After this, you can work out the most you can pay for a lead from your own numbers, not your buddy's.
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Everybody's buddy gets cheaper leads. Every single buddy. But "what should a lead cost?" is the wrong question. The useful one is "what is a lead worth to me?"
That depends on three things you can measure: what a sale leaves you, how many leads book, and how many appointments sell. Change any one of them and the price you can afford moves.
What a typical sold job leaves after the job's own costs. Use an average over a real stretch of jobs, not your best one.
Out of your leads, what share turned into a set appointment? Count after cancellations.
Your own closing rate, after cancellations. Give sales enough time to finish before you count.
Profit per sale times the booking rate times the closing rate. That's what one lead is worth to you, on average.
Decide how much per lead you keep aside for your other costs and your profit. Subtract it. What's left is the most you can pay for a lead.
Run with it, compare against what actually happens, and redo the math whenever one of your rates changes.
Fill this in with your own numbers:
Part 1 of 2 · Copy copies all 13 lines
WHAT CAN I PAY FOR A LEAD?
(my own numbers, after cancellations)
A. Gross profit per sale: $______
B. Share of leads that book: ______%
C. Share of appointments that sell: ______%
D. What a lead is worth = A x B x C $______
E. Held back per lead for otherPart 2 of 2 · Copy copies all 13 lines
costs and profit: $______
F. Most I can pay per lead = D - E $______
Now lower C one step (say 1 in 4 to 1 in 5).
New F: $______These numbers are invented to show the math. They're not bids I'm recommending. That's why they're so round.
A sale leaves $1,000 in gross profit. Half your leads book. One in four appointments sells. Take 100 leads: that's 50 appointments and an expected 12.5 sales. No, nobody's sending half a salesperson to sell half a job. It's an average.
12.5 sales times $1,000 is $12,500 of gross profit, or $125 per lead. You hold back $50 per lead for other costs and profit. That leaves $75 as the most you'd pay for a lead.
Now change one thing: one in five appointments sells. Same 100 leads, same 50 appointments, 10 sales, $10,000. That's $100 per lead. Keep the same $50 held back and your ceiling drops to $50. Same leads. Different closing rate. Suddenly that price you could afford isn't so comfortable.
Your buddy's leads really might be cheaper. So might his closing rate. Ask what happened after he bought them.
Want help setting this up? Receipts Group builds these systems.