Knowing When to No Longer Pursue a Lead

  • We know, it’s easy for a Home improvement lead company to tell contractors to buy more leads — but we really mean it! it helps to know the best places to invest your time and effort.
  • Because older leads are a sunk cost it can be tempting to work old leads too long to squeeze extra sales out of them. Psychologically, these hard-fought sales feel like a deal because they came from an expense that was already “spent” in an agent’s head. In reality, they usually require significant time and effort to convert.
  • Closing ratios equate to the following conversation rates:
  • Let’s test assumptions in real life. — We’ll consider a first-call lead “new” and a fourth-call “old” in this case. Since every contractor’s situation is different, you can enter your own lead cost and commission estimates.
  • Assume you can only follow-up with 100 leads a week. This week, you have the option to buy 100 new leads, or follow-up with 100 older leads that you’ve previously purchased — so in this example option B would require no additional expense.
  • First calculate how much new 100 leads would cost.
  • Using the conversion data as a guide, converting 4.3% of 100 old leads would mean about 4 sales. Converting 12.5% of 100 new leads, which would mean about 12 sales.
  • Now we need to calculate if we made more money with or without the investments in 100 new leads. Since the difference between the two options is 8 sales, calculate the the extra profit you would earn (average profit per sale *8). Profit from 8 Sales — Cost of 100 Leads = Additional Profit from New Leads
  • Now see for yourself — is the profit from 8 additional sales worth the cost of 100 new leads? We believe contractors typically make more money when they work newer leads.
  • The takeaway: Even though it’s tempting to spend additional dollars by working old leads, it is actually more profitable to work new leads because the additional commissions you get from an increased conversion rate typically outweigh the cost of new leads.
  • Does that mean you should abandon old leads? Not at all. Instead you should automate your contact to old leads knowing that they will have a significantly lower conversion rate, so it will be more profitable to spend your time elsewhere. For example, you can schedule automatic emails to check in every month, quarter or year.

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