Cost per lead calculator

This calculator does two jobs. It tells you what each enquiry from your ads is costing, and it works out the most a lead can cost before the customers it turns into stop being worth winning. The second number matters more, because it comes from your own margins rather than from what anyone else pays. The figures already in the form are an example only, in pounds; replace them with your own.

How to fill it in

1. Ad spend. What Google, Meta or any other platform charged you for one period, ideally a full calendar month. If you are VAT-registered and reclaim the VAT on ad invoices, leave it out; if you are not registered, that VAT is a real cost, so include it. The entry on VAT on digital advertising covers how those invoices work.
2. Leads. Genuine enquiries from those ads in the same period: forms, calls and messages, with spam and duplicates removed. Count them from your inbox or CRM rather than the ad platform where you can.
3. Close rate. The percentage of those leads that went on to buy. This is your lead-to-customer rate, and it should come from your sales records, not a guess.
4. Profit per customer. What a typical new customer is worth to you after the cost of delivering the job or product, before any marketing. Use the first sale unless you are confident about repeat business.
5. Share of profit for acquisition. How much of that profit you are willing to hand to advertising to win the customer. The rest pays for overheads and leaves you something.

Reading the four results

• Cost per lead is spend divided by leads. The glossary has a fuller definition of cost per lead and how platforms report it.
• Cost per customer won is cost per lead divided by your close rate. It is the figure that actually comes out of your profit.
• Highest affordable cost per lead is profit per customer, multiplied by the share you will spend, multiplied by your close rate. Above this, winning a customer costs more than the share of profit you set aside for it.
• Headroom shows the gap between the ceiling and your current cost per lead, as a percentage of what you pay now. A minus figure means you are over the ceiling. Pound figures are rounded to the nearest pound and headroom to the nearest whole percentage point.

A worked example

These are made-up numbers, not a client and not a benchmark. A kitchen fitter spends £3,000 in a month and gets 60 enquiries, so each lead costs £50. One in five becomes a job, so each customer costs £250 in advertising. A job leaves £900 profit and the owner is happy to spend 30% of it, £270, winning the work. Multiply £270 by the 20% close rate and the ceiling is £54 a lead. At £50 the ads are paying their way with 8% to spare, which is a thin margin: a slightly worse month in close rate would tip it over.

Notice the lever this reveals. Raising the close rate from 20% to 25% lifts the ceiling to £67.50 without touching the ads at all.

Where the result can mislead you

• Platform lead counts are often inflated. A form submission counted twice, a call that lasted four seconds or a lead from a returning customer all look the same in the ad account. Reconcile against what your team actually received.
• Close rates lag. A lead from this month may buy in three months. If your sales cycle is long, use leads from a period that has had time to close.
• Averages hide the mix. One campaign at £30 a lead and another at £120 can average out to something that looks fine. Run the calculator per campaign once you know which leads closed, which is where importing offline conversions back into the ad platform helps.
• First-sale profit undervalues repeat customers. If customers come back, compare their lifetime value with acquisition cost in the LTV and CAC calculator instead.
• Fees are not included. Add any management fee to the ad spend if you want the ceiling to cover the full cost of running the ads.

Bringing cost per lead down without lowering lead quality

The cheapest leads are rarely the best ones. Lead forms that ask for almost nothing tend to attract more enquiries and fewer buyers, so a falling cost per lead can hide a rising cost per customer. I would look at these first:

• The page people land on: whether it matches the ad, loads quickly on a phone and makes the next step obvious. My landing page checklist goes through it in order.
• Search terms and audiences spending money with no enquiries to show for it.
• The form itself. One qualifying question, such as postcode or budget, often costs a few leads and saves a lot of wasted sales calls. This matters most with Facebook and Instagram lead ads, where the form opens inside the app.
• Bidding. Once the ceiling is known, it can set a sensible target CPA in Google Ads rather than a figure picked because it sounded good.

Using the result

If your cost per lead is comfortably under the ceiling and lead quality holds, there is a case for spending more. If it is over, check the close rate and the lead count before cutting budget, because either can be wrong. If you would like a second pair of eyes on the numbers, send me your figures and I will tell you where I would look first.