Find out how much a lead is worth to your interiors business.

How much can you realistically afford to invest in Instagram and Facebook ads in order to drive new customer acquisition?

It’s something I always ask potential clients; understanding your average lead cost tolerance is essential for effective budget planning.

Here’s a simple two step formula for determining how much a lead is worth to your interiors business.

Step 1: Define your average order value & lead conversion rate

Let’s say your business designs bespoke handmade kitchens and your average order for a new design & fit is worth £35,000.

You typically convert 30% of the leads who attend in-person appointments at your showroom, and you generate 20 leads per month from your Meta ads, with a total monthly investment of £1,050 (£35 each day).

Considering the estimated 30% conversion rate, 6 of the 20 leads become clients, each spending circa £35,000 on their dream kitchen.

The income from your Meta ads is therefore 6 x £35,000 = £210,000. The numbers are pretty compelling, huh?

Step 2: Determine how much you can afford to invest to acquire those customers moving forwards, based on the lead value

Total sales revenue / total leads = lead value

£210,000 / 20 leads = £10,500 per lead

This means your maximum acceptable cost per lead is £10,500 before the leads become unprofitable. In this example, you’ve invested just £1,050 / 20 = £52.50 per lead – far below the tolerance level.

Alternatively, you could use total profit figures instead of sales revenue for a clearer view of ad performance relative to your bottom line but in any case, it’s reassuring to know that you could increase your cost per lead 200x and still break even.

So, what next?

If your business specialises in high average order value products or services, Instagram and Facebook ads can yield excellent results.

Contact me to book a free, zero obligation call to explore how Meta advertising can work for your business.

Image credit: @rachael_gowdridge | @horwoodphoto