Putting Cost Per Lead in Perspective

by Richmond Williams | June 30, 2015

Money“Everything in life has its price.” – Paulo Coelho, The Alchemist

For each of you, there are currently cases in your pipeline that came to you virtually free: a past client referral, a favor from a fellow attorney, a paralegal’s sister. These can fuel incredible growth for your firm, but for most of you, there’s not enough of these to make your dreams come true.

So that means we have to go out and get some.  And that’s where money comes in.

There’s a lot of ways that the acquisition cost for your leads can be viewed and calculated.  But regardless of how you calculate it, my advice is to keep your mindset focused on an investment rather than an overhead expense.  Looking at your cost per lead in a vacuum will conjure up visions in your head of dumping wheelbarrows of cash into a deep, dark crevasse.  Although it takes months or years to materialize, always look at this with the fee you collect in mind.

An example: Let’s say you collected 100 auto accident leads in May and spent $30,000 on marketing costs during the same period.  So now we’re at $300 per lead, a number you probably pay attention to on a regular basis.  You signed 55 of them – in other words, $545 per case.  The conversion funnel continues as 25% of those end up closing without a fee.  So now you’ve got 41 cases and you’re thinking “I paid $731 just to get each of these in the door before anyone touched them!” (Because yeah, touching them and working those cases costs money too).

But wait – there’s more to this story.  Now you’re getting checks from those cases.  Some are bigger than others, but if you add them all up, you average around $5,000 per case in revenue.  So rather than looking at that $30,000 as a necessary evil, view it as an investment that resulted in $205,000 in revenue down the line.  Even looking at it as an expense, you held marketing costs in this scenario to a little less than 15% of revenue.  We observe year after year that healthy, growing firms tend to spend 18-22% of their projected revenue (remember, that’s next year’s revenue at the earliest) on marketing.  What’s more, building your brand in the market over time will help bring in those “free/non-marketing” leads.

At cj, we know that most of you have marketing costs outside our realm.  That’s great – but the more we know about these costs, the more we can come alongside you to help you through these calculations, and in turn, help keep them in line.

This is not gambling – it’s shrewd investing! We look forward to continuing to cast that net for your future cases along with you.