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Know the most you can pay for a lead

The most you can afford to pay for a lead and still hit your profit: lifetime value, times close rate, divided by sales cycle in months, times the margin you want to protect. From Chapter 8 of From Traction to Freedom.

The book's example numbers. Replace them with yours.

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months
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Your Max CPL

$1,170

See the math step by step and whether your current lead cost is over the line.

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FAQ

Questions owners ask

What is Max CPL?

Max CPL is the most you can afford to pay for a lead and still hit your profit. From From Traction to Freedom: Lifetime Value, times close rate, divided by sales cycle in months, times the margin you want to protect.

Can you show an example?

A $23,400 lifetime value times a 20 percent close rate is $4,680. Divided by a 2-month sales cycle that is $2,340, and times a 50 percent margin the ceiling is $1,170 per lead.

What counts as lifetime value?

The total revenue an average customer generates over the whole relationship, based on how the business works today, not how you hope it works.

What if I'm over my ceiling?

Convert the demand you already have before you buy more. Tighten follow-up and speed-to-lead, then raise close rate or lifetime value, which raises the ceiling.