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How Much Does It Cost to Start a Lead Generation Business

Do you have a few hundred thousand dollars lying around? You’ll need it if you want to start a lead generation business.  Doesn’t seem fair, does it? But the reality is that a lead generation business has some pretty heavy startup costs, especially if you want to do it on your own. When I set out to find out how much it costs to start a lead generation business, I scoured the web and asked everyone I could find that had actually gone out and done so.

When we refer to the lead generation industry, we’re talking about any business that makes a living helping other businesses find leads for their sales team. This can include lead generation software companies, marketing agencies, and consultancies. It’s also helpful to think of lead generation as an umbrella term, under which there are many different kinds of businesses working in lead generation.

It is obvious that lead generation is a very popular business model for both companies and individuals who want to make money online. The lead generation business model works well during market upswings. However, during downswings, the lead generation business model suffers and many lead generation companies barely survive or go out of business.

Starting a lead generation business is exciting, but it’s also secure. You won’t have to struggle with long hours, years of work experience and frustration. The fact that you’re considering starting a lead generation business means that there’s an excellent chance you already have payment processes in place and a steady source of leads. Making a decision today will enable you to start getting on the right track straightaway.

What is Lead Generation?

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How many people have engaged with your business to decide on whether to make a purchase or not? This would be the number of your leads generated. Lead generation does not necessarily mean that there must be a conversion. Even a visitor coming to your website and not taking the desired action counts as a lead.

The vital thing to know here is that there are two types of leads because the terms of marketing and sales carry different characteristics within themselves:

Marketing Qualified Leads (MQLs) are the potential prospects that you were able to entice. Whereas Sales Qualified Leads (SQLs) are customers who have engaged with your business. (downloaded an e-book, purchased a product or made a reservation)

How to Calculate Cost per Lead (CPL)?

Cost per Lead or CPL is one of the most used metrics to evaluate the efficiency of a digital marketing campaign. And the formula of CPL is very straightforward:

Total Cost Spend on a Digital Marketing Program/ Number of Leads Coming From The Program

For instance, let’s say you have spent $1,000 on a pay-per-click (PPC) advertisement and 50 people were converted into leads.

Cost per Lead = $1,000 / 50 = $20.

Remember that generating leads is all about a high return on investment of your customer acquisition. The higher the ROI, the more costly a lead is; and the lower the ROI, the less likely you are to pay for obtaining leads.

On the other hand, the average cost per lead varies depending on your industry, lead generation channel, company size, and company revenue. Don’t worry; we will dig into them in a minute.

But first, I want to recommend you some CPL Calculator Tools to save you from doing this math alone;

Cost per Lead (CPL) Calculators

Types of Lead Generation Costs

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Some costs occur during the lead generation process and need to be summed in the calculation, but not all are applicable to every channel for lead generation:

  • Media Placement and Distribution: Cost of reaching the potential audience of a digital campaign.
  • List Purchase: Cost of buying or renting a telemarketing list and a third-party address list for direct marketing. (Here, I want to remind you that purchasing an email list is not a good idea!)
  • Agency and Labour: Cost of hiring an agency to manage some digital marketing processes like SEO.
  • Campaign Creation: Cost of developing an effective digital marketing campaign.
  • Incentive: Cost of immediate rewards like coupons or discounts to high-quality prospects before buying behavior.
  • Other: Costs of managing a digital marketing campaign aside from the ones explained above.

Average Cost per Lead

On average, cost per lead is determined as $198 for 2020. However, CPL differs widely depending on the industry, the profundity of your target audience, and, of course, the competition among your sector.

Let’s dig deeper into these amounts and the cost influencing factors;

Average Cost per Lead by Industry

IndustryCost per Lead on Average
Finance$ 160
Technology$ 208
Healthcare$ 162
Manufacturing$ 136
Travel & Tourism$ 106
Retail$ 34
Education$ 55
Telecom$ 45
Marketing$ 99
Consumer Products$ 105
Media & Publishing$ 108
Non-Profits$ 31
Business Services$ 132

Sources: Marketing Charts, Hubspot, Socedo, Survey Anyplace, Integrated Marketing Association

Average Cost per Lead by Lead Generation Channel

Lead Generation ChannelCost per Lead on Average
Events & Tradeshows$ 811
Public Relations$ 294
Referrals$ 73
Video Marketing$ 174
LinkedIn Advertising$ 75
Webinars$ 72
Display Advertising$ 63
Content Marketing$ 92
Traditional Marketing
(TV, Radio, Print)
$ 619
Search Engine Advertising$ 110
Social Media Advertising$ 58
Search Engine Optimization$ 31
Email Marketing$ 53
Online Retargeting$ 31

Sources: Marketing Charts, Hubspot, Socedo, Survey Anyplace, Integrated Marketing Association

Average Cost per Lead by Company Size

Company SizeCost per Lead on Average
1001+ Employees$ 349
201 – 1001 Employees$ 212
51 – 200 Employees$ 180
2 – 50 Employees$ 47

Source: 1st on the List Promotion

Average Cost per Lead by Company Revenue

Company RevenueCost per Lead on Average
$500 M +$ 429
$10 M – $500 M$ 179
$1 M – $10 M$ 185
< $1 M$ 166

Source: 1st on the List Promotion

Software Expenses

Your lead generation business needs software to run efficiently!

Why spend money on software? Because it can help you save time and automate certain parts of the business, so you can focus on the most important matters. Software and technology can help you grow your business, and save you from expensive personnel costs.

CostRequired?Min CostMax Cost
File Hosting ServiceRecommended$0$299
Email marketing toolRecommended$0$100
CRM Software ➜Recommended$12$300
Project Management SoftwareRecommended$0$25
Internal Communication ToolRecommended$0$20
Accounting & Invoicing SoftwareRecommended$0$50
IT Support ➜Optional$150$2,000
Social Media Management ToolsOptional$0$50
Design Programs & SoftwareOptional$0$50

Office Space Expenses

It will be your call to determine if you need office space. It is not a requirement but may be necessary as your lead generation business grows.

CostRequired?Min CostMax Cost
Rent ➜Optional$0$5,750
Utility Costs For Office Space ➜Optional$0$1,150
WiFi & Internet ➜Optional$0$100

Website Costs

Every business should have a website, and it’s worth spending a bit of money to set it up right.

CostRequired?Min CostMax Cost
Domain Name ➜Required$12$200
Website Hosting Costs ➜Required$0$300
Website Builder ➜Recommended$10$500
Business Email Hosting Service ➜Recommended$1$15
Website & Live Chat ToolRecommended$0$200
Web Designer ➜Optional$200$6,000

How Many Leads Do You Need?

As the main aim of a marketer is to maximize efficiency in campaigns, you must understand how many leads you need to hit the revenue goal of your business.

How many leads you need to generate for sustainable growth

This analysis requires information about your company data elements like;

  • Targeted Revenue – The amount of revenue you aim to reach at the end of a period
  • Marketing-Driven Revenue – The portion of total income that is acquired thanks to marketing efforts.
  • Average Sales Price (ASP) – Net Sales / Number of Units Sold
  • Marketing-Driven Deals – Marketing Driven Revenue / Average Sales Price
  • Opportunity-to-Sale Ratio –  How close you are to turn one lead into a customer out of the total number of leads. (%)
  • Qualified Lead-to-Opportunity Ratio – How many leads it takes to turn one lead into a customer. (%)
  • Lead-to-Qualified-Lead Ratio – How much analysis is necessary to turn one lead into a converting customer.

Now, let’s evaluate one example together:

  • Suppose you aim to reach a $100,000 in revenue by the end of the month.
  • Your marketing-driven revenue is $45,000 at the end of the month.
  • The average sales price is calculated at $5,000.
  • Marketing Driven Deals: $45,000 / $5,000 = $9
  • Opportunity to sales ratio is predicted as 3, which means you have the opportunity to turn one lead into a customer out of 3 leads.
  • Number of Opportunities Needed: 3 x 9 = 27
  • Qualified lead to opportunity ratio is foreseen as 6, which means you can turn one lead into a converting customer if you have at least 6 leads.
  • Number of Leads Needed: 6 x 27 = 162

What you can deduce from this example is that you need to have at least 162 leads in order to obtain zero profit.

Rather than making calculations to know the lead break-even point for your digital campaign, some tools will provide you with the same information automatically;

Sales Lead Calculators

These tools will help you to determine how much engagement you need to convert qualified MQLs into SQLs leading to a boost in your sales. It is also good to know the necessary amount of leads before moving to plan your digital marketing efforts.

Lead Generation Service Providers

Another option to increase leads is to pay a third-party to generate leads for your business. In some cases, getting help from companies in the lead generation sector would be more effective than spending your money and time on obtaining leads by yourself. Especially if you are a small business with a small database of prospects, you may let someone else develop an extensive database for you while you focus on customer retention strategies within the company.

Let a third-party to generate leads for you

The problem with those companies is that they offer you a temporary solution. When you stop paying for obtaining leads, they will simultaneously stop generating leads for you. Therefore, you need to constitute an efficient plan to keep those leads and turn them into loyal customers.

No matter which path you choose, you should set clear objectives, start an accurate program for the job, and track your results to find the best strategy.

Here are some of the companies that may help you generate more leads, their services, and their prices are given;

CompanyServicesPricing (Per Month)
PopupsmartHigh converting popup builder,
digital marketing tools
Try for Free
Email Search EngineLinkedin Email Finder & Prospecting ToolTry for Free
LinkedIn Sales NavigatorLetting you search for
leads and features
$64,99
MailshakeOutbound email generation$ 19
VyperCreating contests, promotions
and social media buzz generation
$ 29
Click FunnelsBuilding sales funnels and webpages$ 97
CallpageEngaging the user to a phone call$ 79
DatanyzeEnabling you to search for leads
based specific conditions
$ 29

To sum up, if your overall value of a lead is more than your total lead cost, it means your lead generation program is a winning one!

I hope that this article was beneficial for you to take the right choices related to expenses on lead generation, lead generation marketing, and guided you to become a digital marketing hero in your workplace. If you have any questions or suggestions, please do not hesitate to communicate with me via the comments!

Conclusion

Generating leads for your business is both a science and an art. A science because there are heaps of outbound and inbound marketing methods available today, and an art because it is all about knowing when to use which methods. A business bank loan is typically an unsecured loan made to a small or medium-sized company by a commercial bank, SBA, or other lending institution. While the requirements for this type of financing aren’t as stringent as those for secured lending such as business loans, there are still some guidelines that need to be followed in order to qualify.

Business loan leads are real and ready to be converted into customers. And, business loan lead generation is one of the best cost-effective strategies for buying your sales team or telemarketing group qualified business loan prospects at all levels of the B2B sales process that can be qualified and turned into customers.

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