Effective Ways to Generate Profitable Leads for Your Service Business

If you are unable to generate leads for your service business in a profitable manner, then your business may not be sustainable.

The value of a new customer is often underestimated or unknown.

What is the cost of acquiring a new client? How much revenue will a single client generate? Can the return on investment (ROI) be improved?

Let's consider predictability.

Is it possible to determine the number of leads I can expect if I invest a specific amount of money?

A comprehensive marketing strategy should make use of all available tools (including your website), in order to achieve predictable results. However, these results may not always be as profitable as desired.

Why?

Many service businesses have not taken the time to analyze their metrics and calculate for a better return on investment.

Calculating ROI

To begin, it is necessary to gather some basic sales information.

• The cost of acquiring new leads over the past year.
• Please provide the number of leads you received and the percentage that converted into paying clients.
• The revenue generated by those customers.
• The retention rates from previous years.

After obtaining the numbers, they can be utilized to calculate the cost per customer.

What is your budget for a new lead?

To determine your conversion rate, track web form submissions, phone calls, or Pay Per Click results and compare with the number of new clients acquired. Divide your advertising expenses by the number of inquiries to calculate the average cost of leads for your service business.

To accurately determine the value of a new lead, it is necessary to calculate the worth of a new client.

The expenses associated with acquiring clients for your service-based business.

Here’s an example: Company XYZ runs a carpet cleaning service. They have 100 customers per year. Each customer brings in $200 in revenue annually. Acquiring a new customer costs $10 in advertising expenses. So, each new client brings in a profit of $190 for the company.

Customer Lifetime Value

A notable advantage is that clients become more valuable when you have high retention rates. Let's refer back to the previous example.

Based on historical data, Company XYZ has maintained an average retention rate of 20% over the past five years. Utilizing this information, they project that out of the 100 new clients, 20 will become repeat clients in the future. Consequently, the total revenue generated by these 100 new clients by the end of Year 2 amounts to $23,000.

• The total revenue for Year 1 is $19,000, calculated by multiplying the number of clients (100) by the profit per client ($190) after accounting for marketing costs.
• The total revenue for Year 2 is calculated to be $4,000 with 20 clients, assuming a 20% retention rate and no additional marketing costs.

It is possible to incorporate average retention rates for different periods of time and estimate the lifetime value of each client, but for the sake of simplicity, we will not do so.

By dividing the $23,000 generated in Year 2 by the original number of clients (100), we can determine that each new client is worth an average of $230. It is important to note that this analysis only accounts for a two-year period, and in reality, the value of each client would be significantly higher.

Considering the cost of leads in relation to customer value.

We previously mentioned that each client cost Company XYZ $10 to acquire. How was this information obtained?

According to previous data analysis, it has been determined that the company needs an average of 10 leads per paying client. Each lead costs $1, resulting in an anticipated expenditure of $10 to acquire one paying client.

Where is the break-even point?

The calculation of revenue needed to achieve an acceptable profit margin can be determined by Company XYZ by examining their Income Statement and considering their operating costs.

Next, they need to determine the number of clients they want to acquire and their budget for acquiring them.

Discovering the most effective marketing tools for generating profitable leads.

Many online marketing strategies incorporate multiple channels.

• Pay Per Click
• Content Marketing
• Retargeting
• Search Engine Optimization

AdWords can be more expensive but show immediate results, while SEO and content marketing require less money but can take longer to see results. Retargeting is effective for retaining clients and maximizing their lifetime value.Finding the right channel to generate leads for your service business may require the expertise of an online marketing professional. They can assist you in developing a strategic marketing plan that aligns with your goals and provides a favorable return on investment.Dog and Rooster creates websites that effectively generate leads for service businesses. We can also provide guidance on the most profitable marketing channels to increase your marketing ROI. Contact us for a free consultation.