How to calculate ROI on buying sales leads
There are two main variables to consider when calculating your return on investment (ROI) for purchasing sales leads.
What is your conversion rate?
First of all, you will need to figure out your conversion rate. Given 100 prospective clients, how many of them purchase your product or service? If you can sell to 20 of them, then your conversion rate is 20% and you're a very successful salesperson. An average sales funnel converts at 10%. You can identify your conversion rate based on historical sales data.
What is your typical sales amount?
Do you sell $20 widgets, or $20,000 consulting services? Your average sale is the amount spent by your typical customer on your product or service. This will differ according to the business you are in. Examine your historical sales and divide your total revenue by your number of active clients. Generally speaking, the lower your average sales amount, the more leads you will need in order to be profitable.
The formula for calculating ROI is as follows:
(profit - cost) / cost * 100%
Example:
Let's say that your company sells a product worth $50, and that your sales funnel has a conversion rate of 10%.
If you purchase 3,000 sales leads, at a cost of 25 cents per lead, your total cost will be $750.
If you convert 10% of 3,000 leads, then you have made 300 new sales.
If your typical sale is $50, then your gross sales is $15,000.
Therefore, your return on investment is as follows.
($15,000 - $750) / $750 = 1900%
In other words, you get 19 times more out of your online purchase of sales leads than you put into it!