How much does it cost to start a lead generation company?
When you’re just starting out in the world of entrepreneurship, one question that keeps popping up again and again is “how much should I charge my clients?” While there are no hard-and-fast rules on how much to charge your clients (or prospects), here's some insight into what goes into running an effective lead gen program—as well as tips on whether or not charging more is wise.
What happens behind the scenes when someone signs up for your free report/eBook/podcast series/webinar? Are they going through your website first to see if their needs align with yours before signing up? Is your landing page optimized so people can find what they need easily? Do they know exactly who will be calling them next based off your marketing collateral? If these things aren't happening effectively, then you're losing money right from the get go. Even worse, you might end up alienating potential buyers because your process isn't streamlined enough.
Here we'll take a look at how much it costs to operate an effective lead generation campaign and how to determine if it’s worthwhile.
Is paying for leads worth it?
There are many factors to consider when deciding if investing time and money into paid advertising is worth it for your business. Paid ads fall under two categories: organic search engine optimization (SEO) where people stumble upon your site by searching online and social media platforms like Facebook and Twitter, or pay per click (PPC) campaigns which usually involve display advertisements such as Google AdWords. The latter option tends to have higher conversion rates than SEO, but both options require investment and expertise to run properly.
The most important thing to remember about all forms of digital advertising is that you must have a plan and execute consistently. For example, if you only post content sporadically across several different channels, you’ll miss opportunities to drive traffic to your landing pages. You also want to make sure whatever form of advertisement you choose has been researched thoroughly, especially since PPC is highly competitive. And finally, keep track of everything so you don’t waste money on something that doesn’t convert. This comes down to having proper tracking tools set up.
Depending on the type of product or service you offer, some companies may decide that it would be better suited to invest in SEO instead of PPC due to lower costs. However, since SEO takes longer to show results compared to PPC, you may lose interest after waiting months to see ROI. In addition, while it’s true that SEO requires less maintenance over time, you still need to stay active to maintain visibility. So even though overall expenses tend to be lower, you’ll incur additional fees if you stop regularly updating your content.
Another consideration is your budget. When setting prices, think twice before raising your rate too high. People often equate price with quality and if you raise your rates significantly without improving services, you could potentially deter future buyers. On the other hand, low pricing can hurt you more than help. Your goal should always be to strike a balance between affordability and efficiency.
In general, paying for leads helps you avoid wasting valuable resources on unqualified prospects, which ultimately increases profits. But is it affordable? It depends on the size of your list and number of subscribers. According to LeadSquared Market Research, the average email subscriber spends $3.71 every month on products & services. Of those, roughly 47% spend over $5, and 13% spend over $10. That means that if 1% opt into your newsletter daily, and each person subscribes for 12 months, you'll earn approximately $1,152. Then let’s say you’ve decided to increase your subscription fee to $7 per month ($2.50 extra). At that point, it’d take roughly 3 years and 557 days to recoup the initial investment made.
Keep in mind that this is assuming 100% profit margin, and if you anticipate a smaller gain, it’s possible you won’t break even within three years. Also, it’s crucial to note that this calculation assumes a fixed monthly income. If you expect fluctuating revenue streams, it’s best to add another year onto the estimate.
Is lead generation same as demand generation?
Demand generation refers to the activities you do outside of marketing to create awareness among prospective buyers. Demand gen tactics include events, webinars, teleseminars, workshops, etc., whereas lead generation encompasses strategies focused solely on acquiring new subscribers. As mentioned earlier, the former relies heavily on maintaining consistent messaging, optimizing websites, and executing regular marketing pieces. Whereas lead gen focuses mainly on providing value to current subscribers and converting them into loyal fans.
Lead gen is essentially building relationships with existing customers, increasing brand loyalty and repeat purchases. With that being said, lead gen strategy should never feel forced or pushy. Instead, focus on establishing trust by delivering high-quality educational materials that give away useful information. Since lead gen is ongoing, you shouldn’t be afraid of experimenting with different formats.
So how can you tell if you’re doing a good job at lead gen? Here’s a simple checklist to review whenever sending emails:
Have great subject lines - Keep subjects short and sweet! Don’t forget to use relevant keywords.
Include strong calls-to-action and unsubscribe buttons.
Proofread your emails multiple times.
Offer incentives and deals regularly.
Ask questions to learn more about your audience.
Always provide value above anything else.
Be genuine — you wouldn’t send unsolicited messages to anyone.
Is lead generation profitable?
It’s easy to get started with lead gen thinking that it will bring in tons of dollars instantly. After all, once you launch your mailing list, you’ll receive hundreds of orders overnight. Unfortunately, this rarely works out that way. Sure, you may experience some success stories here and there, but you need to put in work beforehand to ensure maximum profitability. To calculate your chances of generating a positive return on investment (ROI), try using Return Run Rate (RRR)—which measures how likely any given piece of marketing material resulted in a sale. Once you've determined your RRR, multiply it by the total amount spent on the project. Now compare it to your net revenues earned after subtracting variable costs.
If you found your RRR was negative or zero, then you probably didn't generate enough qualified leads to cover your expenses. Or maybe your marketing efforts weren't targeted correctly. Otherwise, you’re left wondering why you invested all that money into the endeavor. Whatever the case, here are some key points to follow to maximize profitability:
Optimize lead capture processes -- A successful lead gen campaign starts with efficient collection methods. Make sure your landing page is ready for action by testing its responsiveness and usability. You can also utilize third party software to manage certain aspects of the signup flow.
Understand buying patterns – Before launching your campaign, research competitors’ market share and establish yourself as an authority figure. Understand your target audience and customer profile, and tailor your offers accordingly.
Create compelling copywriting — Write persuasive headlines and descriptions that compel readers to engage further. Use powerful words like "free," "guaranteed" and "exclusive."
Make it convenient — Ensure users can access your offerings 24 hours a day, 7 days week. Provide mobile accessibility wherever necessary.
Ask for feedback — Testimonials and surveys will allow you to assess user satisfaction and measure ROI. If you’re unsure what to ask, check out SurveyMonkey, a platform designed specifically for creating polls and surveys.
Don’t worry about scaling — Focus on making your campaign effective rather than growing big quickly. Successful entrepreneurs understand the importance of focusing on long term goals, and so should you. Bigger numbers mean nothing unless you’re able to sustainably grow at steady pace.
Be patient — Building solid partnerships is essential for boosting conversions, so don’t rush into getting a large volume of subscriptions immediately. Take note of which tactics work and build upon them until you reach optimal performance levels.
As you continue developing your lead gen strategy, keep these principles in mind: First impressions matter, and so does reputation. Consumers are known to judge businesses based on word of mouth recommendations. Therefore, it’s imperative to deliver top notch products or services. Second, it’s advisable to stick to specific budgets and deadlines. Thirdly, focus on quality over quantity. Lastly, be mindful of scalability. By following these steps, you’ll be able to boost productivity and increase ROI throughout various stages of development.
You've got the product, you're ready to go into production—but what's next? How do you actually get people interested enough to buy from you or even know about you?
The answer lies with Lead Generation Companies (LGCs). These are businesses that generate leads through various methods including search engine optimization, content marketing, email campaigns, etc., then sell them on to other companies as prospects who can be converted into paying customers. The process is known as "lead conversion" and while there are many ways to approach this subject, we'll focus here on one specific type: Paid Leads.
Paid Leads come in two forms, Solo Ads and Agency-Brokered Accounts. In both cases, an LGC will find qualified buyers for your products by searching online databases of potential customers and matching those individuals up with your business. Once matched, the prospect receives information explaining how they can become clients. This info includes price points, payment options, delivery dates, etc.
Agency-brokered accounts offer more control over their advertising processes than solo ads because they have access to an entire database instead of just one source. They also typically pay less per lead generated compared to solo ad placements. While agency-brokered accounts tend to be higher upfront costs, they often provide better results at lower rates due to economies of scale.
In order to understand whether paid lead services are worthwhile, let’s first look at some numbers. According to research firm eMarketer, US consumers spent $25 billion on digital media last year — and nearly half of all Americans used social networking sites like Facebook. It follows that if everyone is using these platforms, why aren't marketers taking advantage? And indeed, LGCs are quickly becoming popular among small businesses looking to grow.
There are now thousands upon thousands of LGCs available across the country. If you plan to open your own, keep reading! We'll break down everything you need to know about starting out.
Are lead generators worth it?
If you want to make money selling something tangible, such as clothes or furniture, no doubt you'd prefer to spend as little as possible without sacrificing quality. But when it comes to generating leads, which may not always result in conversions, spending big bucks doesn't necessarily translate to huge profits.
While some experts believe that buying expensive leads might help boost overall revenue, others argue that cheap leads don't necessarily mean poor service. There are plenty of reputable agencies offering affordable leads, so chances are good that whatever kind of account you choose, you won't end up wasting too much time trying to figure things out.
What matters most, however, is finding a reliable provider whose expertise extends beyond simple clicks and conversions. You should ask questions about how each campaign is managed, what percentage ends up converting, what kind of ROI you can expect, and how long you’ll stay connected after the initial sale. A solid relationship between buyer and seller is key to building trust, but only if you feel comfortable sharing sensitive personal data.
Answering questions honestly could save you lots of headaches later. For example, I once had a client tell me he wouldn't consider working with any LGC that didn't use double opt-in verification. He was concerned about being scammed by fake websites posing as legitimate providers. Others share similar concerns, especially since scams involving unqualified leads happen frequently.
Most importantly, avoid companies that say they can guarantee results or promise quick riches overnight. Such claims are almost never true, regardless of how high the pitch sounds. No matter how great your idea or how passionate you are about it, success takes hard work, perseverance, and dedication. Even established entrepreneurs struggle to achieve success. So if you truly believe in yourself, follow your passion, and put forth consistent effort, you'll eventually see rewards. That said, be prepared for disappointment along the way.
Is lead generation in demand?
As stated earlier, according to market analysts, roughly 55% of U.S. adults searched online for local goods and services in 2017. To understand whether LGCs were needed in greater quantities, let's compare that number to another statistic: Only 8 percent of respondents wanted to purchase locally produced items directly from retailers.
This means that more than half of American shoppers would rather go straight to the manufacturer whenever possible. Considering that the majority of companies rely heavily on internet traffic to drive sales, this trend is likely to continue.
That said, the future of direct-to-consumer retailing remains unclear. As millennials take charge of finances, interest in shopping locally has been steadily increasing. More brands are beginning to realize that providing quality customer experience is every bit as important as having competitive prices. Some studies show that direct-shoppers are willing to wait longer before making purchases, meaning they place value on personalized attention above anything else. However, others suggest that customers' patience runs short, so it’s best to stick to large chains where you can easily make returns or exchanges.
Regardless of whether you decide to pursue paid lead services, remember that they represent only a fraction of the total market. Success stories exist within all industries, so give it a shot and try different approaches until you find something that works well for you. Don't forget to test regularly.
Is lead flipping profitable?
Lead Generating Companies usually require users to agree to receive multiple offers from third parties. When someone signs up for your program, you send them emails containing links to competing promotions. By doing so, you earn commissions off the fees charged by advertisers. Since competition is fierce, many LGCs employ aggressive tactics to lure potential buyers away from competitors. One common practice involves sending unsolicited messages via spam mailers or texts. Other times, they include misleading statements in emails to trick recipients into clicking a link leading to a phishing site designed to steal private information.
These practices are considered unethical and illegal under federal law. Yet despite widespread criticism, many LGC owners insist that they’re simply protecting their interests. After all, they claim, their job is to ensure that anyone who wants their product gets it. Many businesses view LGCs as necessary evils. Although some think they unfairly compete against smaller firms, others contend that they deserve compensation for helping larger corporations expand. Still others acknowledge that although they dislike certain aspects of LGCs, they recognize its importance. Either way, you must weigh your feelings carefully before deciding whether to join the industry.
It goes without saying that unethical behavior hurts consumer confidence in LGCs. With that in mind, we recommend staying informed about current events related to the industry and keeping track of bad actors and fraudulent schemes. Pay close attention to government regulations regarding lead brokers, as well as public sentiment toward LGCs. Research shows that negative perceptions toward the sector have increased dramatically in recent years, largely thanks to incidents surrounding the COVID-19 pandemic. People generally associate the virus with unscrupulous operators who fail to deliver promised results.
But how exactly did the pandemic affect LGCs specifically? Is lead generation still viable during lockdowns? Let’s explore.
Do lead generators work?
To succeed, LGCs must convince prospective customers to visit their website. Whether they intend to sign up for a free trial or make a full commitment, visitors need compelling reasons to click on a given link. To improve visibility, many LGCs invest in Search Engine Optimization (SEO) efforts. SEO refers to techniques aimed at improving rankings on major search engines, primarily Google, Bing, and Yahoo.
According to the latest figures provided by Google AdWords, 40 million searches occur daily worldwide based solely on keywords related to “direct response marketing.” Of course, many searchers click past that point and reach a landing page filled with promotional material. Depending on the nature of your business, this could range from a basic description of your offerings to detailed descriptions of individual products. Regardless, it’s crucial that visitors arrive at the right address in order to convert them into new clients.
For this reason, many LGCs hire specialists called Marketing Consultants to manage their web presence. Their main responsibility is to create effective strategies tailored to attract relevant eyeballs. Ideally, consultants develop unique profiles for each user depending on his/her preferences and goals. Then they craft targeted advertisements to maximize engagement rate and ultimately increase conversion rates.
However, marketing professionals can prove difficult to recruit. Most entry-level positions involve extensive training programs lasting several months or more. On top of that, wages vary widely between employers, ranging anywhere from $15 to $50 per hour. Therefore, many aspiring marketers turn to freelance gigs to bolster their income. Indeed, it seems like a natural step considering the fact that nowadays, freelancers enjoy the luxury of choosing projects that suit their needs and skillsets.
So is lead generation dead? Not quite yet. Despite the rise of virtual assistants, home workers, and gig economy jobs, many traditional brick-and-mortar businesses remain dependent on human interaction. Without LGCs, they'd have nowhere to channel their enthusiasm. Furthermore, the latter group provides benefits that freelancers cannot match. Employees get perks such as health insurance coverage, 401k plans, vacation days, etc. Additionally, managers benefit from reduced turnover rates and happier employees.
Lead Generation (or B2B marketing) has been around since long before there were digital tools for doing so, but in today's hyper-connected world, it’s become one of the most popular ways to grow your customer base.
There are plenty of companies out there offering various services that can help you generate leads on a budget. But how do you know which ones will be best for you? Where do you even begin when trying to figure out what kind of lead generation strategy works best for your business? And just how expensive will all these options actually end up being?
We spoke with several experts who have successfully started their own lead gen businesses and came up with an estimated price range for each service. Here’s everything you need to know about running a successful lead gen campaign.
How much does lead gen cost?
The costs vary widely depending on the type of product or service you're selling, as well as whether or not you plan to hire employees yourself. Some people choose to use freelancers while others go straight into hiring full-time workers. Either way, here are some general estimates for both scenarios.
If you want to keep things simple and don't mind outsourcing the work, you could try advertising online through platforms like Facebook, Google Ads, etc., where bidding fees may apply. This usually runs between $0-$5/day. You'll also get traffic from search engines like Bing, Yahoo, and other sites that offer paid ads. The downside to using social media for generating leads is that they tend to reach more men than women, meaning you won’t necessarily increase your gender diversity among potential clients.
On top of that, if you decide to create content specifically designed to attract visitors on specific websites, then you’ll probably spend more money on hosting, domain names, graphics, and similar. For example, creating a blog post might run anywhere from $50-$300+.
For those willing to invest in hiring staff, salaries typically fall somewhere between $20-40/hour. Depending on experience, training, education level, and location, hourly rates can vary quite a bit across industries—which means you’d likely need to test different types of packages until you find something that works for you.
To make things easier, we put together a handy guide showing how much you can earn without any specialized skills or degrees by working at home as a freelance writer. If you aren't comfortable taking jobs via Fiverr or Upwork, you can always consider looking for job postings on Indeed.com.
It goes without saying that you’ll also need to purchase certain supplies like writing paper, highlighters, pens, office furniture, computers, cameras, phones, printers, etc. These items add up pretty quickly, especially considering the number of tasks you’re going to perform daily.
Another major expense is paying for website maintenance such as updating plugins, optimizing codes, adding security features, and the list goes on... It’s no wonder why many entrepreneurs opt to forego the hassle altogether and simply hire someone else to handle this for them (and save themselves time).
But if you'd rather focus solely on managing your team, perhaps the easiest way would be to look for a remote employee platform that allows you to manage multiple profiles and assign them projects based on availability. With Zoho Workman, for instance, you can easily set up separate accounts for your employees and track hours worked, billable activities, expenses, taxes, etc. Plus, you can access reports within minutes.
In terms of overall cost, our estimate shows that the highest prices generally come from hiring a dedicated team of writers, designers, editors, researchers, and marketers — which doesn’t include overhead or additional charges incurred over time. In fact, after accounting for fixed monthly payments, total operational expenses for a mid-sized business can exceed its revenue!
This is because a lot of small businesses are forced to take losses for years on end despite having loyal customers waiting for products and services that never appear due to lack of funding. As a result, the only viable option left is borrowing capital, which is extremely risky and often results in higher interest payments.
What is the average cost for lead generation?
So now that we've covered the broadest spectrum of possible situations, let's talk numbers. Below are two sample averages taken from our conversations with various industry professionals.
According to a LeadGenius report, the average cost to acquire a qualified lead ranges from $1.75 to $7.25. On average, smaller businesses spend less ($3.33), while larger enterprises spend twice as much ($7.08). When comparing these figures, remember that "qualified" means the prospect must fit your ideal client profile, which isn't guaranteed 100 percent accuracy.
While LeadGenius' survey data indicates that nearly 90% of respondents said they spent too little money on marketing last year, it seems that the majority of businesses are still spending below $250 on lead acquisition efforts annually. However, according to another research firm called BrightLocal, the average ad spends for local businesses increased by 15% in 2018, making 2017 a record year for local advertisers.
As for the average cost of acquiring a qualified lead, a study conducted by PriceGrabber showed that companies spend roughly half of their budgets on traditional print advertisements (printing flyers, billboards, direct mailers, etc.) and web banners. Only 40% of companies spend on email marketing campaigns.
And although email marketing ranks low compared to other tactics, it remains a very effective method for reaching prospects. According to MailChimp's State of Email Marketing Report, 93% of consumers receive emails every day, and 65% open promotional emails at least once a week.
Other sources indicate that the average cost of acquiring a qualified lead varies greatly for each industry. A recent HubSpot report found that the average cost of acquiring a qualified lead was $6.17.
A few months back, Lead Gen Benchmark released a whitepaper detailing exactly how much it took to convert first-time buyers into repeat customers. They discovered that the average conversion rate for a new buyer comes down to 2.4%, whereas converting existing users takes 5.8%. So, if you’re interested in growing your userbase, getting feedback from happy customers is critical.
How much should you pay per lead?
Now that you understand how costly lead generation really is, you can finally ask yourself what you feel comfortable investing in order to gain new subscribers. Based on our discussions with numerous folks, we recommend sticking to a couple of basic rules:
Don't expect immediate returns. Remember that building a solid foundation requires consistent effort. Don't chase overnight success.
Be realistic with your goals. Even though you believe your market is ready for change, it may take longer than expected. Be prepared for setbacks along the way.
Know your audience. Before jumping headfirst into the deep waters of lead gen strategies, think carefully about whom you want to target. What makes sense for your niche? Does this tactic appeal mostly to young adults, baby boomers, millennials, senior citizens, etc.?
When deciding how much to charge, keep in mind that pricing decisions should be made strategically instead of arbitrarily. Try experimenting with various offers and see what resonates better with your audience.
Remember that lowering your prices alone isn’t enough to turn a profit. Your goal shouldn’t be to break even, but to achieve profitability sooner. Also, bear in mind that the lowest price point determines whether prospective customers will buy your product or not.
One of the biggest challenges facing startups is figuring out how to scale effectively. While it's true that scaling up can sometimes require investments, it's important not to forget that this is ultimately the key to staying afloat.
At the same time, however, you need to develop a clear vision for your brand growth. Otherwise, you risk losing momentum and eventually burning out. After all, nothing kills a startup faster than chasing profits with reckless abandon. Instead, stick to your core values and mission statement and avoid distractions.
Is starting a lead generation business worth it?
Starting a lead generation business definitely has risks associated with it. Unlike almost anything else, you can’t predict upfront how profitable it will truly be. There will always be unexpected hurdles that arise during the process, causing delays, mistakes, and wasted funds.
However, if done right, lead gen can boost your bottom line significantly. To determine whether investing in a lead gen campaign is worthwhile, compare its ROI against your current marketing expenditures.
Once you’ve reached a satisfactory ratio, consider expanding further to reap maximum benefits.
With that in mind, here's a quick overview of how you can potentially maximize your investment. Start by setting reasonable expectations for return on investment (ROI); otherwise, you may be tempted to allocate extra resources toward areas that yield lower yields. Once you’ve determined your threshold, divide it equally among multiple channels. Then, give priority to whichever channel delivers the greatest impact for the least amount of cash.