How to calculate how much you can pay per lead
A simple formula that shows whether your ads will pay off before you launch them. With a worked example.
October 27, 2026
The key question before launching ads isn't "how much does a click cost" but "how much can I pay for one lead and still make money". We start every project with it.
The formula
Target cost per lead = average order value × margin × lead-to-sale conversion
- Average order value is what one customer pays on average per purchase.
- Margin is the share of that amount you keep after costs, materials and staff commission.
- Lead-to-sale conversion is how many leads out of 100 end up paying.
Example
A salon sells a treatment for $300. After costs it keeps 40%, so $120 per sale. Out of 10 leads, 2 pay: a 20% conversion rate.
The math: $300 × 0.4 × 0.2 = $24.
That's break-even: if a lead costs more than $24, the ads lose money. At $12 per lead, each lead brings in $12 of profit on average.
Why it matters
- Test budget. To know whether a campaign works, you need at least 20–30 leads. At around $20 per lead, that's $400–600.
- Where to look for problems. If leads are cheap but sales don't happen, the problem isn't the ads. It's lead handling: response speed, sales script, price.
- Repeat purchases. If a customer comes back 3 times a year, count yearly revenue per customer instead of a single order. Your target cost per lead goes up.
Send us your numbers: average order value, margin and how many leads end up paying. We'll calculate the target cost per lead for your business for free.