How do I calculate the true cost of a lead?

Take what you paid, subtract the credits you actually received, add the cost of filing returns and of verifying and calling every lead, then divide by the leads you could actually work. In the default example, 1,000 leads at $40 cost $38,850 all-in and yield 765 usable leads, about $50.78 each: 27% above the sticker price.

Why does a denied return cost more than a kept lead?

A denied return is a lead you could not use, so you pay its full price and get nothing back, plus the staff time spent filing the return. A kept lead that turns out to be usable at least earns its price.

What counts as an unusable lead that is not returnable?

A lead you cannot work but cannot return under the agreement: for example, contact data that is technically valid but never answers, a reason the contract does not allow, or a problem found after the return window has closed. These leads cost their full price and never show up in a returns report.

Is cost per usable lead the same as cost per sale?

No. Usable means worth working, not converted. Divide the cost per usable lead by your conversion rate from usable lead to sale or funded loan to get cost per acquisition.

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True Lead Cost Calculator

What does a lead really cost once returns, credits and unusable leads are counted?

Enter what you buy, how many leads you return, how many of those returns the seller credits, and what it costs to work each lead. The calculator shows what each usable lead really costs compared with the price on the invoice. The starting values are an illustrative example, not a benchmark.

Leads bought per month1,000Price per lead$40Leads you return15%Returns the seller credits60%Cost of processing a return (staff time, optional)$3.00Kept leads that are unusable but not returnable10%Handling cost per lead (verification, calls)$2.00

Total spend on leads

$40,000

Credits received

$3,600

Net spend on leads

$36,400

All-in cost (net spend + processing + handling)

$38,850

Usable leads

765 of 1,000

Cost per usable lead

$50.78

Markup over the sticker price

+27%

Where the money goes ($42,450 paid out before credits)

Price of usable leads$30,600 (72%)
Price of unusable leads you kept$3,400 (8%)
Price of returns that were denied$2,400 (6%)
Processing returns$450 (1%)
Handling every lead$2,000 (5%)
Credited back by the seller$3,600 (8%)

A returned lead counts as unusable whether or not the seller credits it, so a denied return costs its full price plus the time spent filing it. Handling is charged on every lead, because you verify and dial a lead before you know it is bad. Usable means worth working, not converted: divide by your conversion rate to get cost per sale.

How it works

The price on the invoice is not what a lead costs. Some leads come back as returns and only some of those are credited, some you keep turn out to be unusable, and every lead takes time to verify and call. Enter your volume, price, return rate, credit rate and handling costs to see the effective cost per usable lead, its markup over the sticker price and where the money goes. The default inputs are an illustrative example, not benchmarks.

Spend is leads bought times the price per lead. Of the leads you return, the seller credits a share, and each credit refunds the lead's price. Net spend is spend minus credits. The all-in cost adds a processing cost for every return you file (credited or not) and a handling cost for every lead bought, since you verify and dial a lead before you know it is bad. Usable leads are the leads you did not return, minus the share of those that are unusable but not returnable. A returned lead counts as unusable whether or not its return is credited. The effective cost per usable lead is the all-in cost divided by usable leads, and the markup is that cost divided by the price per lead, minus one.

S = N\,p, \qquad K = N\,r\,a\,p

C = S - K + N\,(r\,c_r + h)

U = N\,(1 - r)\,(1 - u)

p_U = \frac{C}{U}, \qquad m = \frac{p_U}{p} - 1

where

$N$: leads bought per month
$p$: price per lead
$r$: share of leads returned
$a$: share of returns credited
$c_r$: cost of processing one return
$h$: handling cost per lead
$u$: share of kept leads that are unusable
$S,\ K,\ C$: spend, credits, all-in cost
$U$: usable leads
$p_U,\ m$: cost per usable lead, markup over p

Frequently asked questions

How do I calculate the true cost of a lead?: Take what you paid, subtract the credits you actually received, add the cost of filing returns and of verifying and calling every lead, then divide by the leads you could actually work. In the default example, 1,000 leads at $40 cost $38,850 all-in and yield 765 usable leads, about $50.78 each: 27% above the sticker price.
Why does a denied return cost more than a kept lead?: A denied return is a lead you could not use, so you pay its full price and get nothing back, plus the staff time spent filing the return. A kept lead that turns out to be usable at least earns its price.
What counts as an unusable lead that is not returnable?: A lead you cannot work but cannot return under the agreement: for example, contact data that is technically valid but never answers, a reason the contract does not allow, or a problem found after the return window has closed. These leads cost their full price and never show up in a returns report.
Is cost per usable lead the same as cost per sale?: No. Usable means worth working, not converted. Divide the cost per usable lead by your conversion rate from usable lead to sale or funded loan to get cost per acquisition.

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