United States · Lead generation
Lead generation economics.
A plain-language guide to the numbers behind selling leads or referrals to local businesses, with formulas you can check by hand.
The whole business is one inequality: revenue per lead after rejects must exceed cost per lead, by enough to cover fixed costs and your hours. Run it on the pay-per-lead profit calculator.
The variables
- Cost per lead (CPL). What you spend to generate or buy one lead: ad spend, tools and any purchase price divided by leads received.
- Price per lead. What a buyer pays you per lead under a pay-per-lead deal.
- Rejection (return) rate. The share of leads a buyer refuses as invalid, duplicate or out of area, and does not pay for.
- Close rate. The share of leads that become a paying job for the buyer. It matters directly only if you are paid per closed job.
- Job value and commission. In a pay-per-job or referral deal, your revenue is a percentage of the job.
- Fixed monthly costs. Tools, phone numbers, hosting, insurance.
- Hours. The time you spend on sourcing, routing, and dealing with buyers.
The formulas
Pay per lead: revenue per lead = price x (1 - reject rate). Pay per closed job: revenue per lead = close rate x job value x commission x (1 - clawback rate). In both: profit per lead = revenue per lead - CPL; monthly profit = leads x profit per lead - fixed costs; net per hour = monthly profit / hours. Break-even reject rate (pay per lead) = 1 - CPL / price. Break-even close rate (pay per job) = CPL / (job value x commission).
Worked example 1: pay per lead
100 leads a month cost $25.00 each and sell for $60.00 with 20% rejected. Revenue per lead = $60.00 x 80% = $48.00; profit per lead = $23.00; monthly profit = 100 x $23.00 - $500.00 = $1,800.00; over 50 hours that is $36.00 per hour. The break-even reject rate is 58.33%, so there is room, but a buyer who starts rejecting 60% turns the same funnel negative.
Worked example 2: paid per closed job
The same 100 leads at $25.00 each, but you earn 15% of an $800.00 job and 15% of leads close. Revenue per lead = 15% x $800.00 x 15% = $18.00; profit per lead = -$7.00; monthly profit = -$1,200.00. The break-even close rate is 20.83%. Small movements in close rate swing the outcome far more than small movements in price, which is why per-job models are riskier for the lead seller.
Where the model gets fragile
The inputs that you do not control, the reject rate and the close rate, are the ones that decide profit. They also vary by buyer, season and lead source. A sensible habit is to run the calculator with a pessimistic reject or close rate and see whether the funnel still works, rather than trusting one number.
Consent and rules
How a lead was gathered affects whether it can be used. Calls and texts to consumers are regulated under the Telephone Consumer Protection Act rules in 47 CFR 64.1200 (FCC telemarketing and TCPA rules), and telemarketing generally under 16 CFR Part 310, FTC Telemarketing Sales Rule. State rules vary and some regulated industries may restrict paying for referrals. This page collects no personal information and is not legal advice.
What this does not cover
- Legal compliance, consent records, licensing and state rules.
- Forecasting reject or close rates. Those must come from your own data.
- Buyer concentration risk: one buyer leaving can remove most revenue.
- Income tax, except through the optional estimate in the calculator.
Sources
Retrieved October 2026. The formulas are arithmetic on the numbers you enter. The pages below are where to read the current rules and rates yourself.
- 47 CFR 64.1200 (FCC telemarketing and TCPA rules)
- 16 CFR Part 310, FTC Telemarketing Sales Rule
- IRS Topic No. 554, Self-employment tax: self-employment tax
Results vary. This page models the assumptions you type in. It does not report what anyone earns, predict sales, or promise income. It is general information, not tax, legal or financial advice.
Frequently asked questions
What is a good cost per lead?
There is no universal figure. A cost per lead is good only if revenue per lead after rejects exceeds it by enough to cover fixed costs and your time. The calculator tests your numbers.
Should I be paid per lead or per closed job?
Per lead moves the close-rate risk to the buyer; per job gives higher upside but exposes you to the buyer's closing skill and honesty about results.
Why does reject rate matter so much?
Rejected leads still cost you to acquire. Every rejected lead is pure cost, so the break-even reject rate is the margin of safety in the funnel.
Where do I run the numbers?
On the pay-per-lead profit calculator linked on this page.