It’s a common question, but you probably know the answer: It depends.

Still, you need better than “it depends.” How can you determine whether your Cost Per Lead is good — or even acceptable?

The cost of a lead when promoting a freebie lead magnet will not be the same as a lead to discuss the purchase of real estate. The value of these leads won’t be the same either. Quality also matters, so you can’t focus too much on the cost.

Let’s think through how to approach this…

Lead Value

The main thing to understand is what a lead is worth to you. What percentage of these people end up buying from you? What’s the average value of these customers? This can give you a baseline of lead value and how much you should be willing to spend.

This math isn’t all that complicated. Instead of focusing on the value of leads generally, you should isolate those that came from your advertising since results can vary.

If a new real estate client results in an average of $10,000 in revenue, one lead can have a lot of value. Even if 5% of leads become customers, that’s an average lead value of $500. In other words, such a company should be okay with spending up to $500 per lead in this scenario.

If a customer is more likely to be worth $100 and 5% convert, the value is closer to $5. This may be the more typical situation. You need to watch your Cost Per Lead since anything over $10 (or so) just isn’t worth it.

But all of these numbers change quickly depending on your Customer Lifetime Value and conversion rate from leads.

What Are You Asking For?

You should also think about the exchange and how likely it is that someone will become a lead.

In the real estate scenario, someone needs to be able to afford real estate, in the market for it, interested in what you are selling, and willing to hop on a call to discuss it. That’s a lot of qualifications — and it’s also a potentially big commitment. Your lead cost will reflect that.

If you are offering a free video series that requires nothing beyond an email address, there are far fewer barriers preventing a person from providing their information. They need to be interested, but there’s virtually no commitment involved. The cost will reflect his, too.

This is at least napkin math to get you started.