The Value of a Qualified Lead for a Startup

Determining the value of a qualified lead is difficult for most companies, especially startups without historical data to draw from. The value of a qualified lead should be approximated early in the life of a startup as it is essential to understanding where to invest money and resources.

Here’s a simple way to think about the value of a qualified lead for a startup:

• Average monthly customer fee (e.g. $500/mo or $6k/yr)
• Times the gross margin of the business (e.g. 70%, so $6k*.7 = $3,200)
• Times the discount for sales salaries, sales commissions, and marketing salaries (e.g. 20%, so $3,200*.8 = $2,560)
• Times the discount for the cost of capital (e.g. 10%, so $2,560*.9 = $2,304)
• Divided by the number of qualified leads needed to close a sale (e.g. 10 leads to close one customer, so $2,304/10 = $230 for a qualified lead)

In reality, you should also take into account the average life of the customer (e.g. 48 months) and factor that into the value of a qualified lead but from a startup efficiency point of view it is best to acquire a customer for less than the first year’s gross margin revenues, and the cost of a lead is only one piece of that equation.

What else? What do you think of this method to calculate the value of a qualified lead for a startup?