What can you afford to pay for an enquiry?

An enquiry is worth what a customer is worth to you, multiplied by the chance that an enquiry becomes a customer. Once you know that number, you know the most you can sensibly pay to get one, whether it comes from Google Ads, a trade show or anywhere else. Most businesses have never worked it out, which is why they can't say whether their marketing is expensive or cheap.

The sum

What an enquiry is worth = what a customer is worth × the share of enquiries that become customers.

Then decide how much of that you're willing to spend to get it. That's your affordable cost per enquiry.

The calculator on our homepage does the first part: one job's value times your close rate.

A worked example

These numbers are made up.

• A typical job is worth $25,000 in revenue, at a 35% gross margin. So each job earns $8,750 in gross profit.
• About one in eight enquiries turns into a job, a 12.5% close rate.
• So each enquiry is worth $8,750 × 12.5% = $1,094 in gross profit.

If you're happy to spend up to a third of a job's profit on winning it, you can afford about $365 an enquiry ($1,094 ÷ 3). If your enquiries cost less than that, you can spend more. If they cost more, something needs fixing.

The mistakes that throw it out

Using revenue instead of profit. In the example, using revenue would say each enquiry is worth $3,125, not $1,094. You'd think you could spend nearly three times as much as you really can.

Forgetting repeat business. If a typical customer orders three times over the years, they're worth three times as much, and so is every enquiry. For businesses that sell parts, servicing or consumables after the first sale, this changes the answer completely.

Guessing the close rate. Most owners guess, and most guess high. Count it: take the last year's enquiries, and see how many became customers. If you can't count it, that's worth fixing first, and I've written about counting opportunities, not enquiries.

Treating every enquiry the same. Twenty enquiries from people who'll never buy aren't worth the same as five from the right businesses. Work out the close rate for each source, like Google Ads, your website, shows and referrals, and you'll find some are worth far more than others.

Comparing your channels

Once you know what an enquiry's worth, you can compare channels fairly. Say Google Ads brings enquiries at $180 each and a trade show at $239 a conversation. The ads look cheaper. But if the show's prospects close at twice the rate, the show is the better buy. I've worked through a show's numbers in trade show ROI.

Using the number

Your affordable cost per enquiry is also the starting point for a budget: multiply it by the enquiries you need, and you have a figure for the year. I've set that out in how much a B2B business should spend on marketing.

And if you run Google Ads, it's the number your campaigns should be judged against, rather than clicks or cost per click. That's how we run Google Ads.

How we help with this: Google Ads →