What should a lead cost? A way to set a target you can defend.

Every founder asks the same thing in the first meeting: what should a lead cost? It depends on your margin, your close rate and your market — but there's a way to set a target you can defend in a board meeting.

Work backwards from the sale

Take the profit on one sale and multiply it by the share of leads that become customers. That's the most you can pay for a lead and still make money. A service earning 400 on a first booking that converts one enquiry in five can pay up to 80 a lead; a company selling 50,000 contracts with a 2% close rate can pay far more. Set your target at half that number, so there's room for a bad month.

Why campaigns overshoot

• Tracking that counts the wrong thing. Optimising for page views instead of submitted forms, or for calls that never connected.
• One creative for months. Small audiences tire of an ad in two or three weeks. Plan new variations every month.
• Sending traffic to the homepage. A landing page with one offer and one form routinely halves the cost per lead.
• Nobody feeding quality back. If sales never flags junk leads, the algorithm happily buys more of them.

Fix those four and most accounts we audit see cost per lead fall noticeably without touching the budget.