Why is lead conversion cost important? Well it is extremely important if you are the one who has to cut the check at the end of the day for all of the leads that you are receiving and if you have a team that you are generating leads for you really need to know your costs or you will have a big bill at the end of the day without much revenue to show for it.

So just what is lead conversion? Whether you are generating leads through real estate pay per click, SEO, or blogging lead conversion cost is the total of the lead cost necessary in order to get 1 actual client. The conversion formula is an important one to understand and master. Let’s go over an example to make things a little easier to understand.

• Lead Cost: $6.83
• 15 leads to generate 1 appointment: 15 x $6.83 = $102.45 (cost per appointment)
• 4 appointments to find 1 qualified client that buys or sells: $409.80 per client
• Average commission (3% on $225,000) - $6,750
• ROI (Return on Investment) – 16.47

So for every dollar you invest you are getting $16.47 back in return. You can think of if you had 1 dollar and every time you spent it on something you didn’t get change for a dollar but the clerk at the counter gave you $16.47 back in return! Now if your average commission is more than $6,750 your return could be even greater. $225,000 is just below the cost of an average home in the United States. In fact SEO (search engine optimization) can generate leads that are well below $2.00 once you factor in time spent to create the necessary pages. It is important to calculate your time when performing SEO tasks and attach a wage to it so you can figure out your lead cost. You will also want to factor in the cost of your host provider. Even with all costs factored in leads generated from the Internet have a very high rate of return on the dollar and time investment put into them.

Sometimes going over the numbers may not seem boring or even tiresome but spending time to know where your money is being spent is never a waste of time. You can track numbers in as little as a few minutes a week if you just write down what you spend on your Internet advertising and then keep track of how many leads and how many appointments you receive from these leads.

The reason you want to know your numbers is so you can judge what you need to spend in order to generate the income that you desire. Now I wouldn’t recommend spending it all at once but increase overtime as you perfect your system. You can always improve your numbers by practicing your real estate scripts, reducing your lead cost, and improving your conversion rates. Once you understand what kind of return the Internet can provide to you it may be hard to consider any other medium other than the Internet.