Money
Cost per lead: the only number that matters
Rankings, impressions, reach, engagement. All real, all beside the point. There is one number a marketing spend lives or dies on.
3 min read · Updated October 2026
The short version
Cost per lead is everything you spent on marketing in a month divided by the number of genuine enquiries it produced. For most Sydney service businesses a healthy figure is under a third of the gross margin on an average job.
Marketing reporting is full of numbers that can all improve while your business gets no better. Impressions, keyword counts, sessions, engagement rate, reach. Every one is real. None of them pays an invoice.
Cost per lead is the number that connects the money going out to the work coming in.
How to calculate it
Add up everything you spent on marketing last month: ad spend, agency fees, tools, any one-off work amortised sensibly. Divide by the number of genuine enquiries.
That is it. No attribution modelling required. The crude version is right far more often than it is wrong, and you can do it on a Tuesday.
What counts as a lead
Someone who contacted you with a real intention to buy. A phone call that lasted more than thirty seconds, a completed form, a quote request. Not: wrong numbers, people asking for a job, suppliers, or a click.
What a good number looks like
There is no universal benchmark, because it depends entirely on what a customer is worth to you. The rule that travels is this:
A lead should cost less than a third of the gross margin on an average job, adjusted for how often you win the quote.
| Average job | Margin | Close rate | Lead worth | Target cost per lead |
|---|---|---|---|---|
| $500 | 40% | 50% | $100 | under $33 |
| $1,500 | 40% | 40% | $240 | under $80 |
| $5,000 | 35% | 30% | $525 | under $175 |
| $15,000 | 30% | 25% | $1,125 | under $375 |
The third is a rule of thumb, not a law. It leaves room for delivery costs, the jobs that fall through, and a profit. If you are routinely paying more than half the margin for a lead, the business is running for the benefit of its marketing.
Why every other metric is a diagnostic
This is the useful insight, and it reframes most marketing conversations.
- Rankings matter because they change how much traffic you get for free, which changes cost per lead.
- Conversion rate matters because doubling it halves cost per lead with no extra spend. It is the cheapest lever you have.
- Click cost matters because it is the numerator.
- Site speed matters because the people who leave before the page loads were paid for.
Every one is a way of moving the only number that pays you. Reported on its own, each is a way of looking busy.
Tracking it without a system
You do not need software. You need to ask.
- 01Ask every caller how they found you. Write it on the job sheet. Two words is enough.
- 02Add one field to your form: “how did you hear about us?”
- 03Keep a simple monthly tally: spend, leads, leads by source.
- 04After three months you will have something more useful than most analytics dashboards produce.
Proper call and form tracking makes this automatic and more accurate, and it is worth setting up if you spend on ads. But a notebook beats nothing by an enormous margin, and nothing is what most businesses have.
The number behind the number
Once cost per lead is stable, the next question is cost per customer: cost per lead divided by your close rate. If leads cost $100 and you win one in four, each customer costs $400.
This is where a lot of businesses discover their problem is not marketing. If you are getting plenty of leads and converting one in ten, more leads is the expensive fix. Getting better at quoting is the free one.
The question to ask every month
“What did a lead cost us, and what did a customer cost us?” If whoever handles your marketing cannot answer both in under a minute, nothing is being measured — which means nobody can tell you whether any of it is working, including them.