How to calculate revenue per lead
Revenue per lead flips the usual lead metric on its head: instead of what a lead costs, it measures what a lead is worth. That is the number that actually determines which lead sources to invest in.
Paired with cost per lead, it produces the real profitability of a channel. A source with expensive leads can still be the best if its revenue per lead is high enough.
- Revenue / leads The formula
- Lead value Not lead cost
- vs cost per lead Channel profitability
Short answer
Revenue per lead is the average revenue each lead ultimately generates. Divide total revenue attributed to a set of leads by the number of leads, then compare to your cost per lead. If 1,000 leads produced 500,000 dollars of revenue, revenue per lead is 500 dollars. It reveals true lead value far better than cost per lead alone.
Step by step
Attribute revenue to a lead set
Take a cohort of leads and the revenue they eventually generated, allowing enough time for the sales cycle to play out.
Count the leads
Count the leads in that cohort as the denominator.
Divide revenue by leads
Revenue per lead equals total attributed revenue divided by the number of leads.
Compare to cost per lead
Set revenue per lead against cost per lead by channel. The gap is the profitability of each lead source, which is what should guide spend.
Worked example
Channel A produced 2,000 leads at 20 dollars each (40,000 dollars spent) that generated 300,000 dollars of revenue, so revenue per lead is 150 dollars. Channel B produced 500 leads at 60 dollars each (30,000 dollars) that generated 250,000 dollars, so revenue per lead is 500 dollars.
Despite triple the cost per lead, Channel B's revenue per lead is over three times higher. Comparing revenue per lead to cost per lead reveals Channel B as the far more profitable source, which cost per lead alone would have hidden.
How Ardovo handles it
Ardovo attributes revenue back to lead sources and shows revenue per lead beside cost per lead by channel. Rook flags channels with cheap leads but low revenue per lead, so budget flows to sources that actually produce revenue.
Frequently asked questions
What is the revenue per lead formula?
Total revenue attributed to a set of leads divided by the number of leads, allowing enough time for the sales cycle to play out. Compared to cost per lead, it reveals the true profitability of a lead source.
Why is revenue per lead better than cost per lead?
Because it measures what a lead is worth, not just what it costs. A channel with expensive leads can be the most profitable if its revenue per lead is high enough. Cost per lead alone cannot reveal that.
How do I use revenue per lead?
Compare it to cost per lead by channel; the gap is each source's profitability. Direct budget toward channels with the highest revenue per lead relative to cost, not simply the cheapest leads.