What a lead actually costs: the arithmetic from reply to contract

Price per lead is not the cost that matters

Two sources can charge the same per lead and produce completely different businesses, because the number that pays the bills is the cost of a signed contract. Everything between a lead and a contract is a conversion step, and each step has a rate that is yours to measure.

The chain for a text-sourced lead is short: lead, conversation, appointment, offer, contract. Put your own rates on those arrows and the price per lead becomes almost irrelevant next to them.

A worked hypothetical, with the assumptions in the open

These numbers are made up to show the shape of the arithmetic, not a promise about any lead source. Suppose leads cost five dollars each, one in four turns into a real conversation, one in five of those conversations becomes an appointment, and one in four appointments signs. That is eighty leads, twenty conversations, four appointments and one contract — four hundred dollars of leads per contract.

Now change only the conversation rate to one in eight. The same contract costs eight hundred dollars in leads. Nothing about the lead price moved; the thing that doubled the cost was what happened on the phone. That is why the rates deserve more attention than the price.

Time is the bigger line item

Leads are the smallest line item in the chain; hours are the largest. If reaching twenty conversations takes a week of dialing, the contract above cost a week of somebody’s time on top of the lead spend. A source that produces fewer leads but more conversations per hour can be worth more even at a higher price per lead.

This is the honest case for leads where the seller already replied: not that the lead is better, but that the conversation starts closer to the middle, so the hours per conversation drop.

Measure the rates before you judge the source

Keep a plain tally per source: leads bought, conversations had, appointments set, contracts signed. A month of honest counting tells you more than any sales page, including ours. If a source cannot produce conversations for you after a fair test, the price per lead does not matter.

Judge a source on a batch, not a lead. One silent lead says nothing; thirty leads with two conversations says a lot.

What a lead should cost you, then

Work backwards from the only number that matters to you: what a contract is worth in your market, and what share of that you can spend acquiring it. Divide by your measured rates and you have the most you should pay per lead. Anything under that is a source worth keeping; anything over it is a source to drop, however good the leads look individually.