Win more of your leads · Every business
What a Lead Is Worth: From Inquiry to Booked Job, Step by Step
A new inquiry has a dollar value long before anyone books, and working it out step by step shows an owner where each lead is won or lost and how much a faster answer is worth.
At a glance
- The value of a lead is what an average inquiry is worth to the business once you account for the share that get answered, quoted and booked, multiplied by what a booked customer spends.
- In a Harvard Business Review audit of 2,241 U.S. companies, 23% never answered a new web inquiry, so nearly a quarter of those inquiries never had a chance to become a sale.
- In the illustrative business below, each inquiry is worth about $74 in first jobs as things stand and $96 when every inquiry is answered, a difference of about $26,500 a year in first jobs and about $66,000 once three years of repeat visits are counted.
The number and where it comes from
Many owners know what they paid for a lead, if they bought it, but few have worked out what a lead is worth to them, so the decision to spend on ads, answer the phone at lunch or follow up on a quote gets made by feel. The value of a lead is a chain of four numbers: the share of inquiries answered × the share of answered inquiries that get a quote or visit × the share of quotes that book × what a booked customer spends. Each link either keeps the lead's value or loses part of it, and the first link is the one the research measures best.
For a study published in Harvard Business Review, researchers sent a web inquiry to 2,241 U.S. companies and timed the replies; 37% responded within an hour, 16% within a day, 24% took more than a day and 23% never responded. A separate analysis reported in the same article found that firms that tried to reach a potential customer within an hour were nearly seven times as likely to qualify the lead as firms that waited an hour longer, so the speed of that first answer shapes every link after it.
| Step | Inquiries remaining | Share kept at this step | Source |
|---|---|---|---|
| Inquiries received | 100 | Assumption | |
| Answered at all | 77 | 77% | Benchmark: 23% never answered in the HBR audit |
| Given a quote or first visit offer | 46 | 60% | Assumption |
| Booked | 18 | 40% | Assumption |
The worked calculation
The funnel turns into a dollar figure once two more inputs are added, what a first job brings in and how many times an average customer comes back.
| Inquiries per month (Assumption) | 100 |
|---|---|
| Share answered (Benchmark: HBR audit (23% never answered)) | 77% |
| Share of answered that get a quote or visit offer (Assumption) | 60% |
| Share of quotes that book (Assumption) | 40% |
| Booked customers per month (Calculated (100 × 77% × 60% × 40% = 18.48)) | 18.5 |
| Average first job (Assumption) | $400 |
| Repeat jobs per customer over three years (Assumption) | 1.5 |
| First-job value per inquiry (Calculated (18.48 × $400 ÷ 100)) | $73.92 |
| Value per inquiry with repeat jobs (Calculated ($73.92 × 2.5)) | $184.80 |
| Value per inquiry if every inquiry is answered (Calculated (100 × 60% × 40% × $400 × 2.5 ÷ 100)) | $240.00 |
Illustrative example; replace every assumption with your own numbers.
The gap between the last two rows is the value of answering the door. At 100 inquiries a month, $240.00 minus $184.80 is $55.20 per inquiry, or $5,520 for each month of inquiries and $66,240 for a year of them once three years of repeat jobs are counted; counting first jobs alone, the gain is $22.08 per inquiry ($96.00 minus $73.92), or $26,496 a year. Those figures assume the newly answered inquiries book at the same rate as the rest, which a business can test in a few weeks.
Where a lead comes from changes its value too. A study in the Journal of Marketing of about 10,000 bank customers found that customers who came through a referral program were worth at least 16% more over six years than similar customers who did not, which is a reason to track the value of referral leads separately from paid ones.
A lean widget for the site
How you compare
- Answer rate: in the HBR audit, 77% of companies answered at all and 37% answered within an hour. A business that answers every inquiry within the hour keeps the full value of the first link.
- Referral leads: in the Journal of Marketing study, referred customers were worth at least 16% more over six years, so a referral lead is worth more than a cold one even at the same booking rate.
- Your own baseline: count last month's inquiries, quotes and bookings, then divide revenue from new customers by the number of inquiries to get your own value per lead.
Write your four funnel numbers from last month on one line this week, and set the value per inquiry beside what you spend to get one.
Sources
- Oldroyd, J. B., McElheran, K. and Elkington, D. The Short Life of Online Sales Leads. Harvard Business Review, March 2011. Audit of 2,241 U.S. companies.
- Schmitt, P., Skiera, B. and Van den Bulte, C. Referral Programs and Customer Value. Journal of Marketing 75(1), 2011. About 10,000 bank customers.
Related reading: How to Find More Leads for a Small Service Business, and Stop Losing the Ones You Already Get · What Are Leads in Business? A Plain Definition With Examples · Angi, Thumbtack and Google Leads: What Home Service Pros Should Know Before Paying Per Lead
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