Leads aren’t the metric. They’re a useful data point, but at the end of the day, you don’t make payroll based on how many leads you had this month. The only thing that matters is how many of them gave you money. It’s easy to look at an ad report and congratulate yourself that you had hundreds of leads this month so something must be going right? But did you make money though?
The cost of a booked job is pretty much the only metric that matters in your business when evaluating your marketing operations. And you don’t get to count only the leads that are closed. You paid for all of them, so the ones that booked have to cover the cost of the ones that didn’t. That’s why the equation is based on your close rate.
Let’s say you were the sponsor of a car event, it cost you $1,500 and generated 20 leads. The cost of your leads was $75 each. With a 30% close rate, only 6 of those 20 booked, so your real cost of acquisition is $250 per customer.
This is true for any marketing channel, and it’s important to do the full equation based on your actual results for a bit in order to allow you to forecast in the future. For example, Google Ads traffic is usually pretty expensive, but typically high intent leads with good close rates to compensate. Inversely, close rates on Meta are inherently very low, and require an extremely cheap lead cost in order to be successful.
Over time, you’ll want to create a blended or average cost of customer acquisition and price it directly into your operation costs. Marketing always feels more expensive when it is allowed to eat at your net profit just because you didn’t price it in advance.
02Why Leads Are A Weak Metric
There’s a ton of reasons why you should stop looking at leads as a metric, but one of the most common ones is the definition of a lead. Sure, a form fill is a lead, but should it be counted if it’s a 2001 Elantra wanting PPF? A call over 60 seconds is also usually a lead, but unless you’re tracking data, it’s hard to give any value to a length of time. People can easily waste your time on the phone for 60 seconds, hell five minutes if they want to.
Even the common year/make/model lead qualification most shops do right off the bat is severely flawed. A 2027 AMG can still price shop you on tint. A Bentley Continental can still have paint so damaged that no levels of correction will allow a coating to go down. Both of those would be seen as a hot lead by 99% of shops.
Now, if you’re tracking data and you know for a fact that your close rate on Teslas is 20% higher than other brands, okay I can start to see a reasoning behind that qualification. But I wouldn’t have a job if shops already did this.
03Why Almost No Shop Is Doing This
It’s not laziness, it’s just that shops still fall victim to the same issue that all businesses have, siloed information. Your leads are counted in an ad account, the CRM has the close rate, booked revenue is in Urable, calls are tracked in Callrail, and sure every software allows exports and some of them integrate but when are you going to do that?
We’re talking 5-6 spreadsheets, matching numbers together and a few hours of interpreting data. Not only is it a lot of work, there might be up to 5 employees and freelancers involved to get all the information in bigger shops. This is another example of tasks that big corporations have entire departments managing, it’s that important.
Calculating customer acquisition costs is just an essential part of running a business efficiently. It’s the best way to forecast upcoming months while reducing stress and bad surprises. This equation is also one of the rare places in a business where you control every part of it. You can increase your close rate, you can improve your lead quality, and you can bring down your lead cost.
Marketing and sales should never feel like a black box. The equation itself is simple. Getting all the numbers in one place is the hard part.
04You Don’t Need More Leads
Another ironic hot take with Max, I’ve never seen a shop that needed more leads. Almost every shop I’ve worked with has thought that at first though. The issue was always lead quality and close rate. But look I understand, it feels safer to have a lot of opportunities in the CRM.
The issue with this mentality is not so much that you spend money or time acquiring those extra leads, it’s that most shops do it based on feeling slow, not on data proving whether you’re actually slow or not. Even if you end up proving to yourself that you’re not that slow in terms of amount of leads, you might find out that you feel slow because your close rate is dipping.
Maybe after a few months of calculations, you’ll cut out certain marketing channels because you realize they aren’t right for your business, or cost too much for the rate at which the leads from that source close. Switching to booked jobs as a metric and planning around it isn’t just cheaper in the long run, it also makes you feel better.
Of course it’s stressful to invest an extra $2,000 in paid ads if you don’t know the return you’ll get on it. But that $2000 feels a lot lighter when you know you’ll make at least $10,000 back. Event sponsorships start to make a lot more sense when you have historical data of your success rate when attending. This is true for every single channel.
05Spend Like You Know The Answer
I’m sure by now you’d like to get started with this. I also understand that my proposition feels overwhelming in itself. So start small, calculate one channel at a time. Pick the one you have the most data on, usually it’s going to be paid ads.
What did it cost? How many leads came from it? How many of those booked, and what did they pay you? That information alone will illuminate you a lot on next steps to grow your business. Maybe it’ll make you come to realisations about your sales process, maybe you’ll notice your lead quality is lacking.
Sooner or later you’ll have to decide whether to spend more, cut something, or sponsor that event again. You can make that call on a feeling, or you can make it on a number. Start collecting the number now.