Work Out What You Can Afford to Pay for a Lead

September 25, 2026

Shops ask what a lead costs. The more useful question is what a lead is worth, because until you know that, the price is just a number with nothing to compare it against.

The arithmetic is not complicated. What makes it hard is that most shops do not track the four inputs.

The formula

Value of a lead = close rate x average order value x gross margin

That is it. If you close one in five, the average job is 8,000 and your gross margin is 35 percent, then:

0.20 x 8,000 x 0.35 = 560 per lead

That is what one lead is worth to you before you pay anything for it. Anything below that is profitable, anything above it is not, and the gap is your margin on the channel.

The number surprises people in both directions. Shops quoting large jobs discover they can afford far more per lead than they assumed. Shops doing prototype work discover the opposite.

The four numbers you need

1. Close rate. Of the qualified enquiries you quote, what fraction turn into orders? Not enquiries received, enquiries quoted. The difference matters, because the ones you never quote tell you something separate about lead quality.

Most shops guess this and guess high. Count it for one quarter.

2. Average order value. Total invoiced on new customer first orders, divided by the number of those orders. Keep it to first orders only, because repeat business gets counted separately below.

3. Gross margin. Revenue minus material, minus outside processes, minus direct labour and machine time. Not net margin, because overhead is there whether the machine runs or not, and the question here is what an incremental job contributes.

4. Time to quote. Not part of the formula above but it belongs in the decision. If a quote takes three hours to produce and you close one in eight, you have spent twenty-four hours of somebody’s time per order won. That is a real cost and on low value jobs it can exceed the lead price by a wide margin.

The number that changes everything

Repeat business. A first order is rarely where the money is.

Take the example above. A 8,000 first order at 35 percent contributes 2,800. If that customer reorders twice a year for three years, the same lead contributed closer to 17,000, even allowing for some drift.

So run the calculation twice:

• First order value, which is what you can afford to pay with no risk.
• Lifetime value, which is what you can afford to pay if you are confident the work repeats.

The gap between those two figures is a judgement about your own business, not a number anyone can give you. Shops doing production work should lean toward lifetime value. Shops doing one off prototype and repair work should stay close to the first order figure, because most of those customers genuinely do not come back.

One qualifier worth asking for on any lead: does this part repeat? A request that says 180 pieces now, expecting twice a year is worth several times a request for 180 pieces once, and it costs nothing to find out which one you are looking at.

Why cheap leads are often expensive

The instinct is to sort lead sources by price. It is the wrong sort. What matters is cost per closed job, and the quoting hours in between.

Compare two sources:

	Source A	Source B
Price per lead	20	150
Close rate	1 in 20	1 in 3
Cost per closed job	400	450
Quotes produced per win	20	3
Quoting hours per win, at 40 min	13 hours	2 hours

Source A looks seven times cheaper and is not. Once the quoting time is counted it is considerably worse, and it also occupies the person who would otherwise be answering the leads you already have.

This is why “how many shops see this request” is the single most important question to ask a lead source. A request sent to three shops and a request sent to thirty are different products at any price.

Questions worth asking any lead source

1. How many shops receive the same request? If the answer is vague, assume many.
2. Can I see it before I pay? You should be able to judge fit and effort before committing.
3. Is the buyer’s requirement stated properly? Grade, quantity, tolerance, finish and certificates. A lead without these is a lead you will spend an hour chasing.
4. What happens if the contact details are wrong? Ask for the policy in writing.
5. Do I own the customer afterwards? On a marketplace the answer is no, and that changes the whole calculation.
6. Is it my kind of work? The most expensive lead is the one you win and then lose money on. There is more on the channels in where machining leads come from.

Then do the boring thing

Whatever you conclude, track the outcome by source for two quarters. Close rate, order value, repeat rate, quoting hours. Most shops carry an opinion about which channel works that turns out to be wrong when the numbers arrive, usually because the memorable jobs and the profitable jobs are not the same jobs.

If stainless is regular work for you, our previews state the grade, size, quantity, tolerance, finish and the certificates the buyer wants, and each request goes to at most three shops. Register your shop, or read how we quote stainless work first.

Frequently asked questions

Figures in this guide are published specification limits or published typical values for the alloy, not measurements of any part. Machinability is rated against free-machining carbon steel B1112 at 100 and PREN is chromium plus 3.3 times molybdenum plus 16 times nitrogen. The conventions are set out in thereference section and the editorial standards.

Keep reading

• The Stainless Quotes That Go Wrong, and Why
• The Six Places Machining Work Actually Comes From