You want to make sure you’re investing your money in channels that will help grow your business. A working knowledge of the return on your investment (ROI) in lead generation platforms will help you understand just that. Start a new spreadsheet, grab a pen and paper – figuring the return on your investment in leads is pretty straightforward. Follow these steps:
1. Track your leads and hires.
Start a spreadsheet, or keep a physical notebook handy. Make a column for each acquisition channel you use (Thumbtack leads, social media, ads). Jot down how many leads you get through each channel throughout the month, and how many of those leads turned into jobs.
At the end of the month, you should have a good understanding of the number of leads and jobs coming from each channel.
2. Figure the monthly revenue from your jobs.
Next, we’ll take a look at the revenue earned from your jobs. For this example, let’s just focus on jobs from Thumbtack. Let's say you were hired 5 times in May, and those jobs resulted in $1,000 in revenue, for an average of $200 per job.
But were the leads worth it? Let’s dig into the cost of those leads, or your investment.
3. Calculate your ROI
Let's say hypothetically, you got 25 leads on Thumbtack that ultimately led to those 5 jobs, meaning 20% of the leads converted into revenue. If the average cost of those leads was $15, you spent a total of $375 on 25 leads.
So, to recap, you:
Booked 5 jobs from Thumbtack in May
Received $1,000 total for those jobs
Paid $375 to get those leads
Subtract the cost of leads from the revenue attributed to Thumbtack: you made $625 in May through that channel. Now, divide that profit by the total number of leads - both the ones that turned into jobs and the ones that didn’t. Your gross profit per Thumbtack lead is $25.00.
To calculate the ROI for each individual lead, divide that gross profit per lead ($25.00) by the cost of the lead ($15.00), and express it as a percentage — 166.7% in this case. Your average lead – whether won or lost – paid for itself a bit over 1.5 times. That’s a great return!
Looking at the ROI of individual leads is helpful in identifying patterns, but remember to look at the aggregate return on your investment to get an idea of how the channel you’re measuring is performing overall.
The good news is you can always improve your ROI. If you’re responsive, professional, and do great work, you’re more likely to turn one-time jobs into repeat customers, and grow your return without increasing your investment. Even if a lead isn’t quite ready to hire, give them all the information they need to contact you when they’re ready, so the investment you made in that lead is worth it down the road.
Another worthwhile exercise is to take a look back at your job and lead tally for the month. Is there a trend in the types of jobs you were hired for? If you’re a plumber and the majority of leads you get for emergency repairs ends up hiring you, you might want to adjust your profile and your preferences to target these customers, specifically. The more you can narrow the gap between the number of leads and the number of jobs, the greater the return on your investment.
How do you track your leads and jobs? Give your advice in the comment section below.