkit for lead trackers and follow-up templates, or see Business Growth Automation Systems.
